Irish hotel company Prem Group is putting its many pieces in place for an initial public offering in the next three to four years, according to CEO Jim Murphy.
 
The latest step in this process is the finalizing of a new round of funding to the tune of €30 million ($34 million) — money mostly to be used for an expansion of the company’s portfolio.
 
“We will look at a few more freeholds, perhaps four more, but stay in our current five markets,” Murphy said.
 
Prem Group has 14 hotels or serviced apartments in its native Ireland, 14 in Belgium, eight in England and one each in France and The Netherlands.
 
Murphy points to the success of peer Irish hotel company Dalata Hotel Group, which went public in March 2014, as inspiration.
 
“I know [CEO] Pat [McCann] very well. Its success has been phenomenal, its timing great, and it has raised Ireland’s profile significantly,” said Murphy of Dalata, which also is conducting another funding round.
 
“We’re very proud of what they’re doing, but I presume we’ll be competing for assets. Dalata has a slightly different model, but recent comments suggest they’re steering away from management to probably going into freeholds,” Murphy said.
 
All of Prem Group’s England properties are leaseholds. Germany is on its radar, too. 
 
“We have a five-year plan, an ambition to grow room stock and hotel acquisitions via leasehold or managed properties, but our big driver is to grow [earnings before interest, tax, distribution and amortization]. With a fair wind, the IPO will be in three to four years, but there’s much work to do before that,” Murphy said.
 
“We can grow much quicker by leasing, but in the right markets,” he added.

Murphy, a career hotelier, said the Prem began in 1996 when the lease on the Dublin hotel he managed ended.
 
“It was an era in Ireland when hotels were built with significant tax incentives,” Murphy explained.
 
Prem Group, though, structured itself differently, buying several Irish hotel management contracts during 1996 through 2000.
 
“At that time I met some high-net-worth investors who both wanted to retain me, which is always nice, but separate ownership from management, which was not so common here. Prem became the management, and the ownership was in our own names,” Murphy said. He added that this arrangement allowed the company to survive through the last recession, which hit Ireland particularly hard.
 
United Kingdom expansion was next, principally via its extended-stay product Premier Apartments (not to be confused with Whitbread’s Premier Inn brand). In 2006, Wyndham Worldwide invited Murphy and his team to look at three Belgium hotels with the view toward managing them.
 
It was then that the company really started to grow, Murphy said.
 
“We had a relationship with Wyndham, having brought the Days Inn brand to Ireland. Ireland and the U.K. were too expensive, but Belgium had a more sensible real estate market. We saw opportunities to buy based on multiple EBITDA levels, not on site value, so bought four hotels in 12 months and realized our management style would travel. We merged those four into a fund, which acquired (small Belgian chain) Global Hotel Group in 2007,” Murphy said.
 
“There’s no need to own everything. A balanced portfolio is preferable,” Murphy added.

The group’s makeup is a mix of different operational contracts, segmentation and third-party consultancy. 
 
Prem Group also owns or manages limited-service boutique hotels under the Leopold flag; independent hotels; and Premier Suites, an extension of the Premier Apartments brand. There also is a management company, Hotel Asset Management Services, specializing in distressed assets.
 
In addition, Prem operates branded product for Wyndham and InterContinental Hotels Group and has just signed its first AccorHotels’ property, a Mercure, with one more also in the works.
 
A non-operations component is Trinity Hospitality Services, a consultancy for more than 500 clients that advises, predominantly in Ireland, Belgium, France and The Netherlands, on procurement, revenue management, food and beverage, and website design.
 
Murphy is careful to separate the two revenue streams.
 
“That was set up in 1998 and 1999 essentially to help ourselves. But with others asking if they could join, we realized it could be expanded. It now represents 40% of our turnover. It is the market leader in Belgium and will soon launch in Germany.
 
“I see no conflicts. The more hotels we obtain, the better pricing we’ll do,” Murphy said.

With Asian capital in the last six weeks having bought U.K. hotel management companies Kew Green Hotels and Jupiter Hotels, Murphy does not discount the same happening to Prem Group. For now he is concentrating on the IPO and enjoying Ireland’s resurgence.
 
“Two years ago, we acquired two freeholds in Dublin, as we saw value in having Irish debt, of which there was very little until a few years ago,” Murphy said.
 
“Significant uplift in trade in the last two years in Ireland has upped EBITDA and [revenue per available room], and the exchange between the euro and dollar and pound sterling has helped, but so have great government initiatives and the work done by (Ireland’s National Asset Management Agency),” Murphy said.
 
Prem Group has managed distressed assets on behalf of the state-backed National Asset Management Agency and enjoys a close relationship.

“If [properties] are to be sold, we’re in prime position to buy them,” he said.
 
A lack of supply is worrying, Murphy added.
 
“The Dublin market needs 5,000 more rooms before 2020, and if those hotels are not built, we’ll see price inflation,” he said.
 
Another concern is that Irish construction companies disappeared during the recession.
 
“Times are good, but there’s still enough to keep us on our toes,” Murphy said.