Performance in 2024

In 2024, Dalata delivered a strong financial performance with revenue of €652.2 million, an increase of 7.3% from 2023, and an Adjusted EBITDA (see APM ii) of €234.5 million, up by 5.1%. Despite facing challenges such as payroll inflation and the additional supply in the Dublin market, Dalata managed to achieve these results through operational excellence and productivity gains. The company's existing hotels performed robustly, and the new hotels added to the portfolio in 2023 and 2024 contributed significantly to the revenue growth. RevPAR increased by 1.0% on a like-for-like basis, and the UK portfolio experienced a 2.8% growth in RevPAR.

Dalata also made significant strides in its growth strategy by opening four new hotels, one each in Brighton, Liverpool, London and Manchester. We have hotels under construction in Edinburgh and Dublin, and we have acquired, subject to CCPC clearance, the Radisson Blu Hotel Dublin Airport. The completion of a €600 million debt refinance package further strengthened Dalata’s financial position, providing additional liquidity and flexibility for future growth.

Board Changes

As announced in September 2024, Shane Casserly, previously Corporate Development Director, was promoted to the role of Deputy CEO effective 1 September 2024. This role includes responsibility for sustainability, IT, and innovation, in addition to the property and development aspects of his role. Shane’s salary was increased to €439,000, an increase of €25,000, on appointment as Deputy CEO to reflect his additional responsibilities and the broader scope of his role.

In addition, on 1 January 2025 our Chief Operating Officer, Des McCann, was appointed to the Board. Des’ salary has been set at €375,000 (effective 1 January 2025). Subject to strong performance in role his salary will be aligned to that of the CFO in two steps by January 2027.

The Board believes that these changes in Board roles position the Group appropriately for the next phase of its journey as we implement our ambitious growth strategy.

Remuneration outcomes for 2024

2024 annual bonus

The 2024 annual bonus was assessed against Adjusted EBITDA (70% weighting), individual strategic objectives (18%) and ESG objectives (12%). The threshold target under the Adjusted EBITDA measure was achieved, with an outturn of 30.35% of maximum under this metric.

The committee undertook a thorough assessment of performance against the individual and ESG objectives and judged that these targets were met in full for each of the Directors (a detailed summary of performance achieved is provided under Outcomes in Respect of 2024).

The committee recognises that it is unusual that the Executive Directors are achieving full payouts against the non-financial objectives when the financial result was just in excess of the threshold target. However, the committee has reviewed the outcomes in each case in some detail and recognises that the overall performance of the team was exceptional in a year that hotel markets in Ireland and the UK performed significantly below expectations and in many cases behind 2023 levels. The team achieved record levels of employee engagement and customer satisfaction scores for the company. The focus on innovation resulted in significant reductions in payroll hours in both housekeeping and food & beverage. The 2030 Vision was completed and shared with shareholders while four new Maldron hotels were successfully opened in the UK. The team launched a major repositioning of the core brands during the year, reinforced with new marketing campaigns and supported also by the consolidation of hotel websites, digital marketing activities and management of social media activities. Three new significant IT systems were chosen during the year and preparatory work completed allowing the rollout of a new revenue management system, a new customer experience platform and a new CRM to begin at the very start of 2025. The further enhancement of our IT infrastructure, the repositioning of our brands and the digital transformation of our marketing strategy helps strengthen the foundations for the realisation of our 2030 Vision ambitions.

In respect of environmental sustainability matters, a 31% reduction in Scope 1 & 2 carbon emissions per room sold was achieved in 2024 versus 2019 which is significantly ahead of our 20% target by 2026. For the first time all hotels achieved a gold standard from Green Tourism. Our new hotels currently under construction in Dublin and Edinburgh have been designed with zero onsite operational carbon. We launched a water stewardship programme and also increased our focus on the reduction of waste with all hotels having targets now in place.

Overall, this resulted in outturns of 51.2% of maximum. The committee also took into account the wider performance of the business during the year and determined that the formulaic outcome is appropriate in this context. No discretion was applied.

2022 LTIP

The 2022 LTIP award was based 50% on relative TSR and 50% on Free Cashflow per Share (FCPS). TSR performance was between the median and upper quartile versus our bespoke peer group of companies operating in the travel and leisure sector, resulting in vesting of 59.4% of maximum for this element. 2024 FCPS performance was €0.56 which exceeded the maximum target of €0.48, resulting in full vesting under this element. Overall vesting of the 2022 LTIP was 79.7% of maximum.

The committee also took into account performance of the business over the three-year LTIP performance period and determined that the formulaic outcome is appropriate in this context and did not exercise any discretion in relation to the 2022 LTIP award.

Review of Directors Remuneration Policy

The current Remuneration Policy was approved by shareholders at our 2023 AGM and received a strong support of 99% votes in favour. As an Irish-incorporated company, Dalata is not formally required to comply with the UK’s Directors’ Remuneration Reporting Regulations. The Company is committed to maintaining a high standard of governance in keeping with our UK listing and submits the Directors’ Remuneration Policy to an advisory vote in accordance with Shareholder Rights regulations in Ireland. Whilst our Policy is not due for renewal until the 2026 AGM, during the year the Committee considered it appropriate to review our executive remuneration arrangements to ensure they remain aligned to the delivery of the strategy and the reward philosophy across the broader organisation.

Context for the review

Dalata has continuously evolved since listing in early 2014 from an operator of twelve leased hotels and the manager of a portfolio of financially distressed properties to one with fifty-five superbly located hotels in Ireland, the UK, and continental Europe. Over this period, we have earned a reputation for flawless execution of development opportunities through site identification, planning, financing, construction, and integrating each new asset to our high-performing hotel operations platform. Almost half of the business is now in the UK or continental Europe, and the Company has an ambitious and well-defined growth strategy. Our early investments in Germany and the Netherlands have been successful, and we are well-positioned to expand on these and other markets, with a strong pipeline of over 1,600 rooms and a target to add approximately 5,000 rooms in Regional UK beyond the current pipeline.

The Company’s development is illustrated by comparing key figures between 2014 and 2019 (before the Covid-19 pandemic), and today. The levels of growth in each of revenue, total equity and number of employees since 2014 place Dalata in the upper decile versus FTSE 250 companies currently of a similar size.

Process for the review

Our workforce has been at the heart of our strategy, and its commitment and performance are essential to differentiating us from our competitors.

Historically, the Group has positioned pay across the organisation towards the lower end of market practice, reflecting our cost-conscious culture and priority to invest in and grow the business. A vital part of this has been focusing on technology and process innovation to allow us to maximise efficiency. This focus on innovation has given us the flexibility to continue investing in our workforce to ensure that we appropriately balance cost with the ability to recruit and retain high-quality talent, enabling us to deliver the business strategy in an increasingly competitive talent market. This has included moving remuneration packages towards the market median, particularly for roles in more challenging talent markets, and developing the broader value proposition for employees through training, development and promotion opportunities.

Having made substantial progress in the approach to wider workforce, including middle and senior management pay, the Committee considered it the right time to review remuneration arrangements for the executive directors to ensure that our philosophy on pay is applied appropriately and consistently across the organisation.

As part of the process, we have reviewed the overall pay opportunity levels for each of our executive directors in the context of the growth of the business over recent years, our operational expansion and the evolution into a much more mature and complex organisation, as well as the broader philosophy of moving pay towards the market median. We considered multiple market data reference points to ensure a rounded assessment of pay levels, including similarly sized FTSE-listed companies, relevant sector peers operating in the travel and leisure industry and companies listed / headquartered in Ireland. We also considered the relative complexity within our business compared with several of our hotel peer companies. The Group effectively operates as an integrated property, brand-owning and hotel operations business. This framework is intentional, core to Dalata’s success, and designed to foster symbiotic relationships between each element of the business to create greater shareholder value than the sum of the parts. Our senior management team needs to possess a combination of property development expertise and hotel marketing and operating skills to achieve this balance.

A summary of the market data for the roles of CEO and CFO, used to inform the Committee’s decision-making, is shown below. Whilst market data for the roles of Deputy CEO and COO is not shown as these roles are less common at Board level, the Committee is of the view that the relativities of the proposed packages are appropriate in the context of the scope and complexity of the roles and the experience of the individuals.

Our executive director packages are generally positioned towards the lower end of market practice, which aligns with our historical positioning. In proposing a move from this positioning, the Committee carefully considered a number of factors:

• alignment of overall pay opportunities with the evolution of our broader workforce pay philosophy described above;
• implementing remuneration arrangements that are sufficiently competitive and motivating for our executives in an increasingly competitive talent market;
• fair treatment of the internally promoted executive directors in the context of the external market; and
• the strong performance of both the business and the executives.

Proposals

Our initial proposals included increases to both base salaries and long-term incentive opportunities, reflecting the positioning of both salary and total compensation which were towards the lower end of market. Several of our major shareholders were supportive of the proposals; however, based on the overall balance of feedback, the Committee has determined that now is not the right time to award above workforce-level increases to base salary levels, reflecting the challenging macro-economic environment currently facing the business, with particular focus on limiting the impact of cost-inflation which remains high. Salary increases with effect from 1 January 2025 will therefore be in line with the minimum awarded to the wider workforce for 2025 (2%).

As the more material salary increases proposals have been withdrawn, it is proposed to increase LTIP award opportunities as follows:

• CEO – maximum opportunity increased from 150% to 225% of salary
• Other Executive Directors – maximum opportunity increased from 125% to 175% of salary

The Committee believes that these increases ensure that our total compensation levels are more closely aligned to market norms and our broader pay philosophy, whilst ensuring that any delivery of additional opportunity is based on achievement of stretching long-term targets under the LTIP and further alignment to the shareholder experience. The updated proposals provide opportunity to deliver broadly equivalent maximum total remuneration (versus our initial proposals), but with a greater proportion of the package based on long-term performance.

To further increase alignment with shareholders, the CEO’s shareholding guideline will be increased to 225% of salary (from 200%), in line with the maximum annual LTIP award level. Shareholding guidelines for the other Executive Directors are unchanged at 200% of salary which is above the maximum value of the annual LTIP award level.

The current management team have been central to driving both the growth and evolution of the business we have achieved to date, as well as developing the forward-looking strategy which positions the Group well to continue its journey to deliver strong results and the creation of shareholder value. Overall, the Committee believes that the proposals outlined will better support the continued delivery of the Group’s strategy and the creation of long-term, sustainable shareholder value. We are of the view that the positioning of the proposed packages is fair and appropriate in the context of the growth of the business over recent years and our evolution into a more mature organisation, as well as the broader remuneration philosophy and how we want to pay our talent. The Committee has consulted with our major shareholders on the final proposals and shareholders were supportive of the approach.

The Committee remains conscious of the base salary positioning versus the market. It is crucial that the overall balance of the package (fixed, short-term and long-term pay) allows us to retain, recruit and motivate top senior talent and drive delivery of the strategy. Base salary levels will therefore be kept under review going forwards.

Our Policy complies with other generally accepted best practice: a portion of the annual bonus is payable in shares and deferred, and the LTIP has a three-year performance period with a two-year holding period. All incentive awards are subject to malus and clawback provision. The current Policy also includes both an in-employment and post-employment shareholding guideline. No further changes are being proposed as part of this Policy review.

Implementation of Policy for 2025

Salary

Salaries for Dermot Crowley and Carol Phelan were increased by 2% effective 1 January 2025. This aligns with the minimum increase awarded to the wider workforce for 2025.

As discussed previously, Shane Casserly, previously Corporate Development Director, was promoted to the role of Deputy CEO effective 1 September 2024. Shane’s salary was increased to €439,000, an increase of €25,000 to reflect the additional responsibilities associated with his promotion to Deputy CEO. Shane received a further 2% increase effective 1 January 2025.

As discussed previously, on 1 January 2025 our Chief Operating Officer, Des McCann, was appointed to the Board. Des’ salary has been set at €375,000 (effective 1 January 2025). Subject to strong performance in role his salary will be aligned to that of the CFO in two steps by January 2027.

Pension

As set out in the 2023 Annual Remuneration Report, effective January 1, 2024, the Group expanded its Irish pension scheme to include additional employees with a 3% contribution rate. This expansion means that a greater number of pension-eligible employees in Ireland (where executive directors are resident) now receive the 3% contribution rate compared to the 5% rate.

The Committee has reviewed this change and determined that maintaining the executive directors' pension contribution at 5% of salary remains appropriate. This decision reflects the Committee's assessment of competitive market practice and acknowledges that the current 5% contribution for executive directors aligns with the rate received by a significant proportion of Ireland-based employees.

Incentive arrangements

The annual bonus for 2025 will continue to be based 70% on Adjusted EBITDA performance, with the remaining 30% based on individual strategic objectives (including ESG measures).

For the 2025 LTIP award, 50% will continue to be based on TSR compared to peers and 50% on Free Cashflow per Share (FCPS). Subject to approval of the proposed Policy, LTIP opportunity will be 225% of salary for the CEO and 175% of salary for the other Executive Directors.

Non-Executive Director fees

The Chair’s fee was increased by 2% in line with the minimum increase awarded to the wider workforce.

Historically, NED fees have been reviewed every two years, with fees last reviewed for FY23. It has now been agreed that fees will normally be reviewed every year going forwards in order to ensure that fees remain appropriately positioned, as well as reflecting evolving market practice.

Our historic practice meant that NED fees were not increased in 2024. Therefore, for 2025 it is proposed that the base NED fee will be increased by c.7% to bring the fee closer to market norms and better reflect market movements over recent years.

Supporting work of the committee

The committee actively consults with management to acquire the information and understanding required to fulfil its responsibilities and oversee matters related to employee remuneration and working conditions. It does this by receiving presentations and reports from the Chief People Officer, who attends all committee meetings.

Wider workforce remuneration

The minimum wage in Ireland increased by 6.3% to €13.50 on 1 January 2025, and the UK living wage will increase by 6.7%, to £12.21 on 1 April 2025. Wages increased by 3.4% in Germany on 1 June 2024, and a 2.75% increase will take effect in the Netherlands on 1 January 2025. The committee noted that where a lower pay rate is permitted for younger workers, the Group pays no less than the applicable adult minimum or living wage.

The group-wide minimum annual increase awarded for 2025 was 2%. The Group monitors pay rates in the market and awarded higher increases, where merited, to maintain competitiveness

The committee also reviewed the Group's gender pay gap report before its publication in December 2024, noting the increase in the gap from 8.9% to 9.4%. The gap in Ireland was 12.2%, and in the UK, it was minus 5.2%. The report (published on the company's website) details the reasons for the gap, along with the action plan to close it over time. Steps include collaborating with the recently formed EmpowerHer Network @ Dalata, a female employee resource group established to advocate for women's career advancement. Our objective is to provide relevant support and develop strategies that create gender-balanced succession pipelines.

Workforce engagement

Throughout the year, the committee facilitated a collaboration between the company secretarial department and the Dalata Academy to introduce a module on corporate governance. This module included a segment detailing the process for establishing executive remuneration. It was delivered to participants of Dalata Academy development programmes through both face-to-face and online formats. The course provided learners with the opportunity to engage in a remuneration committee role-play exercise and offer feedback on the current remuneration structure. The committee received a comprehensive report on these sessions, which included unedited participant feedback. The course attendees represented a diverse range of employees across various roles and levels of seniority.

I remain open to hearing from shareholders (please refer any queries or requests for engagement to the company secretary at companysecretarial@daltahotelgroup.com) and look forward to your continuing support at the 2025 AGM.