EasyHotel to apply for planning permission for more floors at Old Street

Easyhotel announced it will convert the top floors of its Old Street, London hotel into offices and refurbish the remaining space to its 'new look' format, similar to those at its Birmingham and Manchester hotels, in order to maximise the property's value.

Following a meeting with the Islington Borough Council, the company said it would close the 3rd and 4th floors at Old Street hotel in early October, leaving the first two for use as guest accommodation, and apply for planning permission to add more floors for use as office space.

As a result, the number of rooms at Old Street would be reduced from 162 to 92.

"After undertaking extensive due diligence and considering all the options available to it, the Board considers the retention of the 92-bedroom hotel, together with an extension to the upper floors for additional office accommodation, to be the best outcome for shareholders," said EasyHotel chief Guy Parsons.

The company also said revenues per available room were expected to increase as a result, although earnings would take a hit in the short-term as work was carried out.

As a result of management's decision and delays at Ipswich, analysts at Investec marked down their forecasts for the company's EBITDA over the next two financial years by £1.2m and £0.9m, respectively.

According to the same broker, the company's revenues would be £1.6m and £1.1m lower in each of those years too.

However, Investec kept its'buy' recommendation and 135.0p target price unchanged.

Old Street generated approximately £1.7m of earnings before interest, taxes and depreciation in the financial year ending on 30 September 2016, the company said in a statement.

As of 1600 BST shares in EasyHotel were 0.995 higher to 102.0p.