The decision by super budget hotelier EasyHotel (EZH:AIM) to sell some of its rooms through online travel agents is reaping rewards, driving an 11.6% increase in revenue to £2.59 million in the six months to 31 March.

The £61.9 million cap used to sell rooms exclusively through, but it adopted a new revenue strategy for its owned hotels in December after Guy Parsons took over as chief executive.

Revenue at its owned hotels is up by 18.6%, or 8% on a like-for-like basis. The shares edge up just 0.5% to 99.5p, as investors were already given a sneak preview of the strong first half results in a trading statement on 13 April.

EASYHOTEL - Comparison Line Chart (Rebased to first)

EasyHotel is gradually extending its new revenue strategy to its franchise hotels, which could provide a much-needed revenue boost in that division. Like-for-like franchise revenue rose by just 1.1% in the first half due to weak demand in London.

The group expects to receive planning permission on a hotel in Birmingham in a few weeks’ time, and it has asked for permission for two new hotels in Barcelona and Ipswich.

It was recently hit by delays on the opening of two hotels in Manchester and Liverpool.

EasyHotel’s reported pre-tax profit has dropped from £370,000 to £140,000 due to increased pre-opening costs, share-based payments and the termination fee on a South African franchise agreement. Excluding these, pre-tax profit is 5.9% higher year-on-year.

The group is reviewing further acquisition opportunities and is considering its funding options to capitalise on them.

Investec has lifted its target price from 120p to 130p, implying 30.7% upside.

Issue Date: 24 May 2016