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Almost 1000 hotel rooms were delivered in Dublin in 2018

Written by Robert McHugh, on 12th Mar 2019. Posted in General

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A new report from Cushman & Wakefield has found that development activity remains the predominant focus of the Irish hotel market, with a little over 1,300 rooms delivered across 21 Irish hotels during 2018. Almost 1,000 of these were in Dublin, in 13 hotels.

The global real estate services firm believes this is a very welcome development to the hotel market, particularly in the capital where occupancy levels and average room rates continue to rise. 

Of the 21 hotels which completed construction during the year, six were new builds. Two significant openings in the three-month period Oct-Dec included the 181-bedroom Clayton Hotel on Charlemont Street, Dublin 2, and the 165-bedroom Maldron Hotel on Beasley Street in Cork city.

Furthermore, The Devlin, a new 4 star, 40-bedroom boutique hotel in Ranelagh, Dublin 6, opened its doors in the final quarter. The Devlin, which is being operated by Press Up Entertainment Group, has now also been offered for sale off market guiding approximately €22m, and is likely to attract significant investor interest over the coming months.

The report shows that the volume of rooms under construction also rose considerably during the final quarter. At the end of December, a total of 3,882 hotel rooms were under construction across the country. This represents a remarkable 70% rise on 2017 levels. Again, the majority of these rooms, 87%, are in Dublin, with another 6% in the South West region of Cork & Kerry.

Positively, new build hotels account for 66% of the total number of rooms, while 19% are in the form of redevelopments, with the remaining 14% as part of extensions to existing hotels. 

Two city centre hotels worth mentioning which commenced construction during the fourth quarter included the new 8-storey Travelodge on Townsend Street and Moss Street, Dublin 2, and Motel One, on Liffey Street and Middle Abbey Street in Dublin 1. These two large-scale hotels are planned to provide 393 and 310 bedrooms respectively upon completion and will significantly improve the accommodation offering in Dublin city centre.

Turning to hotel transaction activity, the limited number of properties being brought to the market during 2018 has resulted in a notable slowdown in both the volume and value of activity. Investment in Irish hotels amounted to just €18.2m in the fourth quarter of 2018, bringing total turnover for the year to €97.5m, across 12 transactions. This excludes any unconventional hotel sales such as company sales, loan sales and refinances. This year-end figure represents a fall of 62% on the turnover recorded in 2017, while it also equates to a 62% fall in the volume of sales last year, when 32 hotel assets changed hands, and compares to 51 sales in 2016.

Cushman & Wakefield say the Irish hotel market continues to witness a reduction of distressed asset sales which characterised the market in the years 2014-2016. Transactions during 2018 consisted mostly of small-sized assets, with no big ticket, €50m+ sales occurring during the year. Just one hotel sold was over €20m in value; transacting in the third quarter, the 4 star Hilton Dublin Airport was sold for €22.5m to Canadian-based, Westmont Group. The remaining hotels, comprising 92% of the total turnover, were less than €20m in value.

The majority of sales during the year were trading assets, with only one hotel sold as an investment transaction. Closing in the final quarter, Nama sold the 122-bedroom, 4 star Plaza Hotel in Tallaght to an Irish investment group, as part of a mixed-use development including offices and retail, with the hotel element making up approximately 50% of value of the entire. This was the largest sale in quarter four.

Looking towards the year ahead, while the focus of the hotel market will continue to be on the pace of development activity, some very large hotels have been put on the market for sale recently which should stimulate transaction levels for 2019. The most high-profile of these includes the 5 star K Club Resort in Co. Kildare, which is on the market for approximately €80m. The 5 star Druids Glen Hotel & Golf Resort, Co. Wicklow, is also selling for approximately €45m, while the 3 star Central Hotel on Exchequer Street, Dublin 2, is guiding €40m.

According to Cushman & Wakefield, "For the Irish hotel industry, a huge concern since Brexit has been how a weaker sterling might impact on the number of visitors from our largest tourism market. The exchange rate not only makes Ireland more expensive for UK visitors, but also makes the UK cheaper for visitors from mainland Europe or other longer-haul markets, impacting the Irish competitiveness. This coupled with the reinstatement of the 13.5% VAT rate for the hospitality sector, which kicked in at the beginning of January, adds to the challenges facing the hospitality industry, most particularly for rural hotels."

Source: www.businessworld.ie

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