9
THE IRISH HOTEL MARKET
THE IRISH HOTEL
MARKET
INTRODUCTION
This article presents an overview of the hotel performance for the Irish hotel market looking at the recovery following the depths of a severe economic crisis, to a period of buoyant hotel trading since 2014 and which has continued strongly in the first half of 2016. However, with Great Britain and Northern Ireland representing 40% of tourist arrivals to Ireland in 2015, we review the potential impact on Ireland’s inbound tourism and hotel market, following the UK’s decision to withdraw from the EU. This article undertakes an analysis of the hotel sector, determining the key operators and reviews the growth of domestic brands as well as the large indigenous hotel groups, expanding through acquisitions and development, as brand association in Ireland begins to become more prevalent. Finally we take a look at how the strong hotel trading performance in recent years has resulted in a surge of hotel transactional activity by both domestic and overseas investors, targeting both Dublin and the regional cities. From these various perspectives, the resilience of the Irish hotel market and its future prospects will be assessed, at a time where the Irish economy is presented with a sudden and very real threat of instability that has ensued following the UK’s vote to end ties with the European Union.
ECONOMIC OVERVIEW
Following a protracted period of harsh economic conditions between 2008 and 2012, the tourism sector in Ireland has witnessed positive growth and a strong recovery. The return to overall economic growth in Ireland, improved economic conditions to many of Ireland’s key overseas source markets, trends in exchange rate movements and inflation have all contributed to a buoyant tourism sector since 2014. In 2015 Ireland achieved GDP growth of 7.8%, the fastest growing EU economy recorded. Dublin is globally recognised as a leading location for a range of internationally traded financial, pharmaceutical and ICT companies.
“The first half of 2016 has been a very rewarding period for Dalata Hotel Group, with trading ahead of our expectations. Prospects remain very strong for the Dublin hotel market and
regional cities in Ireland. Despite the outcome of Brexit, to date we have not seen any impact on trading, but we remain highly attentive and alert to ensure we react quickly.”
PAT MCCANN
Dalata Hotel Group PLC, Chief Executive Officer
Dublin is host to a number of strategically important European Headquarters, such as Google and Facebook. Ireland’s economic outlook remains strong but vulnerable to economic shocks. The UK’s vote to leave the EU poses a serious threat to the Irish economy in light of the strong trade and financial linkages with the British economy. Nevertheless, upside also exists for Ireland, as it is possible that a number of businesses and European headquarters may choose to relocate to Dublin in order to retain a presence in the EU. Following the uncertainty in the aftermath of the EU Referendum, according to the Central Bank of Ireland, the outlook for the Irish economy continues to remain favorable, with unemployment forecast to continue to decline and GDP growth in 2016 expected to achieve steady growth of 4.9% and 3.6% growth in 2017. In the medium term Ireland’s GDP outlook is set to stabilise at around 3%, albeit the economic performance is dependent on the severity of a slowdown to the UK economy and to the rest of Europe. Underpinning stability and reducing uncertainty are key economic themes going forward, with the ongoing risks following the UK’s vote to exit the EU likely to have a material impact on the Irish economy.
DEMAND
Between 2010 and 2015 tourism growth in Ireland has been very strong, with record overseas visitor arrivals achieved in 2015. The proportion of overseas visitors to Ireland has increased from 45% of total visitors in 2010 to 56% in 2015. Overseas visitors to Ireland have grown by approximately 35% from 5.9m visitors in 2010 to over 8 million visitors in 2015 and to over 9.5 million visitors when including visitors from Northern Ireland. Particularly strong growth in overseas visitor arrivals has been recorded since 2013, representing an annual average growth rate of 9.6% and double digit year-on-year growth from mainland Europe and North America of 10.8% and 11.6% respectively. Economic growth in many of Ireland’s key tourism source markets have contributed to increased demand from overseas tourism, in the UK and the US, GDP growth in real terms averaged 2.4% and 2.2% per annum between 2013 and 2015 respectively. Other factors positively impacting on overseas visitor arrivals include improved exchange rates in favour of overseas visitor arrivals from outside the Eurozone and the perception of Ireland as a safe destination.
Domestic trips have also recovered following the economic recession, growing on average 3% each year since 2013, with the domestic market benefitting from increases in disposable income brought about through a combination of reduced personal taxes and increased employment opportunities as a result of the improved domestic economy. According to Failte Ireland tourism barometer (April 2016), repeat visitors, increased marketing campaigns from local and national tourist boards and private marketing campaigns have all sought to encourage Irish nationals to take holidays in Ireland, with the South-West, South-East and West of Ireland benefitting from 65% of all overnight stays by domestic holidaymakers.
This growth in overseas visitors, together with a stable domestic market is feeding through to an increased demand for hotel services, impacting positively on overnight stays and revenue spend.
SOURCE MARKETS
The proportion of visitor arrivals to Ireland has remained relatively unchanged over the past few years. Visitor numbers for all major source markets have grown strongly between 2014 and 2015. Factors such as advantageous currency trends, positive economic conditions in the source markets and international marketing campaigns such as “The Wild Atlantic Way” and “The Gathering” have all helped strengthen Ireland’s growth in
Figure 1: Overseas & Domestic Tourist Arrivals to Ireland (2010-2015)
Domestic Arrivals CAGR 2010-2015 0.6% Domestic Arrivals CAGR 2013-2015 2.9%Overseas Visitor Arrivals CAGR 2010-2015 9.9%Overseas Visitor Arrivals CAGR 2013-2015 7.4%Combined Arrivals CAGR 2010-2013 5.2%Combined Arrivals CAGR 2010-2015 5.3%
Figure 2: Compound Annual Average Growth Rates to Ireland by Source Country
Figure 3: Main Source Countries 2012-2015
overseas visitor numbers. Great Britain is the main source market, representing 35% of total international visitation, followed by Continental Europe at 30%, Northern Ireland at 16% and North America 14%. In 2015 the volume of visitors from both Continental Europe and North America increased and in doing so increased their share of overall visitor arrivals by 3%. In 2015, Northern Ireland witnessed a decline in visitor arrivals following strong growth the previous two years.
However in the wake of the UK’s vote to leave the EU, tourism is likely to be largely effected by the impact of Brexit, as a result of the fall in the value of sterling, making holidays to Ireland significantly more expensive for UK visitors. In addition, economic uncertainty as a result of Brexit is likely to result in a more cautious approach to discretionary spending and will impact upon visitor numbers, both domestic and from overseas. Economic ties on the Irish border between Ireland and Northern Ireland will also become a critical issue. As such whilst the implications on tourism to Ireland in the long-term are dependent on the terms of engagement negotiated post-Brexit and the importance of common travel between Ireland and the UK of critical importance to the Irish economy, in the short-term Ireland must be seen to retain its competitiveness and ensure any negative consequences of Brexit are minimised. Positive initiatives by the Irish government, such as its commitment to the Tourism sector with various financial initiatives including 0% Airport travel tax; retention of the 9% tourism VAT rate on hotel accommodation and food; a reduction in excise duty on alcohol as well as the positive promotion of Ireland targeted at key source markets, will all be key drivers of demand in the uncertain aftermath that has followed the Brexit vote. Furthermore, investment plans such as the €100m fund for the Wild Atlantic Way and plans to commence development of a second runway at Dublin Airport by 2020 are all important initiatives for Ireland in a post-Brexit era.
2010 20122011 20142013 2015
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
0
Arriv
als
(000
s)
CAAG 2012-2015 CAAG 2013-2015 CAAG 2014-2015
Great Britain 7.1% 8.0% 11.3%
Northern Ireland 4.7% -2.6% -12.6%
North America 11.2% 11.6% 12.9%
Mainland Europe 8.6% 10.8% 15.7%
Other Intercontinental 10.9% 9.4% 11.7%
Total Overseas Visitors 7.9% 7.4% 8.1%
Arriv
als
(000
s)
2012 20142013 2015
500
1,000
1,500
2,000
2,500
3,000
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4000
0
Sour
ce C
ount
ry
Great Britain North America Mainland EuropeOther Intercontinental North Ireland
Overseas Visitors Domestic Visitors Source: Fáilte Ireland Source: Fáilte Ireland
Figure 4: Main Source Countries 2015
30%
5% 35%
16%
14%
Great Britain North America Mainland EuropeOther Intercontinental North Ireland
Source: Fáilte Ireland
HOTEL SUPPLY
The Irish hotel industry accounts for over 65,000 rooms distributed across 1,156 hotels and hostels, with over 80% of bedroom stock operating within the 3-star and 4-star market. The Irish hotel market remains relatively fragmented with 79% of hotels independently owned and operated, collectively, this represents almost 60% of total room supply.
Of the branded hotel bedroom stock (including hotels operating under a consortium), 36% of rooms are operated under a global or international brand, 42% are operated under an Irish national brand and 22% of the bedroom supply operates as part of a consortium.
We highlight the top hotel brands and top hotel operators in Ireland, ascertained by the number of hotel bedrooms. The Dalata Hotel Group, operates both the Maldron Hotel and Clayton Hotel brands and manage a portfolio of partner hotels, making them the largest hotel operator in Ireland, with some 30 hotels and approximately 4,900 rooms in Ireland. Following the Group’s IPO listing in March 2014, the asset base of the Dalata Group has transformed from a pure hotel operator, with a managed and leased portfolio, to that of a hotel owner operator.
Figure 5: Number of Hotels and Bedrooms by Star Rating
INDEPENDENT BRANDED NUMBER OF HOTELS
BUDGET 2-STAR 3-STAR 4-STAR 5-STAR HOSTEL APTS0 0
50100150200250300350400450500
5,000
10,000
15,000
20,000
25,000
30,000
No. o
f Roo
ms
No. o
f Hot
els
Independent BrandedNuber of Hotels
Source: AM:PM Hotel Data Intelligence
Figure 6: Hotel Room Supply by Brand Type
4% 17% 3%
9% 7%
5
9%
Global Independent Iternational Regional NationalConsortia Source: AM:PM Hotel Data Intelligence
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s
Figure 8: Major Hotel Operators in Ireland by Number of Rooms, Dublin & Regional
Regional DublinAverage Hotel Size Source: AM:PM Hotel Data Intelligence
CLAYTO
N H
OTELS
MALD
RO
N H
OTELS
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Figure 7: Major Hotel Brands in Ireland by Number of Rooms, Dublin & Regional
Regional DublinAverage Hotel Size Source: AM:PM Hotel Data Intelligence
Figure 9: Average Hotel Size by Star Rating and Brand Type
Source: AM:PM Hotel Data Intelligence
BUDGET
2-STAR
3-STAR
4-STAR
5-STAR
HOSTEL
APTS
0 20 40 60 80 100
120
CONSORTIA
NATIONAL
REGIONAL
INTERNATIONAL
INDEPENDENT
GLOBAL
0 20 40 60 80 100
120
140
160
Branded hotels in Ireland are located predominantly in Dublin or regional city locations, with approximately 54% of hotel room supply in Dublin belonging to a global, regional, national or international brand. Meanwhile in rural locations 81% of the Irish Hotel Market is dominated by unbranded, independently operated hotels or unbranded hotels operating as part of a consortia.
Over 80% of Irish bedroom supply operates within the 3-star and 4-star market; and whilst the 2-star and Hostel market represent 30% of total hotel supply, they are significantly smaller in size, comprising less than 10% of bedroom stock. Hotels operating under a global or international flag are also significantly larger in size, averaging over 150 bedrooms. National Irish hotel brands average around 115 rooms in size, whilst independent hotels average less than 50 rooms in size.
HOTEL TRADING PERFORMANCE
The vote by the UK to leave the EU has swept a wave of uncertainty over the future health of overseas tourism to Ireland and the impact it will have on the Irish hotel industry.
Since 2014, the improved economic conditions and resultant increase in demand for overnight accommodation, driven by a combination of higher international and domestic visitor numbers has resulted in strong trading performance for the Dublin hotel market, buoyed further by the dearth of new hotel developments until recently. This enhanced trading environment has meant that Dublin has moved beyond a period of recovery to a period of stabilised growth and prior to the EU Referendum for the UK’s vote to leave the EU, confidence for continued growth remained high.
In 2015 Hotels in Dublin city centre achieved occupancy levels of 84%, growing by four percentage points since 2013. This high level of occupancy performance is evidence of Dublin having a diversified market. Dublin attracts strong corporate demand primarily during weekdays and has a thriving leisure market, with short city breaks at weekends. Corporate demand is weaker during the summer months, but compensated by significantly increased leisure visitation. Dublin also benefits from a large number of sporting and event-based trips as well as conference events, many of which are spread evenly throughout the year.
The seasonality of demand, depicted in the following graph, is shown through an analysis of hotel room occupancy for the Dublin hotel market. The graph shows a very similar pattern in seasonality trends between 2013 and 2015.
Achieving high occupancy levels and with limited new supply entering the market, has allowed Dublin city centre hotels to drive forward their average daily room rate (ADR) and revenue per available room (RevPAR). In 2015 Dublin city
centre hotels achieved an 18.5% growth in ADR and for the first half of 2016, prior to the EU Referendum, performance had been equally strong, achieving 14% ADR growth for the period up to May 2016. (Source: STR Global). In a European context, Dublin outperformed other European cities in 2015, with the highest growth in RevPAR after Milan which benefitted from hosting Expo 2015, driven largely from growth in the ADR. When compared to other European cities, Dublin is ranked well below other European cities, this implies that Dublin currently represents a cheaper destination for international visitors when considering a residential stay in Europe.
MILAN
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TOM
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Figure 10: Seasonality – Dublin 2013-2016
Figure 11: Annual RevPAR Growth 2015 – Dublin v European Cities
Going forward, in the era of Brexit negotiation, we envisage that Dublin’s hotel trading performance will continue to perform strongly, albeit with somewhat weakened growth compared to the past few years. Dublin is likely to benefit from an increase in business travel from international companies relocating or expanding their presence as a result of the UK’s planned exit from the EU. The limited supply growth in the short-term, together with the favourable 9% VAT rate for the tourism sector and Dublin’s growing trend as a tourist destination, despite the fall in Sterling, will continue to have a positive impact on the city’s hotel performance.
Outside of the capital city, regional hotels whilst not experiencing the superior strong levels of growth in trading performance, have benefitted from an uplift in the domestic economy in recent years, resulting in greater demand for hotel accommodation. According to STR data, regional Irish hotels achieved occupancy of 66% in 2015, measuring a 6.8% compound annual average growth (CAAG) between 2013 and 2015. With equally impressive average room rate growth, achieving €101 in 2015, RevPAR performance has increased 10% year-on-year between 2013 to 2015, to €67. Hotel trading leading up to the EU Referendum has remained strong in 2016, with year-to-date RevPAR growth in double digits, up 11% on the previous year to €61. This regional performance marks a period of continued recovery, albeit with the regional trading data still below pre-recession 2007 levels. Hotels located nearest the Irish border are likely to be the hardest hit, with travel and demand for overnight hotel accommodation likely to be impacted.
We highlight the performance of the regional Irish hotels compared to the Dublin hotel market in the charts below. As can be seen Dublin city centre hotels and Dublin Airport hotels achieve a significant RevPAR premium over regional Ireland.
GENEVA
PARIS
ZURICH
LONDON
MILAN
ROME
AMSTERDAM
FRANKFURT
BARCELONA
EDINBURGH
DUBLIN
BRUSSELS
VIENNA
BERLIN
MADRID
LISBON
PRAGUE
€50
€0 €200
€150
€100
€111
€250
€300
Dublin City CentreDublin Surroundings
Dublin AirportIreland Regional
FEB APR JUN0%
5%
10%
15%
20%
25%
Figure 12: Annual Achieved ADR Performance 2015 – Dublin v European Cities
Figure 13 – Hotel Trading Performance, Dublin v Regional Performance
Achi
eved
ADR
Per
form
ance
(€)
Dublin City Centre Dublin Airport Dublin SurroundingsIreland Regional Source: STR Data
Dublin City Centre
Dublin Surroundings
Dublin Airport Ireland Regional
20
0
40
60
80
100
120
RevP
AR G
row
th ye
ar-o
n-ye
ar (%
)
2013 2014 2015
Dublin City Centre
Dublin Surroundings
Dublin Airport Ireland Regional
20
-
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60
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140
Aver
age
Room
Rat
e Pe
rform
ance
€
2013 2014 2015
Dublin City Centre
Dublin Surroundings
Dublin Airport Ireland Regional
20%
0%
40%
60%
80%
100%
Hote
l Occ
upan
cy
2013 2014 2015
2013 20152014 2016
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC55%
60%
65%
70%
75%
80%
85%
90%
95%
2013 2014 2015 2016 Source: Hotstats
Source: STR Global
Source: STR Global
HOTEL DEVELOPMENT
Following a strong recovery from a period of harsh economic conditions and a period of oversupply of hotel accommodation, there is now concern and increasing evidence of a shortfall of visitor accommodation in Dublin. A shortage in quality hotel accommodation can thereby limit the potential for tourism growth in the future, due to the limited capacity to cater for a further lift in visitor numbers to Ireland.
Statistics published by Fáilte Ireland show that available bed spaces in Dublin in approved accommodation have declined by approximately 7% between 2010 and 2015 to around 81,800 bed spaces. Meanwhile, research undertaken by The Irish Tourism Industry Confederation, estimates that Dublin requires 30 new hotels or 5,000 bedrooms by 2020 to accommodate the expected growth in visitor numbers.
Between the period of 2013 and 2016 approximately 2,000 new hotel rooms have entered the Irish hotel market as a result of new hotels opening, hotels reopening following restoration or major refurbishment as well as extensions to existing hotels. The greater Dublin area received 25% of this new supply opening, with the North-West and South-West Regions also capturing over 300 new rooms entering the market.
2013 2014 2015 2016 2017
50
0
100
150
200
Dublin Region Midlands & East Region West RegionShannon North-West Region South-West Region South-East Region Figure 14: Hotel Bedrooms Planned by Region 2013-2017
Table 1: New Hotels Opening in Ireland, 2010-2015
Based on our research for prospective hotel developments and extensions, we have reviewed future hotel supply in Ireland by star-rating and by region. There are approximately 12,000 bedrooms planned, of which over 70% of projects are destined for Dublin. Of this total, 27% of projects are reportedly on-hold, whilst a further 58% remain speculative. Only approximately 1,800 rooms are anticipated to open by 2018. Projects are deemed to be speculative often due to a lack of information or due to the time taken in formulating development plans and funding. Whilst many of these
Dublin Region Midlands & East Region West RegionShannon North-West Region South-West Region South-East Region
New Hotels Opening in Ireland, 2010-2015
Hotel Name Location Region Opened Rooms Star Rating Facilities Location Type Brand
Gibson Hotel Dublin Dublin Region 2010 252 4-star Full Service City Ascend Hotel Collection
Snoozles Galway West Region 2010 27 Hostel Hostel Rural Independent
Ballyfin Ballyfin Midlands & East Region 2011 20 5-Star Country-House Rural Relais &
Chateaux
Waterfront Hotel Baltimore South-West Region 2011 13 2-star Limited Service Rural Independent
Talbot Hotel Belmullet West Region 2011 21 4-star Full Service Rural Independent
Park Place Apartments Killarney South-West Region 2011 73 Apts Limited Service Rural Independent
Anvil Bar Boolteens South-West Region 2012 6 3-star Inn Rural Independent
Marker Hotel Dublin Dublin Region 2013 187 5-star Full Service City Leading Hotels of the World
Dean (The) Dublin Dublin Region 2014 52 4-star Boutique City Independent
Cloughjordan House Cloughjordan Shannon 2015 17 3-star Full Service Rural Independent
North Pole Bar Drumfries North-West Region 2015 3 2-star Inn Rural Independent
Temple Bar Inn Dublin Dublin Region 2015 95 3-star Limited Service City Independent
Croagh Patrick Hostel Murrisk West Region 2015 11 Hostel Hostel Rural Independent
Source: Knight Frank Research
Figure 15: Proposed Hotels in Ireland, by Region
8%
5%
3% 6% 4%
1%
73%
Dublin Region Midlands & East Region West RegionShannon North-West Region South-West Region South-East Region Source: AM:PM
Figure 16: Proposed Hotels in Ireland, by Region and Development Status
Speculative
Oh Hold
Due 2016 Due 2017 Due 2018
1,000
- 2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
SOUTH-EAST REGION
SOUTH-WEST REGION
NORTH-WEST REGION
SHANNON
MIDLANDS & EAST REGION
DUBLIN REGION
WEST REGION
Source: Knight Frank Research; AM:PM Hotel Intelligence Data
Source: Fáilte Ireland
Figure 17: Proposed Hotels in Ireland, by Star Rating
speculative projects are likely to proceed, especially in Dublin, any significant slowdown in visitor arrivals as a result of Brexit, is likely to cause a number of these speculative projects being put on hold until such a time where the Irish hotel sector once again shows signs of stability and sustainable growth.
As shown in Figure 17, the vast majority of proposed hotels are planned in the mid- market segment, with over 70% of proposed hotel rooms planned as three-star and four-star hotels. There is also strong growth in supply forecast for budget hotels making up over 12% of new hotel supply; meanwhile, the serviced apartment sector is likely to make an entry as a sub-sector of the Irish hotel market, with 10% of the proposed new hotel bedroom stock forecast to come from this segment.
We outline below the most significant hotel developments planned in Ireland, with the majority of the developments shown to be located in Dublin. In the short term the supply constraint will benefit hotel trading performance, particularly given the uncertainty following the vote for Brexit; however, in the medium term adding capacity will be important for the hotel industry, in particular Dublin as the capital city, to maintain its attractiveness as a business and tourist destination. Two major Irish hotel owners, Dalata Hotel Group and Amaris Hospitality remain upbeat and positive about the need for new hotel developments or significant extensions planned to existing properties. The Dalata Hotel Group have over 500 hotel rooms in the pipeline for Dublin, including the 367-room extension at the Clayton Hotel Dublin Airport and a proposed 180-room Clayton Hotel at Charlemont Street, both developments are expected to be completed by mid-2018.
Speculative Due 2016 Due 2017 Due 2018
500
- 1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
BUDGET
2-STAR
3-STAR
4-STAR
5-STAR
HOSTEL
APTS
On Hold Source: Knight Frank Research; AM:PM Hotel Intelligence DataOn HoldSpeculative Due 2016 Due 2017 Due 2018
Table 2: Hotel Developments Planned, Dublin & Regional
Hotel Name Location TypeNew Rooms Star Rating Owner Phase Opening Operator
Proposed Maldron Hotel, Beasley St Cork New Build 121 4-Star Dalata Hotel GroupUnder Construction Due 2018
Maldron Hotel Group
Clayton Hotel, Charlemont Street Dublin Conversion 181 4-Star Dalata Hotel Group Full Planning Due 2018Clayton Hotel Group
Proposed Andrews Lane Hotel Dublin Conversion 115 Pod-HotelConsortium led by Firebreak Hospitality
Awaiting Planning Speculative Unknown
Proposed Pinebrook House Hotel Dublin Conversion 152 4-Star Olema Consultants Full Planning Speculative Independent
Clerys Department Store Dublin Conversion 176 4-Star OCS Properties Ltd Awaiting Planning Speculative Unknown
Aquavetro Dublin Mixed-Use 167 4-StarCIE/Ronan Group Real Estate Pre-Planning Speculative Unknown
Bewleys Café, Grafton Street Dublin Mixed-Use 70 BoutiqueRonan Group Real Estate Pre-Planning Speculative Unknown
Convention Centre Dublin Dublin New Build 250 5-Star SDDC Hotel Ltd Full Planning On Hold Unknown
Proposed Coombe Bay Hotel Dublin New Build 263 4-StarRealmside Ltd (O'Sullivan family)
Awaiting Planning Speculative
Hodson Bay Group
Holiday Inn Express Dublin - City Centre Dublin New Build 198 Budget Findlater House Ltd Under Construction Nov-16 IHG
Proposed Hotel, Mill Street, Tenters Pub Dublin New Build 202 4-StarPrivate Owner (Denis O'Brien) Full Planning Speculative Unknown
Proposed Apart-Hotel, Mark Street Dublin New Build 178 Apart-Hotel Tetrarch Capital Pre-Planning SpeculativeStaycity Apart Hotels
Proposed Hotel, Sackville Place Dublin New Build 158 4-Star Tetrarch Capital Pre-Planning SpeculativeTetrarch Hospitality
Proposed Hotel, Bow Lane East Dublin New Build 190 Apart-Hotel Marlin Full Planning SpeculativeMarlin Apartments
Proposed Hotel Pembroke Street Lower Dublin New Build 108 4-StarPlaza on the Square Ltd Full Planning Speculative Independent
Proposed Travelodge, Summerhill Dublin New Build 364 Budget Smorgs Ltd Full Planning Speculative Travelodge
Proposed Maldron Hotel, Kevin Street Dublin New Build 137 3-Star Dalata Hotel Group Full Planning Due 2018Maldron Hotel Group
Proposed Budget Hotel, Moore Street Dublin New Build 107 BudgetKendlebell Mid-West Ltd Full Planning Speculative Unknown
Proposed Hodson Bay Hotel, The Coombe Dublin New Build 263 4-Star Hodson Bay Hotel Full Planning SpeculativeHodson Bay Group
Proposed Hotel North Wall, Spencer Dock Dublin Mixed-Use 169 4-Star Independent Pre-Planning Speculative Independent
Red Cow Hotel Extension Dublin Extension 152 4-StarGuestford Ltd (Tom Moran)
Near Completion Due 2016 Independent
Clayton Hotel Dublin Airport Extension Dublin Airport Extension 367 4-Star Dalata Hotel Group Full Planning SpeculativeClayton Hotel Group
Radisson Blu Hotel, Dublin Airport Dublin Airport Extension 146 4-StarCG Hotels Dublin Airport Ltd Full Planning Speculative Rezidor SAS
Dublin Airport, T2 Dublin Airport New Build 400 4-StarDublin Airport Authority Full Planning Speculative Unknown
Radisson Blu Hotel, Dublin Airport Dublin Airport New Build 168 4-StarCG Hotels Dublin Airport Ltd Full Planning Speculative Rezidor SAS
Proposed Enniskerry Park Hotel Enniskerry New Build 200 4-StarRonan Group Real Estate Pre-Planning Speculative Unknown
Proposed Hotel Connacht Laundry Site Galway New Build 136 5-Star Welmary Properties Full Planning Speculative Unknown
Table 2: Hotel Developments Planned, Dublin & RegionalSource: AM:PM Hotel Data Intelligence
IRISH HOTEL INVESTMENT
ENVIRONMENT
Historically the hotel investment market in Ireland has largely focused on Dublin; however, in recent times secondary cities, such as Cork, Limerick and Galway are becoming increasingly popular with investors. Nevertheless, in 2015 over 60% of hotel investment volume was targeted at Dublin, which as the capital and gateway city to Ireland attracts strong interest from overseas and domestic investors.
As hotels have become a more established asset class and as investors continue to seek out suitable institutional grade product, Dublin has witnessed a significant increase in investment from domestic and overseas investors on the hunt for quality product in prime locations. Furthermore, the strong trading performance of hotels in Dublin since 2014, buoyed by a strong increase in demand from domestic and overseas visitors, together with the limited supply growth have further helped underpin hotel transactional activity.
In 2015, the Irish hotel investment arena was dominated by one key player, Dalata Hotel Group, with the acquisition of 15 hotels in Ireland and the UK for a total consideration of €558.8 million, thereby allowing the Group to significantly scale up its operations and in particular raise its market profile in the Dublin market. The acquisitions consolidated the group’s position as the largest hotel operator in Ireland, operating approximately 20% of the hotel room supply in Dublin. The Group targeted sizeable hotels in prime locations, notably Dublin, Galway, Cork and Wexford, the majority of which have been rebranded under either the Maldron or Clayton hotel brands. Following further acquisitions in the first half of 2016, of the 7,717 rooms under Dalata management, 54% of the portfolio is owned, 31% leased and 15% managed.
Meanwhile, strong investment activity has been recorded by Dublin-based PREM Group, following their €30 million funding package with Swedish investor Proventus Capital Partners. The group have added three Irish properties to their 45-strong diverse hotel and serviced apartment portfolio of owned, leased and managed assets across Ireland, the UK and Europe. In late 2015 PREM Group acquired the 109-room Osprey Hotel & Spa Complex, in Naas, Co. Kildare, followed by two further 4-star hotel transactions in 2016, the 74-room Tulfarris Hotel & Golf Resort in Co. Wicklow for in excess of €8 million and the 38-room Cahernane House Hotel in Killarney for €3 million.
During the first half of 2016 hotel investment activity in Ireland has remained strong, with some 26 single asset hotel transactions recorded, with a total transaction value of approximately €175 million, largely driven by activity outside of Dublin. These hotels include; the 110-suite Staycity Serviced Apartments Dublin for €25m; the 162-room Clarion Hotel Sligo for €13.1m and the 158-room Clarion Hotel Limerick for €16million. Meanwhile, the second half of 2016 has already witnessed the €92 million sale of the iconic 323-bedroom, four-star, Gresham Hotel to the Spanish hotel firm RIU Hotels & Resorts, outbidding Irish hotel group TifCo and generating a profit of almost €60 million for from the National Asset Management Agency which purchased the asset from the former Anglo Irish Bank for €35 million.
A surge of investment activity for Dublin is expected for the second half of 2016, with a number of high profile hotels under negotiation and due to complete before the year end. Such high profile deals include the 501-room Doubletree by Hilton Hotel, Dublin (the former Burlington Hotel), with the German asset manager DekaBank emerging as the preferred bidder for the hotel, with the Private Equity firm Blackstone seeking offers over €180m (€359,000 per room), thereby more than doubling its investment since its purchase in 2012. The Dalata Hotel Group is understood to be in exclusive talks with DekaBank to lease and operate the hotel upon completion of the sale.
Meanwhile the surge of hotel transactions in Dublin is expected to be further bolstered with the sale of the Fitzpatrick Lifestyle Hotel Group portfolio, comprising three hotels (The Spencer, The Morgan and The Beacon), thought to be seeking offers over €130 million.
Table 3: Significant Irish Hotel Transactions – 2015 – Q2 2016
Significant Irish Hotel Transactions - 2015 - Q2 2016
Sale Date Hotel Location RoomsStar Rating
Approximate Price (€)
Average Price per Room Buyer Buyer Origin
Q1-2015 Clayton Hotel Ballsbridge Dublin 304 3-star € 75,200,000 € 247,000 Dalata Hotel Group Irish
Q1-2015 Clayton Hotel Dublin Airport Dublin Airport 466 4-star € 79,300,000 € 170,000 Dalata Hotel Group Irish
Q1-2015 Clayton Hotel Leopardstown Leopardstown 354 4-star € 44,800,000 € 127,000 Dalata Hotel Group Irish
Q1-2015 Maldron Hotel Newlands Cross Dublin 297 3-star € 26,900,000 € 91,000 Dalata Hotel Group Irish
Q1-2015 Clayton Hotel Galway Galway 195 4-star € 16,600,000 € 85,000 Dalata Hotel Group Irish
Q1-2015 Waterford Castle Hotel & Golf Club Waterford 20 4-star € 6,000,000 € 300,000 Private Individual Irish
Q1-2015 Adare Manor Limerick 64 5-star € 30,000,000 € 469,000 JP MacManus Irish
Q1-2015 Maldron Hotel Sandy Road Galway 104 4-star € 10,500,000 € 101,000 Dalata Hotel Group Irish
Q1-2015 Clayton Whites Hotel Wexford 157 4-star € 15,000,000 € 96,000 Dalata Hotel Group Irish
Q1-2015 Intercontinental Dublin Dublin 197 5-star € 50,000,000 € 254,000 John Malone Partnership/Lalco US/Irish
Q1-2015 Temple Bar Hotel Dublin 132 3-star € 30,000,000 € 227,000 Pyramid Hotel Group USA
Q2-2015 Glenroyal Hotel Maynooth 113 3-star € 10,500,000 € 93,000 Comer Group Irish
Q2-2015 Premier Inn Dublin Airport Dublin 155 Budget € 11,000,000 € 71,000 Kirkland Investments Irish
Q3-2015 Grafton Capital Hotel Dublin 76 3-star € 12,000,000 € 158,000 Balrath Investments Ltd Irish
Q3-2015 Ballsbridge & Clyde Court Hotels Dublin 585 3-star € 180,000,000 € 308,000
Abu Dhabi Investment Authority/Chartered Land
Middle East
Q4-2015 Kilkenny Hibernian Hotel Kilkenny 46 4-star € 7,000,000 € 152,000 iNua Hospitality Irish
Q4-2015 Dawson Hotel Dublin 36 4-star € 17,000,000 € 472,000 Tetrarch Capital Irish
Q4-2015 Castlemartyr Resort Castlemartyr 103 5-star € 16,000,000 € 155,000 Eagle Resort (Holdings) UK UK
Q4-2015 Clarion Hotel Cork Cork 198 4-star € 35,100,000 € 177,000 Dalata Hotel Group Irish
Q1-2016 Tara Towers Hotel Dublin 111 3-star € 13,160,000 € 119,000 Dalata Hotel Group Irish
Q1-2016 Hilton Dublin Airport Dublin 166 4-star € 10,000,000 € 60,000 Emerald Investment Partners UK
Q1-2016 Clarion Hotel Sligo Sligo 162 4-star € 13,120,000 € 81,000 Dalata Hotel Group Irish
Q2-2016 Tulfarris Hotel & Golf Resort Blessington 74 4-star € 8,000,000 € 108,000 PREM Group Irish
Q2-2016 DoubleTree by Hilton Dublin 501 4-star € 180,000,000 € 359,000 Blackstone Group USA
Q2-2016 Pillo Hotel Ashbourne Ashbourne (Irl) 148 4-star € 11,000,000 € 74,000 Podium Hospitality Ltd Irish
Q2-2016 Village at Lyons Celbridge 20 4-star € 6,000,000 € 300,000 Private Individual Irish
Q2-2016 Staycity Serviced Apartments Dublin 110 Apts € 25,000,000 € 227,000 Independent Irish
Q2-2016 Maldron Beasley Street Cork 121 4-star € 10,200,000 € 84,000 Dalata Hotel Group IrishSource: Knight Frank Research
CONCLUSION AND OUTLOOK
In 2015 the Irish hotel market moved into a period of stabilised growth, with strong GDP growth in Ireland’s main tourist markets. Favourable exchange rate movement, targeted marketing campaigns, the reduced rate of VAT on tourism and the perception of Ireland being a safe destination for travel, have all contributed to increased numbers of foreign visitors. Hotel supply in Dublin has been stable and hotels have enjoyed strong trading performance, underpinned by the continued economic recovery in Ireland and to the country’s main source markets.
The impact of the UK’s vote to leave the EU, however, has the potential to significantly disrupt the Irish economy due to the considerable amount of Anglo-Irish trade. Following the EU Referendum, the euro has appreciated significantly versus sterling and this is a major concern due to the heavy reliance on visitor arrivals which currently emanate from the UK.
Nevertheless, the fundamentals of the Irish hotel market remain positive despite the significant challenges and uncertainty ahead following the EU Referendum. Indeed, investor appetite from both Irish and overseas investors continues to surge ahead in 2016 and favourable exchange rate conditions for economies pegged to the US Dollar is likely to fuel further appetite from US, Middle Eastern and Asian investors.
ABOUT THE AUTHOR
Philippa Goldstein holds a BSc Honours Degree in Hotel & Catering Management from Oxford Brookes University. Following ten years operational experience in the hospitality industry in the UK and Europe and experienced in Hotel Valuations and Feasibility Studies, Philippa recently joined Knight Frank’s Hotels team in March 2016 as the dedicated Research & Hotel and Market Analyst. PHILIPPA GOLDSTEIN
Hotel Analyst
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