Hotel Sales Value Dips

The value of sales of Irish hotels fell last year, according to new research by Savills Ireland.

The value of transactions involving hotels in Ireland reached €350m, down 30% on the historical average. There was no single deal worth €50m or more during the period. Demand for regional hotels remained strong.

Savills Ireland said inflation and higher interest rates were behind the fall in demand for hotel deals, as yields rose and the value of investment properties subsequently dropped.

It forecasts that 2024 transactional activity will grow from last year's levels, with signs that interest rates have plateaued, providing investors and prospective buyers with firmer foundations on which to make decisions.

Tom Barrett, Director of Hotels and Leisure at Savills Ireland, said that hotel data analysis provider STR has predicted that occupancy levels in Dublin hotels will fall slightly this year. However, the real estate agency predicts that revenue per available room will grow, due in part to a strong pipeline of upcoming events.

“ESG will also play an increasing role in the Irish hotel market, with more hoteliers focused on securing green credentials,” said Mr Barrett. “The Wren Urban Nest was the first Net Zero Operational Carbon hotel to open in Ireland. With rising energy costs putting pressure on margins, investing in sustainable practices will enable hotels to reduce their costs, improve profitability and boost their brands.”

Savills said although the VAT rate increase from 9% to 13.5% last year was a headwind to revenue, the market was supported by a slowdown in the pipeline of new hotel openings, as well as inbound travel which is now 2% higher than it was before the pandemic. Just 1,200 new hotel rooms opened in Dublin, constraining supply.

It also pointed to around 12% of all beds in Fáilte Ireland registered hotels being contracted to the State for the provision of emergency accommodation during 2023. Of these, beds in hotels in the regions were mainly occupied by people fleeing the war in Ukraine, while in the capital they were used by international protection applicants and people who were homeless. Savills predicts that most of these hotel beds will not return to tourist use in the short to medium term.

Overall, occupancy in Dublin returned to above the 80% mark with an average daily rate of €180 per room, up 27% on 2019. In some regional areas, revenue per available room was up 50%.

Among the biggest hotel deals during the period was the sale of a majority share in The Dean Hotel Group to Lifestyle Hospitality Capital by Paddy McKillen Jr, Matt Ryan and their Press Up Group, at a reported €350m valuation.