Irish hotel investors confident for 2020
Crowe partner and hotel specialist Aiden Murphy.
Crowe partner and hotel specialist Aiden Murphy spoke to journalist Conor McMahon to contribute to this article which appeared in The Sunday Times on 19 January 2020.
Buswells hotel, a popular meeting place in Dublin for journalists and politicians, was quieter than normal last week as TDs rushed home to their constituencies ahead of the general election and protesting beef farmers shut down Molesworth Street. “We’re landlocked,” general manager Paul Gallagher told The Sunday Times on Wednesday. “Accessing Buswells on a protest day is difficult.”
The hotel, like many others in Dublin, has thrived in recent years as the city has recorded high room occupancy levels amid a tourism boom and a shortage of available accommodation. Yet 2019 showed signs of softening, particularly towards the end of the year. Data from hospitality research company STR showed hotels in the capital were on average 83.9% full in the year to the end of November, down 1.4 points on the same period in 2018. Revenue per available room (revpar) decreased 3.2% during that period to just over €120.
“When you look in the rear-view mirror, 2018 was a record year for hotels. 2019 didn’t live up to it for a number of reasons,” said Gallagher.
Hoteliers paid a higher rate of VAT, which increased from 9% to 13.5% in 2019, and grappled with hikes to insurance and staffing costs that have affected many other industries. There was also a rise in the number of rooms entering the market following years of stagnant construction activity.
Dublin has about 50,000 hotel rooms. Approximately 5,000 more are under construction, according to the property services giant CBRE, of which 2,200 are scheduled to open for business this year. Despite the added competition, it is a development that is broadly welcomed by the sector. “There are more hotels promoting Dublin and the city is getting more exposure on the international markets,” said Gallagher, adding daily rates would likely decrease and provide better value to consumers.
Mark Scott-Lennon, director and general manager of the Fitzpatrick Castle hotel in Killiney, said that, although a large number of new rooms were scheduled to open over a short space of time, the market would absorb the extra capacity in the long term.
“There is a big increase in room stock. That’s going to have an effect on rates and business, but I don’t think it’s going to have too negative an effect,” he said.
Isobel Horan, of real estate consultancy Cushman & Wakefield, said most “well-run and well-located hotels” in Dublin that had kept up to date with capital expenditure and maintenance should be able to withstand the stream of new bedrooms. For example, the five-star Fitzwilliam hotel near St Stephen’s Green is investing €6m in refurbishing its rooms and improving its IT infrastructure to help with sales, marketing and operational duties. “You cannot sit on your hands when it comes to your product offering and your employees, who are your most important asset,” said Fergal O’Connell, the hotel’s general manager.
Horan noted that several international brands had either opened properties or were scheduled to enter Dublin over the coming years. This should create new competition for a market that has predominantly consisted of family-run properties and large domestic groups.
Aloft, Moxy and Hyatt Centric have already opened sites in the capital. Motel One, Nyx, easyHotel and Hard Rock hotel — attracted by the city’s “strong musical roots”, according to head of global hotel business development Todd Hricko — are among those that will soon open or have committed to opening sites. Premier Inn, which currently runs one hotel in Swords, has set a target of operating 2,500 rooms across the city.
“What [international brands] bring is a certain outside demand and customer base,” said Horan.
Extra capacity will bring its challenges. Aiden Murphy, a partner and hotel consultant at Crowe Ireland, said the quieter period from November to March would test incumbent hoteliers. “You have five months when you have softer levels of demand, and therefore you have all the hotels competing aggressively for available business,” he said.
Garry Walsh, the commercial director of hotel operator Hodson Bay Group, agreed the additional capacity had started to make Dublin “very competitive in these soft months”. The family-owned Hodson Bay Group runs hotels in Athlone and Galway and opened the 234- bedroom Hyatt Centric in Dublin’s Liberties area last year. Walsh said the decision to open under the Hyatt brand was partly due to the lessons the group learnt from partnering with Sheraton in Athlone.
“The Sheraton opened back in 2008, probably the worst time you could open a hotel in Ireland,” said Walsh. “The franchise arrangement helped us pull through. We had additional audiences from all over the world. Franchising with Hyatt is an insurance policy.”
Marlin, which has operated hotels and serviced apartments in London for more than a decade, opened a €55m, 300-bedroom property on Bow Lane in August.
General manager Michelle O’Donoghue said the hotel would be leveraging its central location to attract both domestic and international guests and to entice locals to use its public areas.
“The whole vibe of the place is something different. As you come in the front door, we have both a reception and self check-in. We have a coffee dock and co-working space as you come in,” she said. “It’s a big open space. Whether you’re coming in to work or have lunch, it doesn’t feel like you’re coming into an office or a stuffy hotel.”
Dalata chief executive Pat McCann said the group, which operates the Maldron and Clayton brands in Ireland and the UK, was prepared for the added competition in Dublin. “Whether you’re an international or local hotelier, the principles are the same. I suppose we do have advantages in that we have very well-located, well-invested assets and well-invested management teams,” he said.
Dalata will open a Maldron hotel and apartment complex in Dublin 4 in 2021. It will also open the Samuel hotel in the city’s affluent docklands area near US tech giant Salesforce’s new European headquarter campus, which is currently under construction.
In a December stock market trading update, Dalata said revpar decreased 3.2% during the 11 months to the end of November due to softer market conditions. McCann noted that revpar did not include “food and beverage, meeting space, leisure space and car parking”.
He highlighted that Dublin would this year host several significant events, including four football internationals for Euro 2020. The city is also forecast to enjoy a bump in corporate travel, which could boost Dalata’s Dublin properties.
“There is a notion that we are very dependent on pure tourism. That’s not true at all. A big driver of my business in Dublin is corporate traffic. That’s doing business with Facebook, Google, Amazon, any of these larger companies and indigenous companies,” he said. “That is growing substantially. All you have to do is look at the economic growth figures forecast for Ireland in 2020, that’s up 5%. That reflects in my business as well.”
That economic growth, regardless of new arrivals, is underpinning investment. Radisson Blu Royal hotel in Dublin 8 has committed €100m to an extensive refurbishment, eight-storey extension and convention centre that will host 800 people in its main hall. General manager Madeline Riley said more than 60% of visitors to the hotel were business travellers.
“I think the reason behind the convention centre was the demand. Our hotel being a business hotel, there are not a lot of venues that would have capacity for 800 in Dublin city centre,” she said.
“That was the key business decision of why it is being built.”
Aiden Murphy is a partner within our Corporate Finance department and has consulted on hotel projects for over 20 years. He produces our annual Ireland Hotel Industry Survey and recently published the 24th edition.
Express check-in: why hotel speculators are desperate to book in at Dublin
A stream of investment in Dublin’s hotel sector comes hard on the heels of a testing 2019. But operators are confident economic growth will see few beds left empty.Buswells hotel, a popular meeting place in Dublin for journalists and politicians, was quieter than normal last week as TDs rushed home to their constituencies ahead of the general election and protesting beef farmers shut down Molesworth Street. “We’re landlocked,” general manager Paul Gallagher told The Sunday Times on Wednesday. “Accessing Buswells on a protest day is difficult.”
The hotel, like many others in Dublin, has thrived in recent years as the city has recorded high room occupancy levels amid a tourism boom and a shortage of available accommodation. Yet 2019 showed signs of softening, particularly towards the end of the year. Data from hospitality research company STR showed hotels in the capital were on average 83.9% full in the year to the end of November, down 1.4 points on the same period in 2018. Revenue per available room (revpar) decreased 3.2% during that period to just over €120.
“When you look in the rear-view mirror, 2018 was a record year for hotels. 2019 didn’t live up to it for a number of reasons,” said Gallagher.
Hoteliers paid a higher rate of VAT, which increased from 9% to 13.5% in 2019, and grappled with hikes to insurance and staffing costs that have affected many other industries. There was also a rise in the number of rooms entering the market following years of stagnant construction activity.
Dublin has about 50,000 hotel rooms. Approximately 5,000 more are under construction, according to the property services giant CBRE, of which 2,200 are scheduled to open for business this year. Despite the added competition, it is a development that is broadly welcomed by the sector. “There are more hotels promoting Dublin and the city is getting more exposure on the international markets,” said Gallagher, adding daily rates would likely decrease and provide better value to consumers.
Mark Scott-Lennon, director and general manager of the Fitzpatrick Castle hotel in Killiney, said that, although a large number of new rooms were scheduled to open over a short space of time, the market would absorb the extra capacity in the long term.
“There is a big increase in room stock. That’s going to have an effect on rates and business, but I don’t think it’s going to have too negative an effect,” he said.
Isobel Horan, of real estate consultancy Cushman & Wakefield, said most “well-run and well-located hotels” in Dublin that had kept up to date with capital expenditure and maintenance should be able to withstand the stream of new bedrooms. For example, the five-star Fitzwilliam hotel near St Stephen’s Green is investing €6m in refurbishing its rooms and improving its IT infrastructure to help with sales, marketing and operational duties. “You cannot sit on your hands when it comes to your product offering and your employees, who are your most important asset,” said Fergal O’Connell, the hotel’s general manager.
Horan noted that several international brands had either opened properties or were scheduled to enter Dublin over the coming years. This should create new competition for a market that has predominantly consisted of family-run properties and large domestic groups.
Aloft, Moxy and Hyatt Centric have already opened sites in the capital. Motel One, Nyx, easyHotel and Hard Rock hotel — attracted by the city’s “strong musical roots”, according to head of global hotel business development Todd Hricko — are among those that will soon open or have committed to opening sites. Premier Inn, which currently runs one hotel in Swords, has set a target of operating 2,500 rooms across the city.
“What [international brands] bring is a certain outside demand and customer base,” said Horan.
Extra capacity will bring its challenges. Aiden Murphy, a partner and hotel consultant at Crowe Ireland, said the quieter period from November to March would test incumbent hoteliers. “You have five months when you have softer levels of demand, and therefore you have all the hotels competing aggressively for available business,” he said.
Garry Walsh, the commercial director of hotel operator Hodson Bay Group, agreed the additional capacity had started to make Dublin “very competitive in these soft months”. The family-owned Hodson Bay Group runs hotels in Athlone and Galway and opened the 234- bedroom Hyatt Centric in Dublin’s Liberties area last year. Walsh said the decision to open under the Hyatt brand was partly due to the lessons the group learnt from partnering with Sheraton in Athlone.
“The Sheraton opened back in 2008, probably the worst time you could open a hotel in Ireland,” said Walsh. “The franchise arrangement helped us pull through. We had additional audiences from all over the world. Franchising with Hyatt is an insurance policy.”
Marlin, which has operated hotels and serviced apartments in London for more than a decade, opened a €55m, 300-bedroom property on Bow Lane in August.
General manager Michelle O’Donoghue said the hotel would be leveraging its central location to attract both domestic and international guests and to entice locals to use its public areas.
“The whole vibe of the place is something different. As you come in the front door, we have both a reception and self check-in. We have a coffee dock and co-working space as you come in,” she said. “It’s a big open space. Whether you’re coming in to work or have lunch, it doesn’t feel like you’re coming into an office or a stuffy hotel.”
Dalata chief executive Pat McCann said the group, which operates the Maldron and Clayton brands in Ireland and the UK, was prepared for the added competition in Dublin. “Whether you’re an international or local hotelier, the principles are the same. I suppose we do have advantages in that we have very well-located, well-invested assets and well-invested management teams,” he said.
Dalata will open a Maldron hotel and apartment complex in Dublin 4 in 2021. It will also open the Samuel hotel in the city’s affluent docklands area near US tech giant Salesforce’s new European headquarter campus, which is currently under construction.
In a December stock market trading update, Dalata said revpar decreased 3.2% during the 11 months to the end of November due to softer market conditions. McCann noted that revpar did not include “food and beverage, meeting space, leisure space and car parking”.
He highlighted that Dublin would this year host several significant events, including four football internationals for Euro 2020. The city is also forecast to enjoy a bump in corporate travel, which could boost Dalata’s Dublin properties.
“There is a notion that we are very dependent on pure tourism. That’s not true at all. A big driver of my business in Dublin is corporate traffic. That’s doing business with Facebook, Google, Amazon, any of these larger companies and indigenous companies,” he said. “That is growing substantially. All you have to do is look at the economic growth figures forecast for Ireland in 2020, that’s up 5%. That reflects in my business as well.”
That economic growth, regardless of new arrivals, is underpinning investment. Radisson Blu Royal hotel in Dublin 8 has committed €100m to an extensive refurbishment, eight-storey extension and convention centre that will host 800 people in its main hall. General manager Madeline Riley said more than 60% of visitors to the hotel were business travellers.
“I think the reason behind the convention centre was the demand. Our hotel being a business hotel, there are not a lot of venues that would have capacity for 800 in Dublin city centre,” she said.
“That was the key business decision of why it is being built.”
Aiden Murphy is a partner within our Corporate Finance department and has consulted on hotel projects for over 20 years. He produces our annual Ireland Hotel Industry Survey and recently published the 24th edition.
