Despite average room rates in Dublin reaching a record €155.75 while occupancy rates reached 89.6% and revenue per available room (RevPAR) rose 9.7% to €139.51, 2018 has reportedly been a "normal" year for hotel transactions in the wake of several years of strong turnover in the hotel investment market from distressed Nama-driven sales.
According to The Irish Times, director of hotels and leisure at Savills Tom Barrett stated, "International funds and domestic investors are still chasing hotel assets. So there is a good balance of buyers. The recently announced Budget 2019 increase in the VAT rate on the hospitality sector has put pressure on the industry and Brexit is adding plenty more uncertainty. But the outlook is stable for hotels."
"Drying Up Of Distressed Asset Sales"
Meanwhile, Cushman & Wakefield senior economist Deirdre O'Reilly said, "Investment in Irish hotels amounted to €36.5 million in the third quarter of 2018, which brings the nine-month turnover total to €79.3 million, across just eight transactions. Compared to the same period of 2017, this is a 10% fall in the value of sales recorded. This excludes any unconventional hotel sales such as company sales, loan sales and refinances.
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"So the Irish hotel market continues to witness a drying up of distressed asset sales which characterised the market in the years 2014-2016, with both the volume and value of transactions slowing. Transactions to date this year have been mostly small-sized assets, with no big-ticket, €50 million-plus hotels for sale on the market. Just one hotel sale in the year to date was over €20 million in value."
"Sale Agreed" Hotels
O'Reilly added, "Turnover for the year as a whole could exceed €120 million as about €43 million worth of hotels were sale agreed at the end of September and due to close by year end.
"But turnover will be well below the five-year annual average of over €400 million. All hotels sold in the nine months to September were trading asset sales, with no investment sales occurring in the period."
In The Pipeline
Commenting on hotel development in Ireland, O'Reilly suggested that approximately 2,800 hotels are currently under construction in the country, representing a 37% annual rise. She said, "Two-thirds of the rooms under construction comprise new builds, while 19% are in the form of extensions, and the remaining 14% are hotel redevelopments. The most notable hotel to commence construction during the third quarter of this year was a seven-storey property on Ship Street Great, Dublin 8. This will provide 136 bedrooms upon completion towards the end of 2019."
© 2018 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.