Dublin won’t be getting all those hotels after all

At the beginning of 2020, it felt as if new hotels were springing out of the ground in Dublin like daffodils. A long tourism boom had spurred plans for more than 80 new hotel proposals that, had they all come to fruition, would have added 18,000 new bedrooms to the city’s existing complement of 23,000.

It was party time again for developers after years of post-crash building stasis during which almost no new hotels were delivered. The State’s tourism authorities pushed for city planners to give the green light to more properties to meet demand, while Dublin’s existing hotel operators gorged on occupancy rates that were among the highest in Europe.

But the development rush had become so frenzied that left-leaning city councillors last September voted to curb new hotel projects in favour of more residential and cultural spaces. The #nomorehotels hashtag regularly trended on Irish Twitter.

Despite opposition from some quarters, the scene was set for the most intense expansion of Dublin’s hotel stock in the city’s history over the next three or four years. Then, like a dose of Roundup, the pandemic arrived in February and suddenly the future didn’t seem so bright for daffodils any more.

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Coronavirus has devastated the tourism industry, and a full recovery isn’t expected until at least 2023. As a result just one new hotel has opened in Dublin so far this year as restrictions continue to throttle the hospitality sector.

With the timing of a gymnast face-planting on to a mat, the Hard Rock Hotel in Temple Bar opened its doors two days before the first virus case in Ireland was confirmed. It will be joined in coming weeks by the 160-bed Zanzibar Locke aparthotel, which will open on Ormond Quay in Dublin, and the 240-bed Beckett Locke beside the 3 Arena.

But much of the rest of the city’s hotel pipeline has slowed to a trickle. Of the roughly 3,000 new hotel bedrooms that were expected to be built this year, only about 500 will be delivered. Next year’s pre-pandemic estimate of about 5,000 new rooms is expected to drop by up to 40 per cent, as completion dates are pushed out.

Property agency Cushman & Wakefield this week mused that many planned new hotel developments were now “unfeasible” and some developers were “examining other options” for their sites. Could the #nomorehotels opponents of lopsided development end up with a victory, however hollow, by default?

"Developers can't just build empty hotels for the craic," says developer Johnny Ronan, who is in a battle with planners who have refused him permission to strip the hotel component out of the 23-storey Aqua Vetro mixed-use tower he is building across the river from Liberty Hall.

He wants to replace it with more offices, but council planners fear that will make the area feel dead at night. Ronan's appeal to An Bord Pleanála includes a note from consultants who say the hotel is no longer viable due to the pandemic.

“We had a deal done with an operator to take on the hotel, but after the virus the agreement fell out of bed. It’s that simple,” says Ronan. “We can’t build new hotels if there is no demand for them. Who will take them on as tenants and who would fund them? It’s wishful thinking trying to build empty hotels.”

Arrested development

Isobel Horan, a divisional director with Cushman & Wakefield, told a Bank of Ireland webinar this week that close to 2,000 planned hotel rooms have already been "deferred" by developers, although she stresses that many big international hotel brands remain interested in Irish sites over the medium term. As the slowdown bites, the number of deferrals is expected to grow.

Horan estimated that the value of economy hotels, which have fared least poorly in the wasteland created by the virus, has fallen by 15-20 per cent while higher-end Dublin hotels are worth up to 30 per cent less than they were before the pandemic.

She says her estimates should be viewed with a caveat, as nobody truly knows the value of hotels when so few are being traded. But the numbers look plausible in the context of further figures presented at the webinar by Sarah Duignan of research firm STR. Duignan says Dublin hotels have been clobbered, with a 72.4 per cent drop in revenues per room this year, while occupancy since the summer has floated between 10 and 20 per cent. It is truly grim out there.

“We’re talking to plenty of big brands that still see opportunities in Ireland,” said Horan. “But it is true that we are also having early-stage talks with some hotel developers who are exploring other options for their sites. Offices and apartment blocks look to be the most stable alternatives.”

'Many of the hotel projects that are still in the planning process simply won't get funding because a hotel may no longer be the best use of the site'

There is a belief within the trade that most hotel projects that have yet to break ground, even if they have planning permission, are unlikely to be built. Ronan’s Aqua Vetro case is the highest-profile, but city planners are believed also to have been approached by the developers of two or three other major hotel projects to discuss putting in fresh planning applications for residential schemes instead.

Richard Shakespeare, assistant chief executive of Dublin City Council, says many developers are "waiting to see how the market reacts" to the hoped-for end to the pandemic next year. If tourism comes back quickly, they may start building hotels again, he suggests.

“The pandemic will have delayed many projects by at least 12-18 months as developers wait and see. As for those that have already commenced construction to some degree, it is my view that they will complete as hotels, in the overwhelming majority of cases,” says Shakespeare.

This view would seem to be borne out in some rather old-school research conducted by Tom Barrett, the director of hotel and leisure at Savills. In March he jumped on his bike during the first lockdown, when all construction was halted, and toured the city's hotel building sites. About 5,000 Dublin hotel rooms are believed to be at various stages of construction from the ground up.

“I did the tour again recently, and many of those hotels that I noticed had broken ground early in the year are now up to the third floor,” says Barrett. “So they’re going ahead. But of the ones that had been scheduled to start construction towards the end of this year, very few of those have done anything.”

For example, while enabling works have been completed for a proposed new hotel at Portobello in Dublin 8, Barrett observed on his cycling tour that nothing else seemed to have happened on the site.

Shelved extensions

It isn’t just new hotels being affected. Many extensions to older hotels have also been shelved.

"It all comes down to funding," says John Ryan, head of licensing and hospitality at agents Bagnall Doyle MacMahon. "You can have planning, but if the funders get cold feet, what can you build? Many of the hotel projects that are still in the planning process simply won't get funding because a hotel may no longer be the best use of the site. The major banks will tell you that they're still lending to the sector, but that is more to shore up existing operators. For brand new projects, not a chance."

The pre-pandemic opponents of unbridled hotel development in the city, which they believe was carried out while the need for housing and cultural spaces was neglected, were jolted into voice by a seemingly incessant flow of planning decisions. Barrett, however, suggests many of those hotels would not have been built, “pandemic or not”, as the total of 18,000 new rooms was too high for Dublin to absorb.

A fresh campaign is brewing against an attempt to convert the house from James Joyce's The Dead on Dublin's quays into a tourist hostel

Figures supplied by Savills show that just four new hotel openings accounted for the bulk of new rooms delivered in Dublin in 2018, while there were eight such new hotels in the city in 2019. It is possible that the blizzard of permission decisions may have given the impression that more hotels were being built than was the case.

Barrett agrees that new hotels, which authorities said were needed before the pandemic to cope with the surge in tourism, got a "bad rap" and ended up being blamed for unrelated planning shortcomings such as a lack of affordable housing or cultural venues. The anger appeared to peak last year over the closure of popular street art-themed pub the Bernard Shaw, which was due to be replaced by a hotel.

Andrea Horan, co-presenter of the United Ireland podcast and who also runs quirky city nailbar Tropical Popical, was prominent among those calling for #nomorehotels. Along with her business partner Dave Byrne, they turned the hashtag into a club night in Wigwam. Guest DJs included street artist Maser and Green Party councillor and now Dublin lord mayor Hazel Chu.

Clubbing is culture, Horan says, and the council should be as actively involved in trying to encourage the building of cultural spaces as it has been in facilitating new hotels: “What we were engaged in was never a pushback against hotels.”

But isn’t a campaign entitled #nomorehotels bound to be perceived as precisely that? No, Horan argues. She says it “was never a campaign; #nomorehotels was a statement” that was meant to highlight how the council had lost sight of the real things that make a city live and breathe along with its residents.

“Tourism is an important industry,” she says. “But it was beginning to become a monoculture. We were never trying to say that we hated hotels. But if you allow all development to be just about the market, you allow the wipeout of culture. If everything is development led, and for turning a profit, then it is easy to see why hotels were shooting up everywhere. There is no long-term plan for culture, such as clubbing.”

Even though the pandemic has flattened the tourism industry and choked off much of the hotel development pipeline, Horan’s #nomorehotels endeavour will continue. Its organisers have produced a mini documentary on the issue that is due to be launched in January.

In the meantime, criticism continues about plans to serve the tourism industry, even if it is at the expense of the arts.

A fresh campaign is brewing against an attempt to convert the house from James Joyce’s The Dead on Dublin’s quays into a tourist hostel. Author Colm Tóibín and Joycean scholar John McCourt are prominent in that effort, which has gone to an appeal. The vagaries of the depressed tourism market may, however, have as much influence over the outcome than the campaign.

An awful hammering

Three new city hotel projects that are going ahead are those planned by Dalata, the country's largest hotel operator and leader of the Dublin market. According to its chief executive, Pat McCann, its hotel, The Samuel – part of Ronan's almost-complete Salesforce development in the north docklands – will open next year.

Dalata's revamp of the former Tara Towers hotel on Merrion Road is on track for 2022, while it hopes to open across the road from Croke Park in 2023.

“You did have this rush of hotel planning applications out there. But many of those proposals will move on to different projects, be it residential or something else,” says McCann. “Dublin had been doing very well and people thought the market must be easy. It isn’t. In a normal cycle, you’d find that a rush of development like that would make a lot of the existing weaker hotels fall away anyway.”

A glut of new hotel projects right as the pandemic depresses demand for bednights raises the question of whether some of the buildings may be erected anyway, and then later repurposed for alternative use as apartments or offices in acts of elaborate development upcycling. Barrett believes this is unlikely due to the costs and the need to approach the council for change-of-use permission anyway. It is better to just scrap a superfluous hotel project before construction, and redesign it properly and get full planning for its intended use.

“The hotels that are being built will operate as hotels. It is not just a planning issue, but also the cost of conversion, the actual suitability of the building and the location. In [the crash of] 2009, people thought a lot of the then-new hotels would be converted into alternative use. But that only happened in about 1 per cent of cases,” says Barrett.

Even as some of the new proposals fall away, such as the hotel at Ronan’s Aqua Vetro tower on the south quays, the show goes on for those that are nearing completion. McCann’s soon-to-be-landlord at The Samuel is happy with the partnership and insists the hotel will be a success, despite the tourism collapse that has injected uncertainty into other projects.

“Dalata are happy with The Samuel, and it will be ready in June,” says Ronan. “But hotels in general are after taking an awful hammering. For the moment, I can’t see many new projects getting through. Maybe with this vaccine, we might see a different world in six months. But I think this is going to take time.”