Higher hotel rates due to pent-up demand and refugee crisis, says Dalata boss

Hotel chain expects revenue per room across the group to be 18% ahead of 2019 levels for the May/June period

The boss of Ireland’s largest hotel chain, Dalata, has blamed rising hotel room rates on pent-up demand in the wake of the pandemic and the refugee crisis.

Dermot Crowley said the market was experiencing “a period of exceptional pent-up post-pandemic demand at a time when supply is temporarily reduced as a direct consequence of the war in Ukraine”.

While recognising concerns about rising hotel prices in Ireland, he said the group’s average room rate in Dublin for the second quarter of 2022 was €160. “This is an increase of 20 per cent over 2019 [on a like-for-like basis],” he said.

Public criticism of hotels over their room rates has grown in recent weeks amid reports that weekend room rates of €300-€400 per night were being charged by modest hotels in Dublin.

In a trading update, Dalata said faster-than-expected recovery in hotel markets had continued to surpass expectations and it now expected revenue per room across the group to be 18 per cent ahead of 2019 levels for the May/June period.

The company, which has 49 hotels in its portfolio, including 29 that it owns and 17 that it leases, said demand had largely returned across all segments, led by very strong leisure demand, particularly around event dates and weekends.

“The recovery in Dublin has been particularly strong due to the combination of significant demand and reduced supply in the market,” it said, noting the reduction in supply was primarily the result of rooms being utilised to accommodate a substantial increase in refugees requiring emergency accommodation due to the war in Ukraine.

The group also reported strong trade in the UK and regional Ireland where revenue per room is expected to be 7 per cent and 27 per cent ahead of 2019 levels respectively during the May/June period.

On the downside, Dalata said it was experiencing cost inflation across the business and was continuing to proactively manage the business to protect margin recovery.

It said it expected earnings before interest, taxes, depreciation and amortisation (ebitda) to be in excess of €81 million for the six months ending June 30th, reflecting a strong first-half trading performance and despite operations being curtailed by Covid restrictions during the first two months of the year.

It also announced the completion of the sale of the Clayton Crown Hotel in London to a company controlled by AG Hotels Group for about £21 million (€24.4 million) in cash. The group also expects to conclude the sale of its Merrion Road residential units to Ires Reit for €42 million in the coming weeks.

“I am very pleased with the manner in which demand has recovered across our markets since Covid restrictions were lifted earlier in the year,” Mr Crowley said. “In June, our Dublin hotels are expected to reach occupancy of 93 per cent.

“Despite widespread cost inflation, we continue to honour long-standing agreed prices, including those in place for over 160,000 coach tour guests we are welcoming over this summer,” he said.

“We will continue to assist the Irish Government in its response to the crisis created by the war in Ukraine by making 5 per cent of our rooms in the Republic of Ireland available to the Department of Children, Equality, Disability, Integration and Youth for the remainder of this year at the rates requested,” he said.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times