Hotel sales tumbled last year amid soaring interest rates

The value of hotel sales in the Republic last year fell far below historical levels as interest rates rose, Savills Ireland has said.

However, the property agent said the market is primed for recovery in 2024 as inflation moderates and central banks begin to pare rates back once again.

Deals with a total value of €350 million took place in 2023, well below the historical average, Savills said, largely due to a steep decline in the number of transactions in Dublin. Demand for regional hotels, meanwhile, persisted amid “strong trade” and “attractive yields”, particularly in the luxury hotel category where revenue per available room, a key metric in the industry, coming in 50 per cent ahead of 2019 levels.

Hotel occupancy in Dublin returned to above 80 per cent for the first time since the beginning of the Covid-19 pandemic with the daily average room rate some 27 per cent ahead of 2019 levels at €180.

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However, room and occupancy rates in the capital city are expected to dip somewhat this year. Savills said the market was assisted last year by a slowdown in the pipeline of new hotel openings, which is expected to pick up again this year, creating more competition for rooms and driving down prices.

Overall, deal making in the hotel sector is expected to increase in 2024, said Tom Barrett, director of hotels and leisure at Savills Ireland, “with signs that interest rates have plateaued providing investors and prospective buyers with firmer foundations on which to make decisions”.

The pipeline of transactions is already considered strong with Paddy McKillen Jnr and Matt Ryan’s sale of their Dean Hotel Group brand to Lifestyle Hospitality Capital for a reported €350 million expected to be completed over the coming weeks.

Meanwhile, the Shelbourne Hotel is also reportedly being prepared for sale by Kennedy Wilson while Apollo has launched a €500 million sale process for the Tifco group of 16 owned and leased hotels across the State.

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