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How will the Shelbourne Hotel’s new owner recoup the near €260m price tag?

Hefty price has raised eyebrows within the hospitality industry

Management and staff at the Shelbourne Hotel gathered outside earlier this month to celebrate its 200th Birthday. It now has a new owner, Archer Hotel Capital. Photograph: Leon Farrell/Photocall Ireland

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Sat Mar 30 2024 - 06:00

The five-star Shelbourne Hotel has changed hands, reportedly for just under the €260 million price tag that Kennedy Wilson put on the business. Archer Hotel Capital, which also owns the Conrad Hotel across St Stephen’s Green, is the acquirer, adding the Grand Old Dame of the Irish hotel industry to a portfolio that comprises 13 properties in Europe and almost 4,000 bedrooms.

The price achieved has raised some eyebrows in Irish hotel circles, with many questioning how Archer will achieve sufficient earnings from the Shelbourne to make its money back. It’s a trophy asset for sure but one that requires a lot of capital investment to maintain the 200-year old business as a five-star property within the shell of a listed building.

No doubt Archer can squeeze some back-of-house synergies out of owning two five-star hotels in Dublin within 500m of each other. And there has been a strong rebound in the hotel business in Dublin since Covid-19 restrictions were lifted two years ago.

Kennedy Wilson’s recent annual report shows that the Shelbourne’s revenues last year rose by just under 22 per cent to $57.1 million (€52.9 million) “due to higher volume of travel post-pandemic, which lead to higher occupancy and average daily rates”.

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But its expenses also rose, by 28 per cent to $37.9 million.

The good news for staff at the Shelbourne is that it has a new owner with deep pockets that is fully invested in the hotel sector (the Dublin property was effectively Kennedy Wilson’s only hotel asset). For customers, the bad news could be higher prices on the horizon or a squeeze on service levels as Archer seeks to sweat the asset to justify the hefty price tag.

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