DESPITE improved trading in Dublin and some regional Irish cities, the Irish hotel investment market remains relatively subdued, and investment activity is confined primarily to Dublin, according to Jones Lang LaSalle Hotels' latest Hotel Intelligence report for Ireland.
Jonathan Hubbard, CEO Northern Europe, said the hotel market in Ireland was still plagued by oversupply and, despite an improvement in trading performance in 2011, revenue per available room remained well below its peak in Dublin and was still declining in some provincial Irish markets.
"The divergent trading performance of the Dublin tourism and hotel market compared to Ireland's provinces has created something of a two-tiered market place, with the Dublin hotel market attracting the majority of investor attention."
The report found that 78 per cent of Dublin hotels were owned locally, with a large proportion of the market effectively bank-owned. As of January 2012, Dublin's graded hotel supply consisted of 150 hotels totalling roughly 19,000 bedrooms. Hotel supply is dominated by the three-star segment, which holds a share of 46.3 per cent, followed by the four-star segment (40.4 per cent). The five-star segment accounts for just 7.8 per cent of the market and is dominated by international brands including Radisson Blu, Four Seasons, Westin, Conrad and Rennaissance, together with some well-established Irish hotels such as the Westbury and the Merrion.
Worsening economic conditions in Ireland had a profound impact on Dublin's hotel industry; as a consequence, Dublin hotels suffered room yield falls of 13.4 per cent in 2008 and 22.9 per cent in 2009.
Hubbard said the decline in Dublin room yield started to slow in 2010, due to a rise in occupancy levels alongside a slower decline in average room rates. Hotel performance rebounded strongly in 2011, with Dublin hotels posting a 10 per cent growth in room yield at year-end 2011. "We anticipate continued room yield growth in 2012, albeit at a slower pace of growth than 2011."
John Moran, managing director, Jones Lang LaSalle Ireland, said most of the international capital we are seeing was expressing strong interest in the hotel sector, but only for the higher-quality assets and recognisable brands. Like all sectors of the property market, the polarisation between prime and secondary was evident.
Daniel O'Connor of Jones Lang LaSalle Hotels, said the Dublin hotel performance was expected to continue to improve, boosted by a strong events calendar in the city and recently opened key demand generators including Convention Centre. Dublin. However, the outlook for provincial Irish cities was mixed, with areas of acute oversupply, such as Limerick, likely to continue to experience trading performance decline.
"A perception that the Dublin hotel market is past the bottom and now on an upwards trajectory, is continuing to fuel hotel international investor appetite."
