Irish hotel takeover deals near €140m in first half of year

Dublin hotel deals set for €420 million surge amid record room rates

The Irish hotel market witnessed almost €140 million of takeover deals in the first half of the year, driven by activity outside Dublin, according to DTZ Sherry FitzGerald.

The figure is set to be dwarfed in final six months of the year, amid a surge of activity involving four-star hotels in the capital, as room rates and occupancy continue to rise, unchecked by the impact of Brexit, for the moment at least.

"The latter half of the year is expected to witness a stronger volume of transactions than the first half of 2016," said Kirsty Rothwell, head of hotels solutions at DTZ Sherry FitzGerald in Dublin.

“Activity is expected to be boosted by a number of large hotels which are currently in negotiations.”


Hot spot

Dublin hotels have emerged in 2016 as a hot spot in the commercial property deals market in the past 18 months, following on from a wave of transactions in the office and retail sectors in recent years, with deals in the sector worth more than €420 million set to close before the year is out.

Earlier this month, Spanish group Riu Hotels & Resorts was picked as preferred bidder for the landmark Gresham Hotel on O'Connell Street after bidding more than €90 million.

The sale, managed by CBRE and Christie & Co, is a consensual one under a plan between the hotel's owner Precinct Investments, a company controlled by housebuilder Bryan Cullen, and the National Asset Management Agency, which bought loans linked to the business during the financial crisis. Precinct paid €117 million for the asset in 2004.

Room revenue

Rising interest in the Dublin hotel market comes after the industry recorded an almost 23 per cent increase in revenue per available room, or what’s known in the industry as RevPar, last year – the highest of any European city. The pace of growth has continued this year, rising 21 per cent in the seven months to July, according to STR Global, a research firm that specialises in hotel statistics.

The average daily rate for Dublin hotel rooms now stands at a record €128.15, some 18 per cent above 2007 levels, having risen 19 per cent in the first seven months of the year, according to STR data provided to The Irish Times. Occupancy levels are at almost 82 per cent, above boom-time levels, it said, amid a dearth of hotel development in the capital since the property crisis began.

Only four hotels have opened in Dublin since 2007, according to property agents Savills. These comprise the Gibson, Marker, Dean hotels and the Temple Bar Inn.

While a fall in sterling’s value against the euro following the UK’s Brexit referendum has made Ireland more expensive for British tourists, Ireland and other euro-zone countries have become a cheaper destination for visitors who use or have currencies linked to the dollar.

Savills estimates that overseas trips to Ireland will grow by 10 per cent this year, albeit down from 14 per cent in 2015.


In the race for the Gresham, Majorca-based Riu fended off rival bids for the Gresham, with 323 guest rooms, from Tifco, an Irish hotel company backed by Goldman Sachs, and private equity firms Apollo and Cerberus.

Meanwhile, private-equity group Blackstone is checking out of the former Burlington hotel in Dublin, now run under the Hilton Worldwide's DoubleTree brand, in a deal that is expected to achieve about €180 million. This equates to double the amount the New York firm spent buying the hotel four years ago and refurbishing it.

Blackstone, advised by Savills, is believed to be close to picking a winning bid, having attracted interest from US groups Hyatt Hotels and Host Hotels & Resorts, and the Abu Dhabi Investment Authority. A fourth, as yet unidentified, bidder is also said to have put in a strong offer.

Elsewhere, three boutique Dublin hotels – the Beacon, Morgan and Spencer – are also currently up for sale, having attracted indicative bids of up to €150 million.

Strong market

"The Irish hotel market has been very strong over recent years and, notwithstanding the risks from Brexit, we expect it to remain supportive," German investment bank Berenberg said in a recent research note on Dalata, the country's largest and only publicly quoted hotel operator.

“We estimate Dalata will generate double-digit RevPAR growth in both Dublin and regional Ireland this year, with solid growth continuing further out,” said Berenberg analysts led by Ned Hammond. “Elsewhere, the UK market has been weaker and we forecast just 1 per cent RevPAR growth for each of the next three years.”

Indeed, Dalata's chief executive, Pat McCann, told The Irish Times last month the company is putting its expansion plans in the UK, where almost a quarter of its total 7,500 owned, leased and managed hotel rooms are based, on ice, following the UK's decision to quit the EU.

“We had plans to develop in the UK and we still feel that will happen, but it would be unwise to make any decisions until we get some indication what’ll happen in the UK,” he said.


In the meantime, the company is continuing its rapid growth, with plans to build up to 1,000 rooms on the island of Ireland by 2018. This includes two hotels in the capital – on the site of the former Charlemont Clinic along the Grand Canal and on Kevin Street, minutes from St Stephen’s Green.

The Irish Tourism Industry Confederation estimates the capital needs as many as 30 new hotels, comprising up to 5,000 rooms, by the end of the decade.

Industry observers say it now finally makes economic sense to build four-star hotels again in Dublin’s city centre because values, as seen by recent deals activity, outstrip the cost of construction.