Dublin hotel room prices on the up despite increase in supply
Almost 1,000 new rooms added to capital’s market last year with 2,500 more on the way
Tim Fenn of the Irish Hotels Federation believes the Irish accommodation sector is ‘absolutely good value for money’ and the evidence ‘is to be found in the solid growth we have seen over several years’ Photograph: iStock
Perception counts for a lot in tourism circles and a notion that a destination is good value for money, or at least not bad value, goes a long way towards selling it.
Ireland did well after the economic crash to alter a view held by many in key markets during the boom years that the island was vastly overpriced.
While that altered image still holds, rising hotel prices are proving problematic.
They are the first thing many tourists look at when planning a holiday and prices in Ireland – particularly in Dublin – have climbed sharply as a result of an ongoing problem with supply and strong demand.
Hotels in the capital increased their average daily room rate (ADR) by more than 7 per cent in November compared to the previous year.
Data from travel research group STR shows ADR increased 7.2 per cent to €134.68 in Dublin in the month after Minister for Finance Paschal Donohoe announced the VAT rate for hotel rooms would rise from 9 per cent to 13.5 per cent.
Supply and demand
ADR is one of a number of key metrics in the hotel business which represents the average rental income per paid occupied room in a given period.
The increase in Dublin followed growing occupancy as hotels in the capital filled 83 per cent of rooms in 2018.
In regional Ireland, which STR defines as everywhere outside Dublin, occupancy was almost 20 per cent lower at 63.8 per cent last year.
Nevertheless, in the 11 month period to the end of November the picture has improved in regional Ireland compared to the previous year with revenue per available room increasing 9.4 per cent to €83.53.
Dublin hotels in particular had a strong year in 2018 as supply problems troubled the market.
In May, for example, Dublin hostels had an occupancy rate of 90.5 per cent.
The construction of hotels is picking up and almost 1,000 new rooms were added to the Dublin market last year including the 145-bedroom Iveagh Gardens hotel on Harcourt Street and the 140-bedroom Maldron Hotel on Kevin Street in Dublin 8.
A further 2,500 hotel rooms are due to open either this year or next.
Another factor that has kept hotel prices in check has been the availability of accommodation via property sharing, most notably Airbnb.
That option could be radically altered this year by the Goverment’s plans to cap short-term lets of a person’s primary residence at three months of the year.
Owners of second homes or investment properties will be banned from short-term letting unless they have planning permission, a move which could see as many as 3,000 homes in greater Dublin come back into the long-term rental market.
Eoghan O’Mara Walsh, of the Irish Tourism Industry Confederation, is concerned by the move.
“The sharing economy has been merged with housing and the homelessness crisis and I don’t think much consideration has been given to the impact the new regulations will have on tourism.
Airbnb has been a release valve and kept accommodation prices down,” he says.
He describes that as unfortunate and suggests that on “over 90 per cent of the nights of the year rates in Dublin are less than €120”.
He believes the Irish accommodation sector is “absolutely good value for money” and the evidence “is to be found in the solid growth we have seen over several years.
“That does not come about just because a place is cheap it is because it exceeds expectations across a range of different metrics.”