Ireland finally said goodbye to all Covid-19 restrictions in April, and hotel performance has flourished ever since. The number of domestic trips by Irish residents in the summer of 2022 surpassed 2019 levels. Dublin Airport passenger numbers were 94 per cent back to pre-pandemic levels as of October.
These are all the ingredients required for recovery and, therefore, it is no surprise that the Dublin city hotel market achieved a record 92 per cent occupancy, with an average rate of €234.30 and revenue per available room (RevPAR) of €215.10 in September. This is the highest monthly RevPAR achieved in Dublin ever.
Investment demand grew post-pandemic with about €400 million worth of transactions occurring so far this year and approximately a further €150 million under negotiation. The total investment volume for this year is likely to exceed 2021 levels.
For example, JLL exclusively brokered two of the largest transactions this year, including the sale of the 340-key StayCity aparthotel in Dublin 7 to Song Capital and Premier Inn’s purchase of the Clerys Hotel site.
We have also seen the emergence of new transactional structures this year with the appearance of ground-rent sales with the largest hotel ground-rent deal occurring earlier this year.
In relation to supply there have been several new openings across Dublin after multiple Covid delays, which mainly focused on the economy and aparthotel portion of the market. These include the 163-key Dublin One near Croke Park and the 204-key Samuel Hotel in the docklands. Provincial openings include the 100-key Dean Hotel in Galway and at the luxury end of the market the reopening of the 42-key Cashel Palace in Tipperary.
There has also been some good news in relation to new entrants to the market with the announcement of The Hoxton coming to the former Central Hotel in Dublin 2 in 2024. On the positive side for existing hoteliers the level of new openings in 2023 and beyond is expected to be lower than in previous years.
As always in life there are headwinds which include the legacy of the Covid-19 impact on the supply chain, interest rate increases, and the outbreak of the war in Ukraine. Sanctions and shortages are causing materials to experience cost inflation, increasing supply chain disruption and increasing inflationary pressures, primarily via energy costs. Where many hoteliers are reporting growth in top-line revenues, increasing energy, payroll, and other costs are affecting profitability. Lastly, a proportion of the Irish hotel stock is currently housing emergency accommodation, which has both positive and negative impacts on the sector.
While nobody can predict the future we are expecting the final quarter of 2022 and the first quarter of 2023 to be a period of consolidation. Investors are currently concentrating on closing out existing deals rather than commencing any new deals. This is not about a lack of conviction in the fundamentals of hotel investment. It is due to the current macro-economical and geopolitical uncertainty that we are currently experiencing.
Demand for hotel investments is still strong because hotels are an asset class that is better placed to navigate high inflation. During these times the hotel room rate has proven to outperform, cushioning against higher operational and finance costs.
Isobel Horan is a director of JLL’s EMEA hotels and hospitality division
