Hotel investment spend to surpass €500m as visitor numbers hit new heights

Dublin city hotels secured a record average room rate of €258 in June while revenue per available room came in at €234

Robust hotel market demand is evident by key indicators such as Dublin Airport reporting record passenger numbers with over 120,000 passengers travelling through the two terminals on Sunday, July 30th. And passenger volumes remain strong, with 2.8 million passengers in the month of October, a 4 per cent increase on the same month last year.

Such demand is reflected in the performance of the hotel sector. In June, for instance, Dublin city achieved a 91 per cent occupancy level, a record €258 average room rate, and a RevPAR (revenue per available room) of €234. This broke the existing RevPAR record set when 400,000 people attended the Garth Brooks concerts in Croke Park in September 2022 by 8 per cent.

In a year when investors have questioned the fundamentals of other real estate sectors, hotel investment volumes remain strong, with JLL forecasting more than €500 million worth of transactions. Should this figure be achieved, it would represent an increase of around 20 per cent on 2022.

The activity for 2023 can be broadly categorised as follows:


Thankfully, the interest-rate environment is beginning to stabilise with the re-emergence of private equity into the market, which is evident from the biggest deal so far this year involving the Dean Hotel Group

− €250 million worth of transactions completed so far this year.

− Approximately €50 million worth of deals under negotiation/exclusivity.

− The merger and acquisition sale of the majority stake of the Dean Hotel Group to Lifestyle Hospitality Capital and Elliott Investment Management for a reported €350 million is currently under contract. While the deal recently received approval from the Competition and Consumer Protection Commission (CCPC), the transaction is still subject to some conditions.

− €700 million worth of deals on the market with the largest being the Tifco portfolio, which carries an estimated value of around €500 million.

The profile of buyers for the first half of the year was predominately comprised of high-net-worth individuals and hotel operators. Quarter 3 was a quiet and uncertain period, with back-to-back increases in interest rates. Thankfully, the interest-rate environment is beginning to stabilise with the re-emergence of private equity into the market, which is evident from the biggest deal so far this year involving the Dean Hotel Group.

Solid investor demand continues to translate into the supply pipeline. There have been several new openings across Dublin that mainly focused on the branded budget segment of the market, which the city has been lacking. These include the 393-key Travelodge Plus, Townsend Street, the 310-key Motel One on Middle Abbey Street, and the 113-key Premier Inn Gloucester Street. Premier Inn has been particularly active, with their hotels in Newmarket, Dublin 8 and Castleforbes, Dublin 1, due to open within the coming weeks.

We expect an approximate 6 per cent increase in Dublin hotel stock this year, with supply growth then likely to reduce to between 2 and 4 per cent annually in the medium term. The hotel supply pipeline is drying up due to prohibitive construction and financing costs. Supply constraints are being exacerbated by the housing of refugees in some of Ireland’s hotel stock. There is also some emerging frustration within the market, with some local authorities citing “over-concentration” as their reasoning for refusing planning permission.

Interestingly, we are now seeing a growing list of hotel operators focusing on the office-to-hotel conversion opportunities in Dublin. The capital’s office stock currently stands at 48 million sq ft with a vacancy rate of about 14 per cent. 30 per cent of this vacant office stock is categorised as Grade B and Grade C, making it ripe for conversion.

If all this old stock were to be converted, it could add up to 5,000 keys to the Dublin hotel market, helping to alleviate the current supply shortfall. However, in reality, due to planning, construction costs, and financing challenges, we expect only a proportion of this stock to be converted to hotel use in the short to medium term.

Hotel demand will be strong in 2024 with a number of major events already scheduled for Dublin in the summer, including concerts by Taylor Swift and Coldplay, along with the Uefa Europa League final.

Isobel Horan is senior vice-president of the hotels and hospitality group at JLL Ireland