DUBLIN, November 20th, 2018 Development activity in the Irish hotel market is ramping up, with Dublin predominantly the focus. Delivering almost 800 bedrooms to a market in short supply and increasing occupancy levels, construction completed in 15 hotels during the first nine months of 2018.
Notably, 87% of the rooms delivered were in Dublin across both new builds and extensions. Two significant openings earlier in the year included the 145-bedroom Iveagh Gardens Hotel on Harcourt Street, Dublin 2, and the 140-bedroom Maldron Hotel Kevin Street, Dublin 8. Three more openings are anticipated for the fourth quarter in Dublin, and one in Cork.
A further 2,800 hotel rooms were under construction at the end of September, a 37% rise annually, across 31 hotels. Again, the majority of these rooms are in Dublin, with a mix of aparthotels right through to 5-star hotels in the pipeline. Furthermore, two-thirds of the rooms under construction comprise new builds, while 19% are in the form of extensions, and the remaining 14%, in hotel redevelopments.
The most notable hotel to commence construction during the third quarter was that of a new 7-storey hotel on Ship Street Great, Dublin 8. This hotel will provide 136 bedrooms upon completion towards the end of 2019.
Turning to hotel transaction activity, the limited number of properties being brought to the market for sale over the past year has resulted in a notable slowdown in activity. Investment in Irish hotels amounted to €36.5m in the third quarter, bringing the nine-month total turnover to €79.3m, across just eight transactions. Compared to same period of 2017, a 10% fall in the value of sales was recorded. This excludes any unconventional hotel sales such as company sales, loan sales and refinances.
The Irish hotel market continues to witness a drying up of distressed asset sales which characterised the market in the years 2014-2016, with both the volume and value of transactions slowing. Transactions to date this year have been mostly small-sized assets, with no big ticket, €50m+ hotels, for sale on the market.
Just one hotel sale in the year to date was over €20m in value. Transacting in the third quarter, the 4-star Hilton Dublin Airport sold for €22.5m to Canadian-based, Westmont Group, in their first venture into the Irish market. Also, in the third quarter, UK hotel investor, Propiteer, purchased the recently refurbished 4-star Ibis Hotel, just off the Red Cow Roundabout, for in excess of €14m. These two Dublin hotels were the only two to transact in the capital in the year to date. However, combined they accounted for 46% of the total value. Of the remaining transactions, four hotels were in the West of Ireland, and two in the South-East.
All hotels sold in the nine months to September were trading asset sales, with no investment sales occurring in the period. Cushman & Wakefield believes that turnover for the year as a whole could exceed €120m; approximately €43m worth of hotels were sale agreed at the end of September and due to close by year end. However, this will be well below the five-year annual average of over €400m.
Positively, the CGT exemption holding period, which in last year’s Budget was reduced from seven to four years for assets purchased up to the end of 2014, should result in a rise in further hotel re-trades from 2019 onwards.
Commenting on the market, Kirsty Rothwell, Head of Trading Assets, Cushman & Wakefield, said: "Dublin city is now seeing a steady pipeline of bedrooms coming on stream, which is encouraging to see. As the gateway to the rest of Ireland, it is vital to the wider hotel market that Dublin remains competitive and attractive to tourists."
Finally, as expected, the VAT rate for the tourism and hospitality sector was revised back to 13.5% in October’s Budget. Irish hotels enjoyed a 9% VAT rate introduced in 2011 to act as a stimulus to the tourism sector, which is now at record levels. However, undesirable for the hotel sector, Irish hoteliers particularly in more regional hotels will now be factoring this VAT rate hike into their pricing strategies. This is most particular ahead of the looming Brexit deal and a vulnerability surrounding a potential further decline in sterling. Notably the past year has seen Ireland’s flow of UK tourists decline, with an increased reliance on European and North American overseas visitors. This VAT rate move is anticipated to yield €466m in revenue to the economy next year, however, an allocation of €35m was made for targeted supports to the tourism and hospitality sector.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 48,000 employees in more than 70 countries help investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6.9 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.ie or follow @CushWake on Twitter.