Irish Hotel Market Review

Transcription

Irish Hotel Market Review
SUMMER 2014
Introduction
The following report provides
an overview and analysis of the
performance of the Irish hotel market;
specifically market changes since the
onset of the recession and transaction
activity in the first half of 2014.
An overview of the general economic
environment in Ireland is provided,
with particular focus on the Irish
tourism and hotel sectors. Following
this, a detailed analysis of the Irish
hotel market is presented in terms of
its history and the size of the market
at present by tourism border regions.
In addition, the report provides a
classification of hotels by star rating,
together with a breakdown of tourism
revenue and the volume of hotel rooms
available in each region.
Details on transaction activity
are then provided together with
investment conditions in the hotel
sector; specifically purchaser type,
transactions by location and the types
of hotels transacted. Supply levels
are discussed in terms of hotels on
the market and hotel developments
in the pipeline. A brief outlook is then
provided on activity levels for the
remainder of 2014.
2 Summer 2014 | Irish Hotel Market Review
Economic Overview and Tourism Performance
Ireland’s economic recovery is strongly underway; 2013 marked a year of significant progress and
this strong momentum continued into 2014. GNP increased sharply on an annual basis by 3.4% in
2013, driven strongly by the 4.6% increase in the latter half of the year. This strong performance
extended into 2014 with GNP growth of 0.5% in the first three months of the year, while GDP grew
sharply by 2.7% in the period.
With the world economy also experiencing a similar recovery,
particularly Ireland’s main trading partners, the US and the UK,
the domestic and foreign tourism markets are directly impacted.
In 2013, tourism accounted for 4% of GNP. Furthermore, total
tourism revenue in 2013 stood at €5.7 billion, of which €4.2
billion was generated from overseas visitors, a sharp rise of 12%
from 2012.
The most significant recovery indicator is the improvement in
the labour market, notably the reduction in the unemployment
level. The latest CSO Quarterly National Household Survey saw
the unemployment rate in Ireland falling to 12% in quarter one
2014, from a peak of 15.1% in the first quarter of 2012. Moreover,
the growth in total employment in the year to quarter one 2014
was 42,700, a rise of 3.3%. One of the most significant increases
in employment was in the Accommodation and Food Service
Activities Sector, which rose by 13,500, or 11.2%, in the period,
while employment in tourism in Ireland has increased by 21%
since the quarter one 2011 low of approximately 114,400 jobs.
Overall, the Irish Hotels Federation (IHF) estimates that the
tourism sector in Ireland supports almost 200,000 jobs, of which
approximately 54,000 are employed by the hotel sector.
Tourism exports had a particularly strong year in 2013,
influenced largely by the government supported tourism
initiative “The Gathering”, recording the highest number of
foreign residents visiting Ireland in six years. According to the
latest CSO tourism statistics, the number of overseas residents
travelling to Ireland in 2013 reached approximately 7 million,
of which 1.16 million were from the US and Canada, the highest
figure ever recorded for that region. Domestically, trips by Irish
residents within the country also increased in 2013 for the first
time since 2008. This trend continued into the first quarter of
2014 with an increase of 8.5% in domestic trips by Irish residents
in the three month period.
CSO figures reveal that overseas visitor numbers to Ireland for
the period January to May 2014 rose by approximately 9.2%,
an increase of 228,200 visitors when compared with the same
period in 2013. Trips by residents of the UK, Ireland’s largest
market, increased by 13.1% on an annual basis, while trips by
residents of the USA and Canada increased by approximately
8%. Strong performances in both the UK and US economies
are significantly contributing to this resurgence in the tourism
industry and is driving the demand for hotel services in Ireland.
Economic Overview and Tourism Performance
While recovery in tourism and in the hotels sector is evident,
domestic demand in the economy remains somewhat fragile.
According to the IHF, tourism recovery in 2013 was not spread
evenly throughout the country, with Dublin and other tourism
hotspots such as the West and South-West regions performing
strongly while other, more rural, locations continue to face the
pressure of weak domestic demand. Furthermore, personal
consumption fell by 0.1% in the first quarter of 2014 when
compared with the previous three months; however, the rate of
decline is significantly lower and has improved on its comparable
periods the two previous years. Moreover, the Department of
Finance projects that consumer spending will rise in 2014 and
2015 by 0.4% and 0.8% respectively.
According to the IHF, while indebtedness in Irish hotels is
down from €6.7 billion at the end of 2011 to €5.3 billion,
the significant overhanging
debt problem still remains a
74% of tourism
key issue and is supressing
revenue in 2013 was
recovery in the sector; a
generated from
further reduction of €1.4
overseas tourists
billion is required if the
sector is to remain a viable
area in which to invest. This is particularly the case for
medium and smaller-sized hotels outside of Dublin that still
require investment and debt restructuring.
This said, investor and consumer sentiment is rising and
growth forecasts for Ireland have been upgraded. Having
reached a 7 year high in April 2014, the trajectory in
sentiment is largely on the increase. Moreover, based on the
assumption of improvements in the balance of payments
and in employment, and increased investor activity, the
Department of Finance forecasts GNP and GDP growth in
2014 of 2.7% and 2.1% respectively.
According to the latest Failte Ireland data releases,
provisional figures for 2013 tourism revenue in Ireland from
both domestic and overseas tourists stood at approximately
€5.7 billion. Of this, €4.2 billion was generated from
overseas tourists, which accounts for approximately 74% of the
total revenue.
This compares with the total tourism revenue of €5.4 billion in
2012, of which €3.8 billion was received from overseas visitors.
Dublin remains the region with the highest tourism revenue at
approximately 35% of the total figure. This is followed by the
South West and West regions of approximately 19% and 13%
respectively.
Figure 1
Tourism Revenue by Region, 2013
Tourism Revenue by Region, 2013
EST
NORTHW
WEST
EAST &
S
MIDLAND
20% +
DUBLIN
10% - 20%
< 10%
N
SHANNO
REGION
AST
SOUTH E
EST
SOUTH W
Source: DTZ Sherry FitzGerald Research / Failte Ireland, 2013
Irish Hotel Market
The roots of Irish tourism run deep; the Irish Tourism Association produced their first hotel brochure
in 1925 promoting 400 hotels. Since then, the Irish hotel market has substantially evolved, with the
number of hotels and room capacity growing significantly and doubling by the 2000s. This volume
remained stable between 2000 and 2005.
By 2007 there were 857 hotels registered in Ireland, with 51,300
rooms. This volume had increased markedly by 2009 to reach a
peak of 915 hotels, or 60,100 rooms, almost a one-third jump in
the stock of rooms and bed capacity since 2005.
Although capacity expanded rapidly during the 2000s, heavily
influenced by tax based incentives, hotel profitability remained
steady as demand for overnight stays and other hotel services grew
at pace in tandem with rapidly rising disposable incomes at the time.
However, the property crash brought with it weakened domestic
demand, which resulted in reduced hotel profitability and
massive hotelier debt burdens; thus, many small and large scale
hotels became victim to the recession. This combined with a halt
in construction activity resulted in the number of hotels in Ireland
open for business falling significantly by 11.6% to stand at 820 in
2014, with approximately 57,400 available rooms.
Table 1
Volume of Hotels and Hotel Rooms, 2014
Tourism Border Region
No. of
Hotels
Volume of
Hotel Rooms
% of Total
Hotel Room
Capacity
Dublin
153
18,825
32.8%
South West
153
9,795
17.1%
West
129
6,918
12.1%
East & Midlands
108
6,297
11.0%
North West
100
5,337
9.3%
Shannon Region
81
5,138
9.0%
South East
96
5,058
8.8%
State
820
57,368
100%
Dublin
The Dublin region currently has the largest proportion of hotel
rooms with 18,825 rooms, representing 33% of overall room
capacity. This is almost double that of the next largest proportion
of hotel rooms in the South West region. In total there are 153
hotels in Dublin; of this, 11 hotels are 5 star, 45 hotels are 4 star
and 72 hotels are 3 star, with the remaining 25 hotels 2 and 1
star rated. In terms of hotel size as reflected by the number of
rooms, Dublin holds the three largest hotels, namely the Double
Tree by Hilton (formerly The Burlington Hotel), Citywest Hotel
& Golf Resort and Bewleys Hotel Dublin Airport. The stock of
hotel rooms and bed capacity in Dublin strongly correlates with
tourism revenue in Ireland in 2013, whereby approximately 35%
of the overall tourism revenue for the year was generated in
the Dublin region. Moreover, it is interesting to note that visitor
numbers to Dublin in 2013, both domestic and overseas, were
in the region of 5.8 million, which accounts for approximately
a third of all visitors to Ireland in the year. This suggests that
Dublin is not just regarded as a prime hotel location for business
trips but for recreational and leisure purposes also.
Figure 2
Irish Hotel Distribution by Star Rating, 2014
Star Ratings of Hotels by Tourism Border Region
1* 2* 3* 4* 5*
Dublin
4
21
72
45
11
South West
5
18
61
59
10
West
6
22
54
44
3
East & Midlands
2
17
46
38
5
Northwest
4
19
43
33
1
Shannon Region
2
12
40
23
4
South East
5
13
38
37
3
Source: DTZ Sherry FitzGerald Research
EST
NORTHW
WEST
EAST &
S
MIDLAND
N
SHANNO
REGION
DUBLIN
AST
SOUTH E
EST
SOUTH W
Total No. of Hotels: 820
Source: DTZ Sherry FitzGerald Research / Failte Ireland
South West
North West
Traditionally a region that attracts plentiful tourists, it is not
surprising that the South West, consisting of Cork and Kerry, has
the second highest proportion of hotel rooms in 2014, recording
9,795 rooms. Albeit interestingly, there are the same number
of hotels in the South West as there are in Dublin, reflecting a
largely popular tourist location
Largest number of but for smaller scale hotels.
4 star hotels located in After Dublin, the South West
has the largest number of 5
the South West
star hotels, 10, while it has
the largest number of 4 star
hotels in the country, 59. Again the stock of available rooms in
the South West region, representing 17.1% of the total number of
rooms, strongly correlates with both the proportion of tourism
revenue in the South West in 2013, approximately 19%, and the
proportion of total visitor numbers, 18%.
The North West region recorded 5,337 hotel rooms in 2014
spanning across 100 hotels. There is only 1 hotel in the North
West that is 5 star, while there are 33 and 43 hotels that are
4 star and 3 star hotels respectively. Similar to the East and
Midlands, the proportion of total tourism revenue in 2013
generated in the North West region fell to single digit figures,
indicating that these regions were performing at a slower pace
than the prime tourist locations of the country.
West
In a similar performance bracket to the South West, the West
region holds the third spot of the top three performing regions
in 2014; tourism revenue and visitor numbers for the West both
recorded approximately 13% of overall tourism revenue and
visitor numbers. In terms of room capacity, there are 6,918
rooms, which represents 12% of the hotel room capacity in
Ireland. This is driven strongly by the stock of hotel rooms in
Galway and Galway city, 7.9%. Overall there are 129 hotels in the
West, of which three hotels are 5 star, 44 hotels are 4 star and
54 hotels are 3 star, while Galway city also hosts the 5th largest
hotel in Ireland in terms of the number of rooms; the Connacht
Hotel Galway.
Shannon Region
The Shannon Region has the second lowest proportion of hotel
rooms in 2014, recording 5,138 rooms in 81 hotels. Furthermore,
this region has the lowest number of hotels located in any region.
Interestingly, over 90% of the rooms in the Shannon region are
spread across Clare and Limerick, with the remaining located in
North Tipperary and West Offaly. It is also noteworthy that 11%
of the 5 star hotels in the country are located in the Shannon
region, while 23 hotels are 4 star and 40 hotels are 3 star.
South East
The lowest proportion of hotel rooms was recorded in the South
East region, with only 5,058 rooms in 96 hotels, of which three
are 5 star hotels, 37 are 4 star hotels and 38 are 3 star hotels.
Furthermore, approximately 60% of the hotel rooms available in
the South East region are located in Waterford and Wexford, with
the remaining located in Kilkenny, Carlow and South Tipperary.
Similar to the East and Midlands, the North West and the Shannon
region, the proportion of tourism revenue in Ireland generated in
the South East was in single digit figures in the year 2013.
East & Midlands
The East and Midlands accounted for 6,297 rooms in 2014 which
represents 11% of the hotel room capacity. In total, there are 108
hotels in the East and Midlands region, comprising 14% of all
the 5 star hotels in the country, while 38 hotels are 4 star and
46 hotels are 3 star. It is interesting to note that the East and
Midlands also hosts the county with the lowest number of hotels
and room capacity, Longford, with 23 rooms in just two hotels.
Furthermore, in terms of tourism revenue for 2013, the East
and Midlands region falls under the lower bracket of sub 10% of
overall revenue by tourism in Ireland in the year.
Figure 3
Volume of Hotel Rooms per County, 2014
Donegal
5.0%
Sligo
1.8%
Mayo
4.0%
Clare
4.4%
Cork
7.9%
Monaghan
0.6%
Leitrim Cavan
Louth 1.2%
0.5%
1.4%
Roscommon
0.3% Longford
Meath
0%
2.1%
Westmeath
Dublin
Galway
2.0%
32.8%
7.8%
Offaly
Kildare
0.6%
2.0%
Laois
Wicklow
0.9%
2.4%
Limerick
3.7%
Kerry
9.2%
County
Carlow
0.9%
Kilkenny
Tipperary
Wexford
1.9%
1.4%
2.5%
Waterford
2.7%
Dublin
Kerry
Cork
Galway
Donega
Clare
Mayo
Limerick
Waterfo
Wexford
Wicklow
Meath
Kildare
Westme
Kilkenny
Sligo
Cavan
Tippera
Louth
Carlow
Laois
Offaly
Monagh
Leitrim
Roscom
Longfor
Performance of the Irish Hotel Market
Following a number of challenging years for the Irish hotel sector, 2012 saw the re-emergence
of investors to the Irish hotel market, both domestic and international. 2013 witnessed a
stabilisation in asset values with increased optimism among hoteliers with regard to trading
conditions and willingness to invest in upgrading and refurbishment.
During the year 2013, demand for hotel properties grew at
speed, with approximately 40 hotel sales throughout the
country over the year, the most active year by volume for hotel
sales since 2006. The total value of hotel acquisitions in 2013
was estimated to be in the region of €250 million.
The increase in hotel transactions that became very apparent
in 2013 has accelerated into 2014 as banks and NAMA continue
to deleverage. Liquidity has
Hotel sales saw also risen in Ireland and is
becoming less of an issue for
a 25% increase in
investors entering the market.
quarter two 2014
The past twelve months has
when compared
seen bond yields falling and
with quarter one
expected returns rising, making
properties more attractive in
terms of pricing. This all leads to renewed investor confidence
in the economy.
Transaction activity in 2014 commenced on an extremely
high note, with buyer appetite showing no signs of easing.
The opening quarter of 2014 saw the volume of hotel sales,
excluding loan sales, reach €83 million, while a stellar second
quarter of the year saw a 25% increase on quarter one,
recording sales in the region of €104 million.
This brought the volume of hotel sales in the first six months
of the year to approximately €187 million, with a further €31
million of hotels sale agreed.
Notable deals in the first half of 2014 include the sale of the 4
star Hilton Hotel Charlemont Place, Dublin 2 for approximately
€30 million to US businessman John Malone. Other notable
sales include that of the 4 star Portmarnock Hotel & Golf Links
for €29.8 million to Kennedy Wilson and the Clarion Hotel
Dublin Airport which was purchased by the Dublin Airport
Authority for approximately €10 million. It is being leased to
Dalata Hotel Group who have recently rebranded it as the
Maldron Hotel Dublin Airport.
In Cork, the Radisson Blu Hotel, Little Island was acquired by
iNua Hospitality for €9 million; the well-known 4 star Oriel
House Hotel, Ballincollig, was bought up by the Talbot Group
for €8 million, shortly following its purchase of the Midleton
Park Hotel for €3.5 million; while the 4 star Kingsley Hotel was
purchased for €7 million by the Beijing based Kang family and is
currently mid-development and refurbishment.
Elsewhere, the Rivercourt Hotel in Kilkenny was sold for €9
million to the Neville Group, while the 4 star Moyvalley Hotel &
Golf Resort in Co. Kildare was sold for approximately €3 million
to a consortium led by Oliver Brady.
Significant off-market transactions during the six month period
include the sale of the 5 star Doonbeg Lodge & Golf Club in
Co. Clare for a sum in the region of €15 million to US billionaire
Donald Trump, while the world renowned Mount Juliet Resort
in Kilkenny was sold to Brehon Capital Partners and Emmett
O’Neill for a reported €15 million.
A feature of the market that has become more prominent in
the past year is the restructuring or sale of Irish hotel debt;
loans tied to The Shelbourne Hotel in Dublin were acquired by
US investment group Kennedy Wilson for €111 million in the first
quarter of 2014, while the Ritz Carlton Powerscourt loans were
sold to Brehon Capital in the latter part of 2013.
Demand for hotel properties has been underpinned by Dalata
Hotel Group’s recent IPO raising approximately €265 million,
showing a clear sign of investor confidence in the market.
Dalata is currently Ireland’s largest hotel operator and has a
clear strategy to acquire a portfolio of well-located 3 and 4
star hotels. They have not lost any time in implementing this
strategy and have recently acquired two hotels; the Pearse
Hotel on Pearse Street for €14.4 million and the Maldron Hotel
on Parnell Square for €15.3 million. Overall, Dalata plans to use
its capital to purchase 16-25 hotels throughout Ireland.
iNua Hospitality, one of Ireland’s newest hotel investment
funds, has also demonstrated confidence in the Irish hotel
market by purchasing two well-located Radisson Blu Hotels in
Limerick city and Little Island, Cork in the first half of 2014, for
€3.5 million and €9 million respectively.
Table 2
Top 10 Hotel Transactions (Sold), 2014
Status
Purchaser
Origin
Sold
(loans)
US
€155,440
Sold
US
Q2 2014
€217,391
Sold
US
€15.3m
Q2 2014
€121,429
Sold
Irish
€15m
Q1 2014
€73,530
Sold (off
market)
US
Irish
Hotel
County
Star Rating
Price
Quarter
The Shelbourne Hotel
Dublin
5 Star
€111m
Q1 2014
Hilton Hotel
Dublin
4 Star
€30m
Q1 2014
Portmarnock Hotel & Golf Links
Dublin
4 Star
€29.8m
Maldron Hotel Parnell Square
Dublin
3 Star
The Lodge at Doonbeg & Golf Resort
Clare
5 Star
Price per
Room
Mount Juliet
Kilkenny
4 Star
€15m
Q2 2014
€17,442
Sold (off
market)
Pearse Hotel
Dublin
3 Star
€14.4m
Q2 2014
€142,574
Sold
Irish
Clarion Hotel Dublin Airport
Dublin
5 Star
€10m
Q1 2014
€60,484
Sold
Irish
River Court Hotel
Kilkenny
4 Star
€9m
Q2 2014
€100,000
Sold
Irish
Radisson Blu Hotel, Little Island
Cork
4 Star
€9m
Q1 2014
€63,492
Sold
Irish
Investment by Location
Dublin’s hotel market, in particular, has experienced a significant recovery. With the number of
overseas tourists visiting Ireland on the increase and consumer sentiment on the rise, many
investors believe the worst is over and that there is now value for money to be found in hotels,
particularly in Dublin.
Despite the demand for hotels in regional locations lagging
behind that of the Dublin market, interest has picked up in
recent months and many investors are now concentrating
on regional properties, where competition for stock is
more manageable when compared to Dublin city centre.
Investors also believe that there is still value to be achieved
in acquiring regional properties where they still have the
opportunity to buy into a recovery story and they see
the return on such properties being much greater over
the medium to long term, given that they are acquiring
properties below replacement cost.
Figure 4
Hotel Sales Volume by Location, H1 2014
The majority of sales in the first six months of the year were
hotels located in the Dublin region, 72%, while 11% were
in the South West and the remaining located in the South
East, the Shannon region, the East and Midlands and the
West. Furthermore, of the hotels transacted in the period,
46% were 5 star, 42% were 4 star and 12% were 3 star. This
indicates that investor interest is mainly focussed on the
larger, better quality 4 and 5 star hotels.
Investor Type
Demand for hotel assets is strongest from foreign buyers, purchasing 68% of the market share in
the first six months of 2014, while domestic buyers accounted for the remaining 32% of the total
spend.
Purchaser interest ranges between those already established in
the hotel industry and also outside buyers looking to gain entry
for the first time. Many buyers see the potential to capitalise on
loss-making properties and are motivated by the opportunities
provided by the improved tourism sector in Ireland.
Figure 5
Domestic v International Buyers, H1 2014
Dublin’s growing recognition as the “technology hub of Europe”
as well as a leading location for internationally traded financial
services means that there is significant international interest
in the opportunities in the economy and this is evident in the
increase in hotel transactions in the Dublin market in recent
years.
An analysis of the proportion of foreign buyers in the first half
of 2014 saw the US dominate with a 77% share of the total hotel
sales market and almost €156 million worth of hotel assets
purchased. This was followed by European buyers, accounting for
approximately 15% of the total spend. The remaining hotels were
purchased by investors from South Africa, Northern Ireland,
China and the Middle East. Cross border investment activity is
being led by leading international players such as John Malone,
Donald Trump and Kennedy Wilson. The number of repeat buyers
in 2013 and 2014, both internationally and within Ireland, is a
positive sign and one which bodes well for future interest in the
Irish hotel market.
Figure 6
Origin of Buyers, H1 2014
Occupancy levels and RevPARs (Revenue per available room) of
well-located properties have risen each year since 2010, while
ARRs (Average Room Rate) have increased successively since
2011. Key findings in Crowe Horwath’s 2013 Annual Irish Hotel
Industry Survey show that Room Occupancy and ARR levels
increased on an annual basis by 2.4% and €2.05 respectively,
while RevPAR increased by €3.05 to stand at €47.67, driven
mainly by increased occupancy and ARR levels. This said, ARR
levels still remain low by historical comparisons – the average
room rate at the peak in 2007 stood at €97.69.
According to PwC’s European Cities Hotel Forecast 2014 and
2015, Occupancy levels in Dublin saw a surge in the past year
and surpassed pre-recession levels, rising from 67% in 2008 to
78.7% in 2013 and are forecast to
increase to almost 80% this year
Occupancy
and into 2015. ARR in Dublin is
levels in Dublin have expected to increase from €89.30
in 2013 to €93.60 and €96.50
surpassed prein 2014 and 2015 respectively.
recession levels
Furthermore, RevPAR in Dublin
saw the largest increase in Europe
in 2013 of 11%, to stand at €70.30, while Dublin has the strongest
growth forecast for 2014 of the European cities studied. A lack
of new supply and strong demand is expected to drive RevPAR in
2014 and 2015 by 5.2% and 3.8% respectively.
An analysis of the type of asset sales in the hotel market reveals
that the majority of hotels sold in the year to date, as per the
value of hotels sold, were Trading Asset Sales, 60%, while Loan
Sales accounted for 37% and Asset Sales, 3%. That said, one
large deal has the ability to skew transaction volumes, as €111
million worth of loans tied to only one hotel, The Shelbourne,
accounted for the total value of loan sales while trading asset
sales accounted for 19 hotel transactions in the six month period.
Hotel Supply
Figure 7
Hotel Sales Volume by Asset Type, H1 2014
Other hotels being offered for sale include the Maldron Hotel
City West, guiding €3.75 million; Dublin Citi Hotel, 46/59 Dame
Street, guiding €3 million; the 3 star Central Hotel in Tralee,
guiding €1 million; the Tallaght Cross Hotel; the Middleton Park
House in Westmeath, guiding €1 million; the Letterkenny Court
Hotel, guiding €900,000; the Glencarn Hotel in Castleblayney,
guiding €750,000 and the Pontoon Bridge Hotel in Mayo, guiding
€550,000. The 3 star George Boutique Hotel in Limerick city is
currently under offer significantly above the guide price of €3
million. Furthermore, there have been market reports that the
Premier Inn in Swords and Waterford Castle will be offered for
sale shortly.
Another portfolio – Project Nadal - consisting of approximately
10 hotels is due to be brought to the market by Ulster Bank in
the coming weeks, a move which is part of a wider deleveraging
program by Ulster Bank which should see the disposal of their
entire portfolio of approximately 40 hotels. Project Nadal
includes two hotels already being operated by Dalata Hotel
Group; Whites of Wexford and the Clayton Hotel in Galway.
A number of hotels were sale agreed in recent months, including
the 5 star Aghadoe Heights in Killarney for €6.5 million; 5 star
Heritage Golf & Spa Resort in Killinard for €5.5 million; the Metro
Hotel and Apartments Dublin Airport for €5.5 million; the 4 star
Charleville Park Hotel in Cork for €4 million; the Fitzwilton Hotel
in Waterford in excess of €3 million and the Cavan Crystal Hotel
for €2.5 million.
There is also a healthy supply of hotels in the pipeline as a result
of NAMA and the banks’ ongoing deleveraging. NAMA are set to
capitalise on the international interest by bringing several prime
hotels to the market throughout 2014 and into 2015, particularly
in Dublin. Of the 208 hotels worldwide that have been secured
on NAMA loans, 136 of them are in Ireland. NAMA has sold 19
Irish hotels to date, recovering proceeds of €237 million; while
101 hotels have yet to be released, representing 12% of all Irish
hotels. Of the 136 hotels secured by NAMA in Ireland, almost half
are focussed in Dublin.
Hotels that have come to the market recently include three hotels
in NAMA’s first hotel portfolio - Project Venue – which consists
of the Malton in Killarney, the Gresham Metropole in Cork and
the Kilkenny Ormonde Hotel. These three premises are on offer
as individual lots or as a collective portfolio. The Savoy Hotel in
Limerick city, guiding €3.75 million, was also launched recently as
part of the City Central portfolio which includes residential and
commercial properties in Limerick city, and is being offered for
sale as an individual lot or as part of the entire portfolio.
New Development
Since the onset of the downturn, there has been very little hotel development with the exception of
two Dublin city hotels, The Gibson Hotel in 2010 and The Marker Hotel in 2013. However, renewed
investor confidence and improved trading conditions have revived interest and therefore activity in
hotel development, particularly in Dublin.
Planning permission is being sought for several more hotel
extensions and redevelopments for 2014. Construction has
commenced on the development of the Dean Hotel, Harcourt
Street, Dublin 2, for an estimated €3 million.
Planning permission has been granted for a 165-bedroom hotel
development on Camden Street, Dublin 2 for an estimated €8.65
million. Planning has also been granted for the development of
20 suites at the Merrion Hotel,
Renewed investor Dublin 2 for an estimated €9.5
confidence has revived million. Planning for a hotel
interest and activity in extension, which will include 20
bedrooms, at the Russell Court
hotel development
Hotel, Harcourt Street, Dublin
2 for an estimated €9.2 million;
and planning for the conversion of Findlater House, O’Connell
Street, Dublin 1 to a 198-bedroom 3 star hotel costing an
estimated €2.7 million were both given the green light. Moreover,
Dalata Plc have announced that they intend to plan further hotel
developments in Dublin.
Planning permission has been refused for 170 bedrooms in the
former Ormonde Hotel on Dublin’s Quays; while similarly, initial
permission for a 130-bedroom hotel development in the former
Irish Lights building on Pembroke Street was also refused by An
Bord Pleanála.
Development outside of Dublin includes the Kingsley Hotel, Cork,
which is due to reopen as a 4 star hotel this summer.
Outlook for the Future
The first six months of 2014 witnessed strong performance in the Irish hotel market. The total
value of hotel acquisitions for the year 2014 is estimated at present to be in the region of €350
million, however, this could potentially be closer to €400 million with a large number of high value
properties due to come to the market in the autumn. Strong performance is expected to continue
into the latter half of 2014 with a number of hotel sales agreed in recent weeks.
Despite the uplift in the hotel industry, there exists some
potential challenges for hoteliers and investors. Debt remains the
key issue which must be addressed in order for hotels to be at a
level that is sustainable. A potentially high VAT level could be a
fundamental threat to smaller hotels, eroding their profitability
and thereby challenging the continued improvement of the hotel
sector. Furthermore, the IHF has called for a 30% reduction
on local authority rates; these rates are the biggest single
cost that hoteliers have no control over and is a threat to the
Irish tourism sector’s ability to compete effectively in both the
domestic and overseas markets. The lack of capital expenditure
is also a challenging feature, as hoteliers may be allocating their
profits for debt repayments rather than for investment and
refurbishment purposes, which overtime would diminish the
quality of hotels in Ireland. Moreover, while the Irish economy
is on the path to recovery, any downturn or upheaval in the
Eurozone economy can be a potential threat to Ireland’s recovery
and in turn, this would negatively impact the Irish tourism sector.
This said, the significant growth and recovery that is evident in
both the hotel industry and the tourism sector bodes well for the
overall wider economic recovery, in particular for employment
levels in the industry given the labour-intensive nature of the
business.
In addition, “the Wild Atlantic Way” was officially launched
in February; Failte Ireland plans to invest €10 million in 2014
promoting the 2,500km coastal driving route which stretches
from Cork to Donegal. This is viewed as a long-term investment
strategy to sustain tourism levels.
The recent announcement by the government that the current
Capital Gains Tax (CGT) exemption will not be extended after
December 31st 2014 should influence hotel sales activity for the
remainder of the year as vendors will push to ensure hotel sales
are completed by year end.
The strong momentum witnessed in the opening
half of 2014 is expected to gather pace during the
latter six months given the high level of demand
from both domestic and international investors
Kirsty Rothwell, Head of Hotel Solutions
DTZ Sherry FitzGerald
Authors
Marian Finnegan
Chief Economist, Director
Research
+353 (0) 1 237 6341
[email protected]
Deirdre O’Reilly
Research Graduate
+353 (0) 1 237 6365
[email protected]
Kirsty Rothwell
Head of Hotel Solutions
+353 (0) 1 639 9386
[email protected]
About DTZ Sherry FitzGerald
DTZ Sherry FitzGerald is the sole Irish affiliate of DTZ, a global leader
in property services. With Irish offices in Dublin, Cork, Galway, Limerick
and an associated office in Belfast, we are the largest commercial
property advisory network in Ireland and are part of Sherry FitzGerald
Group, Ireland’s largest real estate adviser.
We provide occupiers and investors around the world with
best-in-class, end-to-end property solutions comprised of leasing
agency and brokerage, integrated property management, capital
markets, investment, asset management and valuation.
www.dtz.ie
© 2014
This report should not be relied upon as a basis for entering transactions without seeking specific,
qualified, professional advice. It is intended as a general guide only. This report has been prepared on
the basis of publicly available information, internally developed data and other sources believed to be
reliable. While reasonable care has been taken in the preparation of the report, neither Sherry FitzGerald
nor any of directors, employees or affiliates guarantees the accuracy or completeness of the information
contained in the report. Any opinion expressed (including estimates and forecasts) may be subject to
change without notice. No warranty or representation, express or implied, is or will be provided by Sherry
FitzGerald, its directors, employees or affiliates, all of whom expressly disclaim any and all liability for
the contents of, or omissions from, this document, the information or opinions on which it is based.
Information contained in this report should not, in whole or part, be published, reproduced or referred to
without prior approval. Any such reproduction should be credited to DTZ Sherry FitzGerald.

Irish Hotel Market Review

Transcription

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