Manufacturing & Supply Chain

Despite headwinds in terms of a higher VAT rate and Brexit uncertainty, the Irish hotel real estate market performed solidly in 2019, with more hotel supply expected to open in 2020, particularly in Dublin, according to JLL, the real estate services group.

In recent months, there has been some negative press around the Irish hotel sector, particularly regarding the number of new hotels now opening in Dublin city.  However, this new supply is a direct response to growing underlying demand, with Dublin still boasting the highest occupancy of any major European city in 2019. 

In fact, based on analysis of 35 major European hotel markets in 2019, Dublin is placed an impressive first in Occupancy terms. The city achieved an impressive 83.9% Occupancy for YTD November 2019. Hotel demand, measured by the total number of rooms sold in a market, also increased last year. For example, in Dublin City Centre there was an increase of +2.1% in the total number of rooms sold, despite 1,500 new rooms opening in the city.

Dan O’Connor, Executive Vice President with JLL’s Hotels & Hospitality Group and head of JLL’s Irish Hotel division, commented on the increase in hotel demand: “Despite headwinds, the good news is that underlying hotel demand in Ireland continues to grow and this positive trend will continue in 2020. It is onwards and upwards for the hotel sector in Dublin this year.”

INCREASING NEW SUPPLY

The question JLL are often asked is “Are there too many hotels being built in Dublin right now?” JLL’s answer is “No”, the new supply is needed, and it will be absorbed. To support this view, one only needs to refer to the demand trends set out above. The issue is therefore not the amount of new supply, it is volatile timing of its delivery to the market. In Ireland, no new hotel rooms were built in the first half of the 2010’s. We then raced to catch up, with significant delivery in recent years. For context, there are 11 new hotels expected to open in Dublin in 2020, and JLL expect this supply to be quickly absorbed.

Already this year, The Mayson Hotel has opened. It is a 94 key hotel and is located in North Wall Quay, Dublin 1. It includes a number of amenities setting itself apart from other existing hotels, such as a rooftop bar, a gym including a thermal suite and pool, a hatch coffee shop and a boutique barber. 10 additional hotels are on schedule to open before 2021, with hotels such as Holiday Inn Dublin Airport, Hampton by Hilton and Beckett Locke Aparthotel on the larger scale with 240+ keys in each. Irish hotels are in high demand and this trend is expected to continue for the next 3 years.

Dan O’Connor commented on hotel trends in Ireland: “We expect the last decades supply trend to be reversed in the 2020’s, with the highest levels of new hotel supply expected to come on stream in the early 2020’s (2020-2022) and more muted new supply delivery thereafter.”

ROBUST TRANSACTION VOLUMES

Irish hotel transaction volumes in 2019 reached €650 million, with deal volumes dominated by big ticket Dublin sales. JLL expect a healthy level of volumes in 2020 as well and are forecasting at least €500 million of hotel deals. For example, it is expected that the market will see a number of Premier Inn forward funding’s occur in 2020. This is due to the brand securing an impressive development pipeline of over 1,000 keys nationwide. Some of these schemes are expected to attract institutional buyer interest in 2020.

Hoteliers will also take some cold comfort from VAT stabilisation in 2020, whilst the upcoming general election will also be watched closely in terms of any further potential impacts on the Irish hotel market.

PLANNED NEW DUBLIN HOTEL & APARTHOTEL OPENINGS 2020