Friday 28 July 2017

Third of hotels sold on after crash in deals worth €2.4bn

The Gresham Hotel
The Gresham Hotel
Donal O'Donovan

Donal O'Donovan

A third of hotels have changed hands since 2011, with a total of €2.4bn of transactions, according to figures from auctioneers and property consultants Savills Ireland.

Ireland is unique in terms of the sheer volume of hotel sales in recent years, according to Tom Barrett, Head of Hotels & Leisure at Savills Ireland.

In some cases the same hotels have changed hands multiple times since the crash - passing from original owners to banks and US equity funds before coming back on the market.

Deals worth more than €850m were closed last year, the second-highest ever. Major deals included Blackstone Group's sale of the former Burlington Hotel in Dublin for €182m to German investor Dekabank, having been bought in 2012 for €67m from a receiver.

Other hotels sold last year included The Gresham, also in Dublin (€91m), the Temple Bar Hotel (€55m) and The Fitzpatrick Lifestyle Portfolio (€150m). Outside Dublin, big deals included The Radisson Farnham Estate for over €27m and Lyrath Estate for €23m.

The data provides a stark insight into the scale of volatility in the sector. Irish hotels have swung dramatically through the boom, to the zombie hotel era immediately after the crash, when many properties were in deep financial distress due to a combination of high debts and low customer numbers, to the present when Dublin has too few beds to meet demand.

"Hotel development, like many areas of the property sector, stopped during the downturn, so there is a big element of catch up in Dublin. This, coupled with air traffic surpassing all previous records in 2016 - with further growth expected this year - means there is a real need for new bedroom stock in the right areas," Mr Barrett said.

Figures from the Irish Tourist Industry Confederation last year showed Dublin with the highest hotel occupancy rate in Europe, averaging around 82pc. That in turn has pushed up prices, especially around peak events and seasons.

This year, new supply will remain small, with just 180 bedrooms added to the total in Dublin, according to Savills. That includes no new hotel being built, but extensions to existing properties. The largest will be 73 additional bedrooms at the North Star Hotel on Amiens Street in Dublin 1.

In 2018 and 2019 supply will ramp up sharply, however.

Savills expect approximately 1,500 net new bedrooms to be completed next year in Dublin, including two new hotels developed for Dalata, now the country's largest hotel operator - a Clayton Hotel on Charlemont St in Dublin 2 and a Maldron on Kevin Street Upper in Dublin 8.

In 2019 there could be in excess of 2,000 new bedrooms in Dublin, including a new 402-bedroom Terminal 2-linked hotel at Dublin Airport and extensions to a number of existing airport hotels.

One trend developing to meet the rise in city centre hotel demand are so-called aparthotels. Savills says there are potentially 10 Dublin aparthotels at various stages of development, ranging in size from 50 to 250 bedrooms.

Irish Independent

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