Sunday 21 July 2019

Hotels boss warns against squandering cash on Brexit advice

Stock image
Stock image
Dalata CEO Pat McCann
John Mulligan

John Mulligan

THE Dublin hotel market will be undersupplied with rooms for at least another three years due to construction cost inflation and more expensive funding, according to the CEO of Ireland's largest hotel group.

Dalata boss Pat McCann also said there's a "lot of talk" around Brexit and suggested firms are squandering money on advice when no-one knows what's going to happen.

Speaking to the Irish Independent, Mr McCann dismissed suggestions from Savills that 3,000 new rooms would come on stream in the capital next year, with the figure likely to be about half that.

Dalata also anticipates that just 1,200 of the projected 1,600 of new rooms expected in 2019 will be opened.

Mr McCann said that demand in Dublin is being driven by investments by multinationals such as Amazon and Google in the capital.

He said they are a "key driver" of demand in mid-week hotel use, while the expansion of air routes between Dublin and North America also immediately results in additional demand.

But he insisted that some of the planned hotel projects in the capital won't proceed.

"Two things have happened: building inflation for material and labour will probably make some of these projects questionable," he said. "What you'll find then is that funders will start to question whether they make sense or not. That's going to be the challenge."

He added that there may be a better return for investors in residential projects.

"It's easier to find builders who can build residential than it is to find builders who can build hotels, and there is a big difference," said Mr McCann.

There's currently planning permission in Dublin for the guts of 6,500 new hotel rooms, compared to the 4,460 Dalata had in the city at the end of 2018.

There's a total of about 20,500 in the capital.

Mr McCann was speaking as Dalata announced a strong set of full-year results for 2018. Its revenue rose 11.8pc to €393.7m. Its adjusted earnings before interest, tax, depreciation and amortisation (ebitda) was 14pc higher, at €119.6m.

Its Dublin hotel portfolio performed strongly, delivering 8.8pc growth in revenue per available room, compared to a sector rise of 7.2pc.

In regional Ireland, revenue per available room rose 5.2pc, and by 3.1pc in the UK.

Mr McCann said that the reversion of the Vat rate for hotels and other sectors to 13.5pc from 9pc in the last Budget had been largely absorbed by customers.

He said it had been passed on to corporate customers, along with a general increase, with little pushback.

The group had a total of 39 owned and leased hotels in Ireland and the UK in 2018.

Dalata said that Brexit has had no impact on its business, but chief financial officer Dermot Crowley said the uncertainty had eased competition for prime city development sites in the UK.

Irish Independent

Also in Business