Guest house market rising as buyers seek out value
Buyers are showing increased interest in the Irish guest house and B&B markets however many owners are still reluctant to sell at the prices being offered.
Galway City, Killarney and Kilkenny are three provincial centres which have benefitted most from the increase in tourism and staycationing and these upturns are reflected in increased room occupancy and tourism revenues. However very few guest houses and B&Bs have come to the market in these three centres in the last 12 months.
This is partly because prices being offered by prospective buyers are well below what owners are seeking; partly because owners are understandably reluctant to bring properties to the market at a time when the market is still at its trough and partly because both the tourism and property markets are showing signs of an upturn.
But the picture is not as promising in other areas. A search show as many as 80 guest houses and hotels for sale in Dublin and around the country and supply seems plentiful in counties such as Clare, Mayo and Cork. But while the latter owners may be more willing to sell, one estate agent believes that their asking prices are above the budgets of buyers.
Many of these vendors also feel they need to hold out for higher prices in order to recover either the amounts they have invested or the amounts that they still owe the banks.
"Some are not business people and they don't understand that they need to forget about what they have spent and simply go for what they can get in the current market. Gone are the days when you could get €40,000 or €50,000 per bedroom. Most of the prospective buyers are ex-pats and are willing to buy guest houses with at least 10 bedrooms for between €300,000 and €400,000," he adds.
The crash in the guest house market came during the boom due to tax incentives to build hotels and the cut price room rates from budget hotels which forced guest houses to slash their rates to less than €25 per night. Many B&Bs closed rather than invest in maintenance, upgrade or add ensuites. However in the last 12 months the increased tourism business has helped some of the survivors, especially those on main tourist routes, roads and close to town and city centres where guests can walk to restaurants, pubs and nightlife activities.
In Galway City recent figures show that hotel room occupancy rates between July 2013 and 2014 increased from less than 90pc to 94.2pc - the highest in the country at a time when Dublin occupancy fell from 87pc to 84.4pc. At the same time Galway hotel revenue per room or REVPAR, increased from €82.24 to €91.41 which is well above the €68.11 for Dublin and more than double the €39.63 REVPAR in Limerick. Such near full occupancy suggests scope for more hotels in Galway but it also suggests that the city's guest houses have scope to improve occupancy levels.
Indeed guest house rates have increased in a range of between €35 and €90 per night depending on the quality of the accommodation, the location and the time of the year. For instance top rates can be achieved for the Galway Races in July, especially in the Salthill area.
Colm O'Donnellan of local agents O'Donnellan & Joyce, reckons that values for guest houses dropped about 60pc from their peak. "With so few transactions it's difficult to say how values have benefitted from the fantastic tourist season we've seen since last year," he adds.
A slight guide might be gleaned from the trend in residential prices as many of the former guest houses were converted into family homes. In the last two years house prices in Galway have increased by between 10 and 15pc.
Tony Kavanagh of Sherry FitzGerald sys that the market is really confined to prime strips such as College Road, near The Sportsground where Connacht Rugby play their matches and within walking distance of the centre as well as in Salthill.
One of the few guest houses currently for sale, Amber Bay, 6 Cashelmara, Rusheen Bay, Knocknacarra, just west of Salthill, extends to 357 sq m, and has eight ensuite bedrooms. Mr Kavanagh is asking €550,000 for it but says most interest has come from home buyers. An even larger Galway property with guest house potential is the former Pointe Boise nursing home in Salthill which extends to 654 sq m and has 25 ensuite bedrooms over three storeys. When O'Donnellan & Joyce launched it on the market they were asking €450,000 but have since received offers over €600,000.
During the boom three Galway hotels closed when developers planned new projects which never happened. Colm O'Donnellan expects that one of these, The Warwick in Salthill, may be re-opened as a hotel by purchasers with whom he is currently finalising a sale. In Kilkenny City, enquiries from potential guest house purchasers have increased by about 30pc since 2012 but there have been no transactions according to Peter McCreery of Sherry FitzGerald McCreery.
The city's B&Bs have fared well thanks to a range of festivals which attract visitors for almost 10 months of the year between February and November and Kilkenny Castle attracts 260,000 visitors a year.
McCreery currently has two guest houses for sale. The largest of these is The Laurels, College Road, which extends over 3,000 sq ft and has 12 bedrooms, 11 of which are ensuite. Its asking price is €455,000.
The other formerly known as Chaplins, has a €440,000 price tag. Its accommodation includes six guest bedrooms en-suite, and four other bedrooms for private family accommodation.
In Killarney Michael Coghlan of Sherry FitzGerald Coghlan reports that buyers are willing to spend up to €500,000 for 10 bedroom properties on the prime Muckross Road strip in the Kerry tourist mecca. However no properties have come to the market since Allsop Space auctioned the 43 bed Darby O'Gill guest house two years ago for €735,000 or €17,093 per bedroom. House prices in the town have increased by about 6pc in the last 12 months and are expected to show by 10pc off the trough before the end of the year.