Hotel prices are expected to continue to strengthen this year and supply of properties to the market looks likely to be sustained, despite the surge in 2014 when 60 hotels sold with combined prices totalling €555m, according to the latest hotel market report from DTZ Sherry FitzGerald
Kirsty Rothwell of DTZ says that while debt holders will continue to sell hotels, in addition "non-distressed asset holders are now beginning to bring their hotels to the market, as prices are rebounding and there is value to be found in hotels again."
She reports an increasing number of enquires in recent months and expects "investors from China will make a larger appearance in the Irish hotel market in 2015.
The falling value of the euro, meanwhile, should increase the amount of activity coming from overseas."
Forthcoming sales are expected to include the Crystal Collection of seven hotels in Leinster and Munster with a combined €35m price tag for which CBRE is currently assessing best bids.
In addition Ulster Bank is due to bring Project Coney to the market, a portfolio of mainly Northern Ireland pubs and hotels but also including at least one hotel in the Republic of Ireland.
Last year foreign purchasers accounted for more than half of the deals and, according to DTZ, US purchasers accounted for 87pc of the foreign spend or €275m of the hotel assets. European buyers comprised 5pc and Asian 3pc.
Looking into the future, demand for Dublin hotels is expected to be underpinned by recent forecasts for increased hotel revenues.
According to PwC's European Cities Hotel Forecast 2015 and 2016, occupancy levels in Dublin have surpassed pre-recession levels, rising from 76pc in 2013 to 78.3pc in 2014 and are forecast to reach 80pc in 2015. Furthermore, Dublin is ranked in the top five of European cities' hotel occupancy levels.
Average room revenue in Dublin increased by 8.5pc to stand at €95, from €88 in 2013, and is forecast to reach over €100 by 2015, according to the PwC report.
Furthermore, RevPAR (room revenue) in Dublin increased by 11.1pc, from €67 in 2013 to €75 in 2014, and is forecast to rise to €81 and €88 in 2015 and 2016 respectively.
Reflecting Dublin's busier hotels, DTZ's analysis shows Dublin also accounting for 59pc of purchaser spend.
Munster's South West and the South East region, accounted for 11pc and 10pc of spend respectively, while 8pc of sales were in the Shannon Region, 7pc in the East and Midlands, 4pc in the West and 1pc in the North West.
"That said Dublin accounted for only 12 out of the 60 hotel sales, emphasising that higher valued hotels sold in the capital compared with the rest of the country, while in the South West, 11 sales were transacted in the year which only represents 11pc of the total spend," Ms Rothwell said.
As many as 75pc of the hotels sold were priced at less than €10m in value; 15pc were €10 - €20m; 7pc were €20 - €50m; and just 3pc were greater than €50m.
She also points out that the price differentiation between the best quality hotels outside Dublin and mid-classification hotels within Dublin became very evident in 2014.
"Investors are willing to pay a premium for well-located three and four star hotels in Dublin city centre, while five star hotels outside Dublin are being acquired for a price per room that is significantly less," she adds.
This premium was also reflected in a separate report by Aiden Murphy of Crowe Horwath which he presented to the Irish Hotels Federation conference.
In his presentation, Mr Murphy showed how sales values varied by location. For three star hotels, prices per room ranged from €134,000 per room for the Pearse Hotel in Dublin City centre to €63,000 per room for the Metro Hotel in Dublin Airport to €24,000 for the Quality in Killarney.
The four stars included the 193 bedroom Hilton in Dublin which sold for €155,000 per room; the 90 bedroom Rivercourt in Kilkenny for €100,000 per room and the 195 bedroom Clayton in Galway sold for €66,000 per room.
He reports that the top performing hotels, classified as Tier 1 and comprising 84 hotels in Dublin city centre, grew their RevPAR by an average of €20 over three years.
As an estimated 60pc of their revenue was generated from bedrooms, this has enabled them to maximise their profitability.
As many as 109 hotels across the country or 22pc of Ireland's hotel stock are in Tier 2.
They include hotels in Dublin's suburbs as well as in regional cities such as Cork, Galway and Kilkenny. Their RevPAR has grown by €12 over three years and about 40pc of their revenue is generated by room sales.
Tier 3 is the most numerous sector of the market with as many as 663 hotels throughout the country where REVPAR grew by an average of only €8 over the last three years.
Furthermore, as about three fifths of their revenue is generated by food and drink, they are less profitable than the other two market tiers.
These types of hotels are "unlikely to attract international investors who are seeking larger properties in central city locations," he adds.
While a number of those Tier 3 hotels have attracted local cash buyers, those that were built in unsuitable locations may have to be sold to buyers who have plans for alternative uses. The market may have recovered but it is still not enough to sustain those properties.
About 35 hotels around the country which have entered receivership have yet to be sold or placed on the open market for sale.
He expects these to be sold in the next 12 to 18 months. The majority of them are open and trading with only three of them currently closed.
Of those 35 receiver hotels, about half of them are classified as three star mid-price properties, less than a third are in the Tier 2 category and about 60pc can be categorised as being in Tier 3 regional locations.