Ireland's 'unique' market sees hotel sales top €850m
More than €850m was generated from sales of Irish hotels last year bringing to €2.4 billion the value of the hotel transactions seen during the five year between 2011 and 2016.
Consequently about one in every three Irish hotels have changed hands over the period.
This makes "Ireland unique in terms of the sheer volume of hotel sales in recent years compared to other markets," says Tom Barrett, head of Hotels & Leisure at Savills Ireland.
He was commenting on a study from property consultants, Savills Ireland.
The larger cities saw most of the action with as many as 80pc of Cork City hotels changing hands over the five years compared to 47pc of those in Dublin. Limerick was also active with 56pc of them sold while 33pc of Galway City hotels were bought.
Last year was the second largest year during the last five boosted by two especially large deals.
Major sales include the former Burlington Hotel which was bought by German asset manager DekaBank for €182m. The vendor US private equity giant, Blackstone, acquired the Burlington for €67m in 2012 and is reported to have invested about €20m on its refurbishment.
The four star Gresham Hotel on O'Connell Street was bought by Spanish company, Riu Hotels, for about €91m. Other Dublin sales include the Temple Bar Hotel for €55m and The Fitzpatrick Lifestyle Portfolio, consisting of the Morgan, Spencer and Beacon hotels for a combined price of €150m.
Outside of Dublin the largest regional transactions included The Radisson Farnham Estate for over €27m and Lyrath Estate for €23m. "With such an intense level of activity over the past five years, we expect the volume of sales to normalise in the coming years," Mr Barrett says.
Meanwhile rival agents CBRE has forecast that a number of significant hotel properties will be brought to the market throughout the country this year.
"However, the volume of hotel sales activity is expected to ease somewhat compared to the record sales volumes of the last two years, now that deleveraging is winding down and many hotels have already re-traded out of NPL (loan) portfolios," says CBRE's John Hughes.
"We continue to see strong demand from a range of domestic and international buyers for Irish hotel properties. This is particularly the case in Dublin where hotel values continue to increase on the back of exceptional trading performance," he adds.
Tom Barrett says that the continued strong performance in the Irish hotel market and the much talked about undersupply in Dublin, makes a strong case for more bedrooms 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"
He estimates that new supply will remain small in 2017 with only about 180 new bedrooms brought to the market by way of extensions to existing hotels. The most significant is the addition of 73 bedrooms to the North Star Hotel on Amiens Street in Dublin 1.
In 2018, Savills expect approximately 1,500 net new bedrooms.
Dalata, Ireland's largest hotel operator, will open two new hotels, a Clayton on Charlemont St in Dublin 2 with 178 bedrooms and a Maldron on Kevin Street Upper in Dublin 8 with 150 bedrooms.
A 202 bedroom Aloft Hotel is under construction as part of a mixed use scheme in Dublin's Liberties, an area that is benefiting from major urban regeneration. Oakmount, headed by Paddy McKillen Jnr and Matt Ryan, will also open a 41 bedroom hotel in the trendy Ranelagh area of the city, which will bring roof top dining to Dublin 6 - similar to the Dean Hotel which opened in 2014
The following year, 2019 could see delivery of more than 2,000 bedrooms in Dublin including the new 402 bedroom Terminal 2 linked hotel at Dublin Airport and extensions to a number of existing airport hotels.
John Hughes is a bit more optimistic about short-term supply as he expects 300 hotel bedrooms will come on stream in Dublin during 2017 and a further
1,700 new hotel bedrooms are due for completion in the capital in 2018 between new builds and extensions.
"At least another 3,000 hotel rooms are scheduled to be delivered in the city by 2020. With the market likely to cool a little once there is a meaningful improvement in hotel provision in the capital," he adds.
Kirsty Rothwell, Head of Trading Assets, Cushman & Wakefield, said; "With a requirement of approximately 6,000 new hotel bedrooms in Dublin city, there is certainly a need to develop more hotel rooms at a fast pace, to ensure that the supply constraint will not affect Dublin tourism."
An interesting trend from the Savills report is the number of Dublin aparthotels in various stages of the development cycle.
There are 10 potential new developments raging in size from 50 to 250 bedrooms.
Many of these schemes secured their planning permission in 2016 which indicates an ongoing and active move towards expanding this previously limited section of the Dublin hospitality offering.