Tuesday 17 September 2019

Over 7,500 hotel rooms set to be built in three years

The Gresham Hotel in Dublin is likely to sell for €85m
The Gresham Hotel in Dublin is likely to sell for €85m
Donal Buckley

Donal Buckley

Up to 7,600 hotel bedrooms are expected to be developed across Ireland over the next three years, of which 6,100 are expected for Dublin.

According to a quarterly report from DTZ Sherry FitzGerald, planning permission has been granted for 4,200 of the proposed Dublin hotel bedrooms, a further 488 are under construction, 17pc have submitted plans and the remaining 6pc are at the pre-planning stage.

Furthermore, 70pc of the Dublin rooms are located in the city centre, where availability is under most pressure. Just one hotel development completed construction in the opening quarter of 2016, namely the 52 bedroom extension to The North Star Hotel, on Amiens Street, Dublin 1.

Explaining the upsurge in activity, Kirsty Rothwell, head of trading assets, DTZ Sherry FitzGerald, says "Dublin is currently suffering from a shortage of available rooms in the city centre to accommodate the increasing number of tourists."

In all 13 hotels were under construction in the broader Irish hotel market at the end of March, comprising 658 rooms. Of these, 71pc or approximately 464 rooms span across five Dublin projects. Of the total number of rooms under construction, 48pc comprise extensions to existing hotels, 45pc in new hotels while the remaining 7pc are in hotel redevelopments.

Some of the latest projects to get the green light include two by Oakmount, the development company headed by Paddy McKillen Junior and Matt Ryan. Bord Pleanála granted them permission to develop a five-storey boutique hotel in Ranelagh village, Dublin 6 and a seven-storey, 93-bedroom hotel, at North Wall Quay, Dublin 1. McKillen and Ryan are also reported to be considering developing a new hotel on Thomas St, Dublin 8.

Meanwhile Brian and Sally McGill also received the green light for a new four-star, 152-bedroom hotel on the site of Pinebrook House offices, just a few doors down from their Harcourt Hotel in Dublin 2. Nearby Dalata plans to develop two new hotels by 2018 including a new Clayton Hotel on Charlemont St and a Maldron on Kevin St.

This week Lone Star's hotel chain, Amaris Hospitality, announced plans for an 85 bedroom extension to its Hilton Garden Inn Custom House hotel, formerly Jurys Inn, on Dublin's North Docklands. John Brennan CEO Amaris says they may develop or acquire other hotels if the right strategic opportunity presents itself in Ireland and the UK.

These new developments are partly in response to a short fall as recent Fáilte Ireland statistics showed there were 3,000 fewer beds in Dublin than there were in 2010 when they totalled 44,929.

Meanwhile in Cork, Dalata is to proceed with the completion of the 121 bedroom unfinished hotel which it acquired last month at Beasley St.

Interestingly while more than 1,400 beds are in the pipeline for Fingal County which includes the area around Dublin Airport, in contrast only 10 extra bedrooms are in the pipeline for Dun Laoghaire where the ferry services have been slashed.

Research form Construction Information Services predicts the hotel and catering sector will grow significantly in the coming years.

Meanwhile DTZ reports that total hotel sales in quarter one amounted to €65.8m across 17 deals but only two of those were in Dublin.

"Domestic buyers continued to dominate purchasing 69pc of the value of hotel transactions in the quarter when transaction activity was dominated by small to medium assets, with 88pc of overall sales accounted for by deals at less than €10m in value," Ms Rothwell says.

John Hughes of CBRE says "A number of budget brands including Premier Inn, Motel One, Bloc, Citizen M and Yotel are all reportedly looking for opportunities in the Dublin market considering the prevailing shortages of hotel rooms in the capital."

While the value of Q1 sales was up 31pc on the previous quarter, it is less than half the €133m attained in the corresponding quarter of 2015. The two Dublin deals completed in Q1 were the three star Tara Towers in Dublin 4 purchased by Dalata Hotel Group for €13.1m and the three star Abberley Court in Tallaght, Dublin 24, for about €3.4m.

Ms Rothwell says the remainder of the year will certainly be active with about €61m worth of hotels sale agreed at the end of March and due to close in the coming months. These include Stauntons in Dublin 2; Hilton Dublin Airport Hotel; Kilronan Castle, Co. Roscommon and Lough Rynn, Co Leitrim which have since completed.

Those figures will likely only increase in the period between July and September, with a number of major hotel sales likely to go through during that time frame.

Third quarter figures look set to be boosted by the sale of two of Dublin's land mark hotels. Savills are currently assessing bids for The Doubletree by Hilton, formerly The Burlington, which is expected to sell for around €180m and the Gresham Hotel for which CBRE are assessing second round bids. It was expected to achieve over €85m.

Another major sale that may close in the quarter is the proposed sale of Fitzpatrick Lifestyle Hotels. The company has retained CBRE to assess interest in its Spencer Hotel in the IFSC, the Morgan Hotel in Temple Bar, and the Beacon Hotel in Sandyford. The portfolio is believed to be on the market for about €130m

The Gresham and Burlington prices are the equivalent to between €320,000 and €380,000 per room. That sort of figure is far above what the market has seen so far in the current cycle, and would push hotel prices above replacement value - a crucial benchmark of the health of the market.

Those figures are also way above the price per room seen among the top five deals closed in Q1. They ranged from the €53,086 per room paid for the three star Waterford Marina Hotel which sold for €4.3m up to €300,000 per room paid for The Village at Lyons Kildare which sold for €6m.

Dalata paid between €118,514 per room for the three star Tara Towers Hotel and €80,864 per room for the four star Clarion Hotel Sligo.

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