Business Irish

Tuesday 19 March 2019

Dalata has 'tentative' talks on hotel sites

Dalata CEO Pat McCann says some hotel developers are facing financing challenges
Dalata CEO Pat McCann says some hotel developers are facing financing challenges
John Mulligan

John Mulligan

Dalata, Ireland's biggest hotel group, is being approached by other hotel builders to help finance the construction of some new venues in the capital as funding dries up, according to chief executive Pat McCann.

He said that "part of the problem" is that the market for financing hotel construction is dysfunctional.

Mr McCann pointed out that construction costs for hotels have risen significantly in the capital. He said that Dalata is building its 188-bedroom Clayton Charlemont Hotel on the city's southside at a cost, including site acquisition, of about €225,000 per bedroom.

"You wouldn't do it for less than €300,000 per room today," said Mr McCann, who added that difficulties for other hotel builders in securing finance look set to continue.

"Finance has become less available and costs have risen," he said after Dalata's annual general meeting in Dublin yesterday. "That's the problem."

He said property agent Savills has predicted that 5,000 hotel rooms are needed in the capital by 2020 to satisfy demand.

"I can say with a high degree of certainty that that's not going to happen," said Mr McCann.

He has predicted that about 3,000 new rooms will be added in that time frame.

"If you're an individual developer starting up and wanting to build your own hotel, you will not have the information we have," he said.

"I'm not making statements about difficulties in finding funding for no reason," he added. "We're aware of some of the challenges some of the potential developers are having. Are people knocking on our door? The answer to that is yes.

"I'm not having any difficulties financing in either Ireland or the UK, but we know of other people who are," said Mr McCann, adding that those developers are looking for Dalata to get involved "because we can raise finance".

He said Dalata has had "tentative" conversations in relation to three or four potential projects where financing has been an issue. He said each of those potential properties would be 200 bedrooms or more.

Dalata, with a €1.2bn market capitalisation, follows a sale and leaseback model. Its backers include the likes of German investment fund Deka, and M&G Real Estate, which is part of Prudential's M&G Investments unit that it's spinning out of the main insurance group.

Mr McCann reaffirmed Dalata's commitment to being a leading player in the UK three- and four-star hotel market by 2020, where it plans to have 7,000 to 8,000 extra rooms there within five to seven years. It will primarily target the four-star market in 20 regional UK cities.

Mr McCann also said that Dublin is now losing out on some conference business because there are too few hotel bedrooms. Shares in Dalata fell yesterday, despite an upbeat trading statement.

Irish Independent

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