Hotel room numbers to be hit by closures
Dublin's hotel supply will continue to remain tight this year, despite a number of new projects coming on stream that are aimed at boosting the number of hotel rooms available in the capital.
But Davy Stockbrokers said that 2018 will be the first time in almost 10 years that Dublin will see a "meaningful increase" in the supply of new hotel rooms.
It's forecasting that 1,300 new hotel rooms will be added in the capital this year, with more than 500 of those from extensions to existing properties.
Dalata, the stock market-listed company that is Ireland's largest hotel group, will deliver 551 of those new rooms.
"At a net level, however, we believe Dublin will only see around 800 additional rooms as Dalata closes two hotels, Ballsbridge Hotel and Tara Towers, at the end of 2018 and start of 2019," said Davy.
Dalata, whose CEO is Pat McCann, is expected to open an additional 228 hotel rooms elsewhere in Ireland this year, and 501 between Britain and Northern Ireland.
Davy also reckons that Dalata will continue to benefit this year from growth in visitor numbers and a 5pc increase in revenue per available room.
As the Dublin market continues to strengthen, aided by supply tightness, Davy Stockbrokers also expects the regions to perform better, helped by visitor number growth and the improving economy.
"For 2018, we expect regional Ireland to be a focus area for Dalata as this market significantly lags Dublin and UK given a greater proportion of food and beverage," said Davy.
The stockbroker is forecasting that Dalata's earnings before interest, tax, depreciation, amortisation, and rent margin will be one percentage point higher to 29pc this year.
For Dublin and UK, the broker predicts that margins will remain unchanged at 49pc and 42pc respectively.
Davy has also forecast that shares in Dalata could hit €8.30 if it can deliver 8,000 promised new hotel rooms in the UK between 2020 and 2026, according to Davy Stockbrokers.
Dalata, whose shares were changing hands at €6.10 at the opening of trading yesterday, has a €6.90 price target on the shares based on current forecasts, however.
Last year Dalata said it aims to become the largest operator of three-and four-star properties in 20 cities across the UK.
It hopes to add 8,000 bedrooms to its portfolio there over the next five to seven years.
Dalata has pinpointed significant expansion opportunities for the company in cities including Edinburgh, Oxford, Liverpool, Cambridge and York.
It aims to take advantage of what it said is a "very fragmented" UK regional hotel sector.