Business Irish

Sunday 17 December 2017

Hotel shortage lays the sector's 'ghosts' to rest

Average room rates rise

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Click to view full size graphic

Paul O'Donoghue

Hotels in Dublin are now "virtually full" during peak times of the year as occupancy rates hit their highest levels in 2014 since before the crash, according to a new study.

Crowe Horwath's annual hotel survey found that occupancy levels in the capital hit 77.2pc last year. This compared to a rate of 76.8pc in 2006 and 76.3pc in 2013. Occupancy levels in Dublin were as high as 85pc between May and October 2014.

Nationwide occupancy rates were up by 1.9pc to 67.8pc. The midlands and east region saw the strongest growth, albeit from the lowest base, rising from a rate of 60.1pc in 2013 to 62.4pc.

Speaking to the Irish Independent, Aiden Murphy, a partner at Crowe Horwath's corporate recovery unit, said Dublin needs to encourage the construction of an extra 5,000 rooms to cater for demand - a far cry from the crash era and fears over so-called 'ghost' hotels.

He said that if the number of rooms stays static, rising hotel prices caused by increased demand and a lack of space could damage the wider tourism sector in Ireland.

"The challenge for Dublin is capacity. At 77pc Dublin is pretty much full for about six to seven months of the year," he said.

"Between 2006 and 2014 there were an extra 4,800 rooms added to the Dublin market and they were easily absorbed. I would say that over the next three to five years Dublin would need another 5,000 and I would say that it could take that easily."

He added: "If rooms are not delivered it could damage tourism for Ireland as a whole. If there is a perception abroad that Dublin is expensive it could cause tourists to choose other locations. As tourists who holiday in Dublin often spend some time in rural Ireland, it could have a knock-on effect for the country as a whole."

The survey also showed that average profits before tax per room continued to rise, and are almost on a par with pre-crash levels. Across the country average profits before tax were just over €9,200 last year compared to a little over €9,300 in 2007. This was despite the fact that room rates remained well below those seen during the height of the boom, although they did increase compared to 2013.

Nationwide, tourists paid out an average of €82.29 per room in 2014, an increase of €4.80 compared to the year before.

This was skewed upwards by Dublin, where room rates stood at €97.25.

However, rates both nationwide and in the capital were still some way off pre-recession levels, which stood at €97.69 and €116.59 respectively in 2007. Mr Murphy said the increase in profitability, which came about despite the relatively low average prices, was mainly attributable to increased efficiencies.

"Hotels are able to offer rooms at the prices that they are and still make a profit because they are more efficient.

"Also, what helped hotels to maintain their rates was that the Government protected the hotel sector in bad times with the cut in VAT from 13.5pc to 9pc [and] the hotels have delivered," he said.

Irish Independent

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