The multimillion sale of the Morrison Hotel on Ormond Quay last week underlines how the demand for hotels in Dublin is not a simple thing
During the recession, the streets of the Liberties, a working-class Dublin neighbourhood that originated in the 12th century, were dotted with vacant buildings and the remnants of its industrial past lay derelict. But as the Irish economy began to prosper, the Liberties’ proximity to both the Guinness Storehouse and the city centre attracted developers of hotels, student accommodation, and apart-hotels.
These developments lead to the demise of Dublin Flea Market on Newmarket Square, the demolition of the Tivoli Theatre on Francis Street, and the exodus of other cultural spaces.
Off Thomas Street, Harry Crosbie wants to flatten a warehouse building to the rear of the Vicar Street music venue to make way for an eight-storey hotel, which is beside the site of another planned 224-bed hotel at Molyneux Yard, where generations of locals have kept horses.
For some Dubliners, the number of hotels springing up in the medieval neighbourhood is indicative of how the capital city is prioritising tourist accommodation while eradicating the authentic experiences valued by visitors and locals alike .
Rebecca Moynihan, a native of Dublin 8 and a former city councillor who is now a Labour senator and the party’s housing spokesperson, says Dubliners want more homes in the locality – not a “playground for tourists”.
“The main issue in my part of the city is that the cultural venues were being crowded out by large hotels,” she says. “Covid brought that to the fore when all the tourists disappeared. All we were left with was hotels, student accommodation and co-living.”
In mid-February 2020, the #NoMoreHotels movement, which campaigns against the destruction of late-night venues and other cultural spaces, held its last club night in Wigwam on Middle Abbey Street. Then Covid-19 arrived and the music stopped. Hospitality and tourism both fell to their knees.
Hotels can re-open on June 2, after being in hibernation for more than five months. As the vaccination roll-out gathers pace, the capital’s hotel industry is counting on the latest lockdown being the last, and on international visitors soon being allowed to return.
Tourism Economics expects that it will be 2024 before Dublin visitor numbers return to the same level as they were in 2019, when the city attracted 6.6m visitors.
However, industry experts also fear that when the tourism market rebounds, Dublin will have too few hotels to accommodate visitors – thanks to a legacy of under-investment in the sector in the post-crash era, construction delays due to Covid restrictions, and investors and financiers getting spooked by the Covid crisis.
In 2018, a year after An Taisce complained to Dublin City Council about the number of new hotels being built in the capital, Fáilte Ireland predicted that there would be a shortage of 1,100 hotel rooms in the city centre by 2020 – because demand from tourists was expected to outstrip the supply of hotel accommodation.
Isobel Horan, a divisional director at real estate advisers Cushman & Wakefield, says: “That narrative of there being too many hotels has been around for a number of years. But when you look at the occupancy rates that Dublin was achieving in 2019, it was up there with London and Paris.
"If you consistently have 84pc occupancy levels across a city for three years, that illustrates a supply issue. The rest of Europe was in the mid-70s for a well-functioning hospitality city.”
As a result of the Covid crisis, some 2,842 rooms at 30 new hotels and aparthotels – or extensions of existing hotels – have been shelved or postponed, Horan says, citing figures from market intelligence firm AM:PM. About 19 of those projects (1,762 rooms) were earmarked for Dublin city centre.
“We are seeing developers who haven’t broken ground yet or gone to tender for construction, who are finding it difficult to obtain finance for hospitality development – because hospitality is deemed to be a lot riskier now than it was in 2019,” Horan says.
“So they are looking at other sectors that still have value and are developing PRS (private rented sector) schemes instead. There is a shortage in the housing market, so it’s easier to change planning from hospitality to PRS than to get planning for offices.”
Yet 43 hotels (4,658 rooms) are still in planning for Dublin city and its suburbs, while 76 projects (6,855 rooms) have been granted final planning, Horan says. This compares to about 100 new hotels and 49 extensions just before Covid arrived.
At the moment, according to Horan’s figures, 33 hotels and aparthotels (or 5,536 rooms) are under construction. But the lag time between planning a new hotel, getting planning permission, construction and opening up can take from three to four years.
There are already 22,800 hotel rooms in Dublin, about 12,500 of which are in the city centre, estimates CBRE. About 3,000 of those rooms were built between 2018 and 2020 – but almost 500 rooms are being removed from the total Dublin hotel stock, because the 88-bed Beacon Hotel was sold last year to form part of an extended Beacon Hospital, and the US Embassy is taking over the 400-bed Ballsbridge Hotel.
CBRE estimates that the hotel stock will increase by 16pc to 26,000 rooms by 2023. However, Dave Murray, a director at CBRE’s hotels division, argues that Dublin has been under-supplied with hotels for years.
After the financial crisis, it was not commercially viable to build a hotel from the ground up – until the fourth quarter of 2016, when large transactions such as the sale of the Gresham Hotel and the Lifestyle Collection (the Spencer, Morgan and Beacon Hotels) indicated hotel values were high enough to justify construction.
“There were hardly any new hotels introduced to the Dublin market between 2008 and 2016,” Murray says. “The annualised growth rate of hotel supply in Dublin since 2007 is just 1.4pc. For ten of those 13 years, nothing happened, and then there was a spike in 2018 and 2019.”
The city’s hotel capacity not only needs to be prepared for a return of overseas and domestic leisure travellers who have accumulated record savings, but also needs to cater for the growth in activity from multinational office occupiers, Murray says.
Some 250,000sqm of the office space committed to by multinationals is not yet occupied and will accommodate an extra 20,000 staff. While Covid may reduce the need for all that space, the international nature of these multinationals will mean their staff will still have to travel to some degree, and will require hotel accommodation.
While corporate travellers are expected to fly less frequently (because companies have realised during Covid they can conduct meetings remotely), they will likely have more meetings in one trip, leading to fewer but longer trips, Murray says.
Indeed, the growth in hybrid workers in a post-pandemic environment may even feed demand for hotels.
“What we are seeing in London now, is that some people who previously commuted to the city for an hour-and-a-half each way are not prepared to put in that slog anymore. Post-Covid, they will work from home on Mondays or Tuesdays, and stay in a city hotel the rest of the week.” Murray says.
There are already signs of renewed confidence in the Dublin hotel market from both investors and operators.
Last week, Whitbread – owners of Premier Inn, the UK’s largest hotel business – said it was pressing ahead with plans to add 2,500 beds across five hotels in Dublin, with three of those properties hotels currently under construction.
Matt Gent, development manager for Premier Inn in Ireland, says the company is scoping out additional locations in the city.
Earlier this month, The Moxy, which only opened on the corner of Dublin’s Marlborough Street and Sackville Place at the end of 2019, sold for €35m – the first major hotel sale in the capital city this year.
And last week, Russian billionaire Yelena Baturina – who bought the Morrison Hotel on Ormond Quay from Nama in 2012 for €22m – sold it to UK private equity firm Zetland Capital for an estimated €68m.
The oligarch had initially sought between €80m and €85m for the Liffey-side hotel when it went on the market in February 2020.
“The Moxy was an off-market process and when the deal was reported in the media, we were inundated with international investors asking why the hell we hadn’t called them about it – even though we couldn’t,” Murray says. “There is an appetite to spend a lot of money here.”
Horan agrees. “Any international clients we talk to, we find Dublin is in the mix with Paris, London and Rome – especially with all these new tech firms coming in, like TikTok setting up an office for 2,000 staff.”
In February, Dublin City Council planners denied Ringline Investments permission for a 142-bed hotel on Capel Street, saying it would “exacerbate the existing saturation of hotel rooms within the immediate vicinity”.
Ringline has appealed the decision to An Bord Pleanála, and Accor, the French hotel giant that planned to operate the hotel under its new Tribe band, is undeterred.
Philip Lassman, vice-president of development at Accor Northern Europe, says: “We don’t make a decision to enter a new market lightly – so our plan to open our first managed and operated hotel is indicative of our confidence in Dublin.
“There was a shortage of hotels in Dublin before the pandemic, and there is an opportunity now to correct that imbalance, before the tourists return in their droves – and we believe that they will.”