Saturday 21 July 2018

Vat rise fears after surge in hotel room revenues

Ireland's hotels have performed strongly as summer begins, with revenue per available room jumping 13.6pc in Dublin and by 18.3pc outside the capital during May. Stock picture
Ireland's hotels have performed strongly as summer begins, with revenue per available room jumping 13.6pc in Dublin and by 18.3pc outside the capital during May. Stock picture
John Mulligan

John Mulligan

Ireland's hotels have performed strongly as summer begins, with revenue per available room jumping 13.6pc in Dublin and by 18.3pc outside the capital during May.

Davy Stockbrokers said the performance continues the year-to-date trend of strong growth in both areas.

The May data from travel research company STR follows figures for April that showed total revenue per available room in Ireland rising 9.7pc year-on-year.

The STR figures show that during May, occupancy of hotels in Dublin was one percentage point higher, while the average daily rate soared 12.3pc compared to a 6.6pc rise in April.

In the year to date, revenue per available room in Dublin is 8.9pc higher.

In regional Ireland, revenue per available room rose 18.3pc last month, with occupancy up 4.1 percentage points. The average daily room rate in that area was up 12.3pc year-on-year during May.

While the performance will be welcomed by the sector, it may also have a sting in the tail.

Hoteliers have successfully lobbied for a number of years to have the special 9pc Vat rate for the sector retained. It was introduced in 2011 by the Government as a special measure to help a number of businesses in the services sector, including hotels, restaurants, hairdressers, newspaper publishers, cinemas and takeaways.

But while the reduced rate has been credited with creating or retaining thousands of jobs, the Government has continually warned that if hotel room rates rise too much the rate could revert to 13.5pc. However, looming Brexit could stifle any plans to return the rate to 13.5pc in at least the short-term in order to protect the tourism sector.

Davy Stockbrokers said it's forecasting growth in revenue per available room of 5.5pc in Dublin for Dalata, Ireland's biggest hotel group, in the current financial year. Davy is predicting a 5pc increase for Dalata in regional Ireland.

"As we enter the key summer months, average daily rate will remain central to growth as occupancy level comparatives are very full," according to Davy, adding that Dalata is likely to continue to outperform in the UK market despite general softness there.

Stock market-listed Dalata saw its revenue jump 20pc to €348.5m last year, while its pre-tax profit rose 75pc to €77.3m. It has a market capitalisation of €1.2bn.

The group has a portfolio of 38 hotels, with 7,600 bedrooms. It is developing an additional 2,234 rooms.

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