Business Irish

Sunday 22 April 2018

Warning lack of funds and skills will hit hotel rooms target

Dalata boss Pat McCann saw shares soar after it reported better than expected first-half profits
Dalata boss Pat McCann saw shares soar after it reported better than expected first-half profits
John Mulligan

John Mulligan

Dublin "hasn't a hope" of building enough hotel rooms to meet demand by 2020 as funding for projects dries up and a lack of tradesmen hampers the construction industry, the CEO of Ireland's largest hotel group has warned.

Tourism bodies have repeatedly said that more than 5,000 new hotel rooms are needed by 2020 to satisfy demand. And while a number of new hotels are being built and existing ones extended, Dalata boss Pat McCann said it's likely that just 3,000 new rooms will be ready for use within three years' time.

"There are things beginning to bite now for potential developers," Mr McCann told the Irish Independent. "One is the availability of funding for hotel projects. The second is building inflation and getting companies and tradesmen to do the work - that's a big challenge."

"When you look at all the offices and residential that has to be built, [the hotel sector] will struggle to find builders and skilled tradesmen. There's a big challenge coming down the line on that," he said.

He said the lack of necessary construction personnel is particularly acute in Dublin.

"Next year, about 1,200 new hotel rooms will be added in Dublin," he said. Dalata will account for about 600 of those. "When you look forward into 2019, there's an expectation of 2,000 more rooms, but I think that number will fall. By the end of 2020, if there are 3,000 additional rooms in Dublin it will be good going."

Mr McCann was speaking as Dalata reported profits of €32.7m for the first half of the year - an 80pc increase on the first six months of 2016, as a surge in average room rates helped the bottom line. Revenue rose 24.4pc to €161.8m, with the results ahead of analyst expectations. Shares in the group jumped 7.7pc, catapulting Dalata's market capitalisation to just under €1bn.

The Dalata chief also called for the retention of the 9pc VAT rate for the hotel and some other sectors and believes Taoiseach Leo Varadkar and Finace Minister Pascal Donohoe "will be loathe" to tinker with it.

Mr McCann also said that Dalata has no designs on any more projects in Ireland and will be able to fuel its asset-light expansion in the UK without having to raise any more equity from shareholders, or any more debt.

The hotel group has just agreed to lease a planned 300-bedroom hotel in Manchester that will be built by Property Alliance Group. The hotel, which has yet to receive planning permission, is set to open in mid-2020.

Mr McCann said the focus for Dalata has been the UK for the past 18 months, even as it's involved in a number of new hotel builds and extensions here.

"There might be one or two more projects in Ireland - but that's a very big might - and other than that, it's unlikely we'll do a lot more [in Ireland]," said Mr McCann.

He said there are a number of undisclosed UK projects Dalata is working on.

"Unless somebody comes to us in Ireland with a very good deal and a very good project, it's unlikely you'll hear any more about expansion in Ireland."

Dalata currently operates a total of 38 hotels, with 7,500 rooms, under brands including Clayton and Maldron. At the end of June, it operated seven hotels in the UK.

"We could have up to 35 hotels in the UK over the next five to seven years, on top of the existing ones," said Mr McCann. "There's a lot of opportunity there that we need to exploit."

Irish Independent

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