If Irish eyes are smiling, it may be because of the country's surging hospitality sector. The country is poised to see more supply coming to the transactions market, with equally strong demand expected to make acquiring additional hotels more competitive.
Investor Appetite
According to CBRE, investor appetite for Irish real estate remains strong, with some further Asian investment expected in the second half of the year. In the first half of the year, eight hotels sold for a combined total of more than €214 million, and the company said that an increasing proportion of transactions in the hotels, development and investment sectors were being conducted off-market.
“Following a year in which transactional activity in the hotel sector was constrained by a shortage of product, particularly in the Dublin market, we expect to see significant improvement in this situation in 2018 with several high-profile hotel properties expected to be offered for sale (both on and off market) over the next few months,” said Lisa Keogh, associate director, CBRE Hotels. “Some of these sales will have been fast-tracked by Capital Gains Tax Waiver scheme changes announced in last autumn’s budget, whereby assets purchased after 2011, that originally had to be held for a seven-year period in order to trigger a capital gains tax waiver, can now be sold after a four-year hold period.”
While hotels were coming onto the transactions market, the lack of hotels coming into operation has meant that performance remained strong. According to STR, in the first quarter occupancy was up 3.4 percent on the year to 67.6 percent, average daily rate rose 6.2 percent to €113.67 and revenue per available room increased 9.7 percent to €76.79.
STR analysts noted that performance was strong across the country, “not just in the always-popular Dublin, where RevPAR increased 7.8 percent. Continuing to help Ireland’s performance is a lack of meaningful supply growth.”
Ireland's iNua Hospitality will face competition from a number of quarters. Choice Hotel Group, which controls the franchise for Clarion, Comfort, Ascend and Quality brands in Ireland, has confirmed that it is looking to bring the Clarion brand back to the country after a two-year absence and is prepared to purchase a site and lease another to do so.
And as CBRE noted, overseas investors are still targeting the country. The Goldman Sachs-backed hotel group Tifco, which owns 25 hotels with another two in development, is currently attracting a number of buyers, with global interests and pricing to match. Those wishing to compete must have deep pockets.
Domestic Investment
Overseas investors aren't the only ones digging in. Earlier this month, iNua announced that it had secured an investment of €40 million to support the future growth of the business in its domestic market.
The group announced its intention to commence a funding round last March, targeting up to €40 million in fresh investment and consolidating the company under a single entity. This newly formed entity, iNua Hospitality, now owns and operates seven hotels.
“Having secured fresh investment, and finalized the consolidation of our hotel group in a PLC structure, iNua Hospitality is positioned for further growth across our current portfolio and for new opportunities as part of the next phase of our development,” said iNua founder and CEO Noel Creedon. “We have successfully grown a portfolio of seven well-performing assets, over four years, with increased profitability across the group. We remain focused on continuing to invest in our existing portfolio and our people, as well as making further strategic investments and returning value to our investors.”
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.