Can Ireland create 5,000 new hotel rooms?

Ireland finds itself in a rather enviable position. Turns out new supply isn't problematic; in fact, it's what it desperately needs to meet growing demand.

Hospitality Ireland is reporting that an additional 5,000 hotel rooms will need to be created in the next three to five years to cater for demand as occupancy rates hit their highest since the boom.

A survey carried out by accounting firm Crowe Horwath found that occupancy rates in Ireland rose by nearly two percent to 67.8 percent in 2014, with Dublin rising 0.9 percent to 77.2 percent.

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Occupancy rates in Dublin are now higher than in 2006 and are "virtually full" during peak times.

Despite the high occupancy levels, room rates are still down considerably since 2007. An average rooms now costs €97.25 in Dublin, down from €116.59 in 2007, a 17 percent drop. Profitability per room, however, is almost in-line with pre-recession levels.

Speaking to the Irish Independent, Aiden Murphy, a partner at Crowe Horwath, said that 5,000 new rooms must be constructed or room prices will continue to rise. Some 4,800 rooms were added in Dublin between 2006 and 2014. 

But those 5,000 rooms may not come easy. Last month, Delata Hotel Group, Ireland's largest hotel operator, said the trend of cheap hotel deals could be coming to an end in the country. Increased development throughout Ireland, particularly in the Northern Irish city of Belfast, could be a sign of things to come, with prices and interest on the rise.

Brian Lavery, managing director of CBRE NI, told the Irish Times that a "period of investment" is coming to the city's hospitality sector. "After seven to eight years of inactivity, the correct drivers are in place for this sector. Increasing tourism, successful public events, affordable land prices, high levels of occupancy in hotels and general consumer confidence means we will see a raft of hotel development and also the trading of existing hotels over the next couple of years,” Lavery said.

Not unlike the U.S., Ireland faced similar financial calamity post-2007, and is still fighting its way back out of it. During that time, many Irish hotels went into foreclosure. Back in 2012, it was estimated that at least one in six Irish hotel rooms was under bank control, with 56 percent of these controlled by NAMA.

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