Ireland's hotel deals approach €650M for 2015

Ireland's hotel industry has shown remarkable strength this year, and may well keep growing. Late last week, CBRE Ireland reported that, for the first nine months of 2015, a total of 54 hotels with a combined value of almost €650 million were sold throughout the country. This, the Irish Times notes, compares with 64 sales last year, totaling over €422.5 million, and 33 transactions in 2013 with a combined value of €160 million.

Fifteen sales totaling €74.7 million were recorded in the third quarter of 2015, following a busy first-half in which in which 39 hotel properties—worth a combined €575 million—changed hands.

The Irish Examiner noted that the first three quarters of this year have surpassed all of last year, when 63 deals were signed. The highest volume of hotel sales ever recorded in Ireland occurred in the first three months of 2015 when 25 hotels with a combined value of over half a billion euro changed hands.

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The last time hotel transactions exceeded €600 million was in 2008, when only 10 deals were completed. The last time values topped €1 billion was in 2006. During the recession in 2009 and 2010, the Times notes, only five hotels changed hands. Since then, the government's 9 percent VAT rate for tourism services has helped the industry recover—but as Minister for Tourism Paschal Donohoe noted in August, this rate will only be retained as long as it is evidently helping to retain jobs in the sector and feeding through to prices for consumers.

Lisa Keogh of CBRE’s hotels division said that there is a marked supply and demand problem simmering in the Irish hotels market. “There is now a scarcity of hotels to satisfy inherent volumes of demand from hoteliers and investors,” she said in a statement. “The need to release more hotel assets for sale to cater for this demand is becoming increasingly apparent.” 

The statistics agree: In August, Hospitality Ireland reported 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. Occupancy rates in Dublin are now higher than in 2006 and are "virtually full" during peak times.

Big deals
This year’s activity has been boosted by the likes of Nama and Ulster Bank continuing to offload assets. Among the big deals announced so far this year was JP McManus’s purchase of the five-star Adare Manor Hotel and Golf Resort in Co Limerick for €31.5 million and Dalata Hotel Group’s purchase of the four-star Clayton Hotel in County Galway and the four-star Whites of Wexford for a combined value of more than €31 million. Last month, Dalata chief executive Pat McCann said he expected the Gresham, currently owned by Precinct Investments and controlled by Nama, to go up for sale.

The Irish market's leading hospitality business, the Dalata Hotel Group, is about to launch what the Examiner calls "a significant fundraising exercise" to take advantage of the rise in demand amid the "glut" in room supply. Its shareholders are scheduled to vote on the company’s latest share issue plan, which is targeting a fresh €160 million to be used on significant portfolio expansion.

The additional raising of up to €90 million in debt financing should give Dalata in the region of €250 million to bolster its hotel offering.

Its money will be spent on a mix of buying existing hotels, significantly expanding premises already in its portfolio and building new properties. Speaking at the group’s interim results presentation last month Dalata’s management noted the need for more hotel space; particularly in the Dublin area. It is looking at a number of sites there.

It hopes to have sites purchased in the next five months and would like to be on-site within a year, with construction likely to take up to 18 months. The company sees scope for two or three new hotels in Dublin, with the consensus being that the capital is short of about 4,000 to 5,000 rooms at peak demand times.

Meanwhile, The Radisson Blu Hotel in Athlone is on the market (through what the Irish Independent calls a "private treaty" with CBRE Hotels) and expected to fetch more than €6.5 million. 

The four star hotel is being offered for sale on the instructions of the receiver to Earls Holdings Limited (In Receivership) Kieran Wallace of KPMG. It is being sold as a going concern and the sale offers investors an exceptional opportunity to acquire a landmark and highly profitable, said CBRE.