How the Brexit could affect Ireland's hotels

Dublin

With growing demand and a wealth of deals throughout the country, Ireland’s hotel scene has been doing well over the past year. An estimated €710 million worth of hotel property was bought and sold last year, and the Ireland unit of Cushman & Wakefield reported that hotel transaction sales volume jumped 31 percent in the first quarter of the year to €66 million ($73.5 million) from the same period a year ago.

But as Europe and the U.K. alike look ahead to the long-term effects of the recent vote in Britain to leave the European Union, Ireland’s hospitality industry may have to cope with the consequences as well.

Ireland by the Numbers

A total of 7,600 hotel rooms are expected to be built across Ireland over the next three years. Eighty percent of these are slated for Dublin, according to a report from Cushman & Wakefield.

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The developments reflect both Ireland’s improving economy and the growth in visitor numbers from a range of nearby and distant countries. Five years ago, the hotel occupancy rate in Dublin hovered at 67.2 percent. Last year, it reached 82.2 percent. Similarly, room rates have increased 45 percent over the same time period. Both measures have surpassed prerecession levels.

The numbers make sense: From 2010 to 2015, the number of international visitors to Ireland increased 33 percent to 8.6 million. Back in November, JLL Hotels & Hospitality Group reported that Dublin is suffering a "major shortage" of hotel rooms, and that the city needs an additional 3,000 rooms to satisfy demand. 

And while some investors stepped up, those new rooms have been slow in coming. Kirsty Rothwell, director and head of asset trading at Cushman in Dublin, said that hotel supply in Ireland was “really limited.” “There hasn’t been a new hotel built since 2013,” Rothwell told the Wall Street Journal. “We are playing catch-up.”

Visitors and Regulations

According to recent research from CBRE, more than 40 percent of the tourists that visit Ireland each year come from the U.K. and Northern Ireland thanks to the open-border Common Travel Area between the countries. This number may decline in the wake of the sharp decline in the value of the pound, and if new borders pose new restrictions on travel between nations that are members of the European Union (like Ireland) and non-members. 

But those concerns may be premature. The Common Travel Area between Ireland and the U.K. could very well remain in the wake of the Brexit. Bernard Ryan, professor of migration law at the University of Leicester, said that U.K. authorities “feel that it is impractical” for the land border to be an immigration frontier. This has driven unionist support for a Common Travel Area, Ryan told the Irish Times, because locals do not want to see the U.K. impose controls on travel between Northern Ireland and Britain, which is the only alternative if controls along the land border are considered impractical. 

In 2014, Ireland and the U.K. agreed a joint British-Irish visa that allows nationals of China and India to visit both states for up to three months on the basis of a visa issued by either state. Protocol 20 of the Treaty on the Functioning of the EU allows the two jurisdictions to “continue to make arrangements between themselves relating to the movement of persons between their territories (the Common Travel Area),” and Ryan believes that the underlying reasons for the Common Travel Area would continue to apply, with the position of Northern Ireland being an especially significant factor. 

Ryan does not feel that there is any obvious legal reason why Ireland could not retain the benefit of Protocol 20 and maintain special arrangements outside of the Schengen visa-free travel zone within the EU. A visa plan that would let EU citizens enter the U.K. without visas for up to three months would mean that there would be no need to end the common travel arrangement between the Republic and the U.K.

The Future

As a result of the Brexit, Dermot Crowley—deputy chief executive of Dalata Hotel Group, which owns 17 properties in Ireland—told the Wall Street Journal that Ireland could attract more investment from the U.S. because it will be the only English-speaking country in the European Union if Great Britain departs. Dalata is still going ahead with its plan to begin constructing two hotels in Dublin later this year and start expanding another property in 2017. Dalata recently added 18 rooms to one of its hotels in Dublin. “We’d like to build 1,000 new rooms in the city and we have 500 in the pipeline,” Crowley said.

Meanwhile, Dublin-based Amaris Hospitality is planning to add 85 rooms to one of its three hotels in Dublin. CEO John Brennan said that the company would consider expanding its two other properties in the country, but doesn’t have enough space to do so. When Brennan sees the price of deals that are out in the market, he told the Journal, he doesn’t even bother to bid. 

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