Supply growth could slow Dublin deal boom

Savills is marketing the €10.7-million sale of the Dublin Citi Hotel in Dublin's Temple Bar with a sale-and-lease-back agreement.
Dublin Citi Hotel, Ireland. Photo credit: Dublin Citi Hotel

It’s hardly surprising that Dublin has been enjoying a strong hotel transactions market in recent years, but an increase in supply could temper demand for investments. 

According to a study produced earlier this year by Deloitte, Dublin was the third-most attractive city for hotel investment in Europe. But despite strong interest in the city and the wider Irish market for hotel investments from domestic and international investors, 2017 was a relatively quiet year for hotel sales. After €1 billion worth of deals in 2015 and €850 million recorded in 2016, only €500 million worth of hotels changed hands last year. 

According to Savills, the city’s hotel market remained buoyant due to continued growth in visitor numbers—particularly from Europe, the U.S. and Canada. At the same time, Irish hotel investment opportunities, particularly in prime Dublin locations, are scarce.

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“Investors are capturing strong rental income underpinned by experienced operators, and the opportunity to own a strategic piece of Dublin’s streetscape,” said Aaron Spring, associate director of hotels and leisure at Savills.

This does not mean, however, that there are no investment opportunities to be found in Dublin. Savills Ireland is bringing the Dublin Citi Hotel in Temple Bar to the market, seeking investors for the 27-room hotel and bar at a guide price of €10.7 million. The property will have a new 25-year lease with a rent of €660,000 per year.

Also available Goldman Sachs-backed Tifco, which owns 18 hotels, including the Clontarf Castle in Dublin and sites for two new hotels in Dublin. The sellers were thought to be looking for up to €600 million.

Growing Demand

International demand continued to grow in the first quarter of the year, Crowe Horwath reported, with CSO data showing the number of overseas visits to Ireland increased 7 percent to 1.92 million visitors compared with the same period in 2017. 

The greatest increase was from other European nations, up 13.8 percent over the quarter. The group said that the continued strength in international demand boded well for Ireland, particularly if the demand continued into the peak summer months.

The company predicted additional growth from emerging markets as air access from Asia continued to increase. In March, Chinese airline Hainan Airlines announced that it would begin direct flights between Beijing and Dublin from June, and Cathay Pacific have also announced a direct route between Hong Kong and Dublin. These new routes open Ireland up to an array of new markets.

Measuring the Metrics

Hotel performance in Dublin continued to show strength in the first quarter, with average daily rate in Dublin increasing 4.6 percent in the first quarter over the same period in 2017 to approximately €124, while occupancy increased 2.2 percentage points to 74.2 percent. RevPAR grew 7.8 percent to €91.94.

Dublin is still performing well in a European context, Savills claims—important as the city competed with other European cities for the short-break and conference markets. While occupancy in Dublin remained among the highest in Europe, Dublin’s ADR was on a par with Amsterdam, Copenhagen and Barcelona.

Now would appear to be a good time to sell. According to Fáilte Ireland, the supply side pressures the city has seen are due to significantly ease by 2019, extensions or no. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.