Ireland’s hotel industry, post-recession, is no longer as reliant on U.K. travellers thanks to broader tourism demand and new destinations.
DUBLIN—Reports of Ireland suffering as a result of its neighbor United Kingdom’s decision to leave the European Union are wildly overestimated, sources said.
With many U.K. travelers having already booked and paid for travel to Ireland for 2016, Dublin and regional Ireland are showing positive industry performance metrics.
Trips to Ireland increased 10.8% for the second quarter of 2016, according to figures published by Ireland’s Central Statistics Office, while trips from the U.K. increased 14.4%.
The CSO added for the same period overseas trips by Irish residents increased 2.5% to almost 2 million.
According to Niall Gibbons, CEO of Tourism Ireland, U.K. visitors account for 42% of visits to Ireland but only 24% of revenue.
Tom Barrett, head of hotels and leisure at Savills’ Dublin office, said activity is largely centered on the country’s capital.
“Ireland is not frothy, but it has life and capital expenditure,” Barrett said. “Hotel development outside of Dublin, though, will be rare.”
Some, including former Irish minister for trade and development and current Irish Labour Party spokesman Joe Costello, have complained the recent jump in average daily rate threatens to return the country to the woes of its Celtic Tiger years, while others say rates seen today are a correction from a very low base.
According to Dublin Live, Costello said ADR in Dublin had “increased by almost 50% in two years,” with, in his opinion, the likelihood “the hospitality industry is beginning to rip off the customer once more.”
Irish hotel issues
Even with many positives signs, the Irish hotel industry still has issues to contend with, including:
- Exchange rates—U.K. visitor numbers always fluctuate with currency. Hoteliers usually react by running regional, specific offers to ensure value. Most hoteliers, according to sources, have not seen alarming changes in booking patterns.
- Outbound capital—A weaker sterling could make U.K. acquisitions more viable, but it is too early to assess Brexit’s longer-term impact.
- Irish performance in context—Performance around Ireland remains mixed, with some areas in recovery mode and showing good growth but still trading below pre-recession levels. Dublin is the success story and, sources said, already at capacity in 2015, with overseas visitors growing 13% year over year in June.
- Distressed assets—Sales of distress still take place but at much lower levels. The National Asset Management Agency, the government body assigned to refund property debt to taxpayers, has sold nearly all of its book’s assets.
The largest transaction tickets for the remainder of 2016 might be from Blackstone Group selling Dublin’s Burlington Hotel for approximately €180 million ($201.5 million) and Fitzpatrick Lifestyle Hotels selling three properties, with different media sources stating the likely sales price would be between €130 million ($145.5 million) and €150 million ($167.9 million).
Jim Murphy, CEO of Irish management and hotel and serviced apartment firm PREM Group, said a potentially cheaper U.K. is no reason for him to rush to spend a €30 million ($33.6 million) funding package received last October from Proventus Capital Partners.
“We will spend wisely. Fortunately, we bought two freehold assets in Dublin in 2012 and 2013. We’re very happy with those, and we have bought all we will do so for present time,” he told Hotel News Now.
Murphy said Ireland was shocked by Brexit, which initially caused a slowdown in his extended-stay business.
“Since then we’ve seen that sector pick up, and it will do so in September and beyond,” he said. “We’re more comfortable now than we were in June, seeing normal patterns of corporate business and also uplift in leisure. In my opinion: no need to panic.”
Barrett felt similarly.
“Brexit obviously was no positive, but pricing has changed and business is broader,” he said.
Ireland’s tourism industry also has so far avoided any freefall, Murphy said.
“June, July and August is high season over here, and we’ve been strong this year,” he said. “Dublin is buzzing, but my concern is what happens when the season ends as we might not be able to reply on city breaks from U.K. travelers. The Northern Ireland market also is strong, although there could be a marked effect on border counties.”
PREM recently bought a property in Killarney, Western Ireland, and has one property in the process of sale in the border counties, which was contracted before Brexit, Murphy said.
Barrett said he is optimistic about business coming to other parts of Ireland, including U.S. technology firm Apple’s to add 1,000 jobs to its European headquarters in Cork.
Dublin continues to be the Irish catalyst, though.
“Dublin is supply and demand. Some agents say the city will get an additional 1,000 rooms this year, 1,000 next year and 2,000 in 2018. We will catch up over the next three years to stability, and you must remember room rates have been coming up from very low rates. In Ballsbridge, Dublin, our embassy district, there were rooms at €49 ($55.26) a couple of years ago, and office space is coming, too,” Murphy said.
Those sentiments were shared by Savills’ Barrett, although he claimed pipeline would not be as robust as Murphy believed.
“In Euro-currency context, Ireland and Dublin’s pricing is competitive now, and with good product,” he said. “In 2009 and 2010, it was possible to get a room in Dublin for €30 ($33.83), not a room operated by what I’d call a hotelier. It was a terrible time, and we thought we’d never dream of a hotel opening anywhere, any time.
“The transaction market is normal, but what is abnormal is the lack of development seen over the last 10 years,” Barrett added.
But development is becoming a bigger piece of the puzzle even with Brexit making financing more difficult.
“There are more cranes in the city now,” Barrett said.
Dublin’s supply increase largely comes from extensions to properties, he said.
“There’s also a lot of refurbishment, where for a period of seven to eight years there was very little,” Barrett added. “The industry is being led by hoteliers doing this, and for the guest it results in a better product.”
Barrett said other parts of the larger travel industry are also enjoying the boom.
“Increased tourism numbers are reflected also in the health of the car-rental market,” he said. “The arrival pattern is not as reliant on U.K. travelers as it once was. We now see a far broader tourism demand, which has moved from hen and stag dos to sea and scenery. The west of Ireland, the Wild Atlantic Way, is a real hit and has strong legs.”
Barrett believes Brexit might lead to London-based financial firms considering Dublin.
“We’ve seen very little movement in London, but Dublin would be on the radar as an English-speaking country. We have to make sure our infrastructure is ready if that was to happen,” he said.
Barrett also said the Irish government was making the right noises.
“It rightfully sees tourism as one of the planks of the economy,” he said. “We hope they do not up (value-added tax) in the budget, probably announced in the last quarter. That would be a backwards step.”