Average hotel room value down 40% since peak

THE average value of a hotel room in Dublin has plunged 40% to €150,000 since the peak, which is well below the European average.

The most valuable hotels rooms at an average €569,000 are in Paris followed by London at €524,000.

Last year, hotel values fell just 5% fall in hotel values for Dublin, which was significantly lower than the 20% falls in 2009 and 2008.

The figures are contained in the latest European Hotel Valuation index and according to Savills Ireland it shows some resilience in the Irish hotel sector. The annual report monitors 33 top European cities and estimates the value per bedroom and the percentage change.

Head of the hotels and leisure sector with Savills, Tom Barrett, said that last year, hotel valuations increased in 20 European cities compared to only one increase during 2009 in London.

“Unsurprisingly, based on 2010 trading performance, values in Dublin are estimated to have fallen by 5% in 2010 to an average of €150,000 per bedroom.

“If we factor in the poor sentiment and shortage of debt finance, the real decline will have been greater. However, this is still better than the 20% decline in the index during 2009 and 19% fall in 2008.”

The figures show that compared to the peak index value for Dublin of €251,000 in 2006, hotel values in 2010 were down 40%, which experts say is relatively good compared to the decline in prices that have been seen in other property sectors.

“For example, residential house prices are down between 40% to 60% depending on the location while some prime commercial properties have declined in value by an estimated 50%, once again depending on the location,” said Mr Barrett.

“But due to the growth in hotel supply and limited increases in price during the years leading up to the 2006 peak, hotel index values grew by only 16% from 2001 to 2006 – which was very low compared to other Irish property sectors.”

In Paris room values rose 4% to €569,000 and in London 8%. The European average was €215,000.

“The peak to trough decline in Dublin of 40% is very similar to provincial UK and weaker European cities, but actual transactions in Dublin have been lower than in most other European markets.

“Athens, the other recipient of IMF/ESFS assistance had a decline of 29% last year reflecting the negative impact of strikes and demonstrations. Central Athens also saw the closure of eight hotels during the year,” said Mr Barrett.