Hotel sector brighter, but Dublin leads the recovery

Higher occupancy rates, increased room prices and a positive outlook for the future are all indications that the Irish hotel sector is recovering as it emerges from the difficulties of the past number of years.

According to the Crowe Horwath Annual Irish Hotel Survey released yesterday, Dublin hotels are driving the industry’s recovery with other regions also showing signs of improved performance, albeit somewhat less so than the capital.

Average room occupancy in Dublin has surpassed 76%, leaving it just shy of peak levels of 76.8%.

“There are a number of key factors driving growth in the hotel sector: the turnaround in the Irish economy, the improvement in Irish consumer sentiment and the continued increase in overseas visitor number,” said Aiden Murphy of Crowe Horwath.

“Although the Irish hotel sector has managed to regain some of the ground lost during the economic downturn, particularly in Dublin, there is still work to be done nationally to reach the peak performance of 2007. Despite room sales increasing in 2013, room rates are still some 21% below the peak levels achieved in 2007.”

The report identifies a two-speed recovery in the sector with Dublin outpacing the rest of the country in terms of room prices — which increased by 3.7% nationally in 2013 compared to 2012 — and occupancy rates which were 16% ahead of the midlands and east region.

On average, each hotel room in the capital is occupied for 280 nights per year, compared to 220 in the midlands and east, according to statistics.

“While Dublin continues to outpace the rest of the country across all key performance metrics, the Irish hotel sector generally has managed to regain some of the ground lost during the economic downturn,” Mr Murphy said.

Profit-before tax per room is substantially down on 2007 peak levels however, lagging more than 20% behind.

Respondents to the survey highlighted the reduced Vat rate of 9% — introduced in July 2011 and extended in last year’s budget — as crucial for further growth.

“Given that the reduced rate of 9% was highlighted by the majority of respondents as an important factor for driving growth in the sector, it is important that the current rate of Vat is maintained to allow hoteliers to continue offering consumers value for money within the sector,” added Mr Murphy.

Some 80% of hoteliers expect further annual increases in revenue, according to the survey.