Rising hotel room rates ‘threatening’ inbound tourism

The rising cost of staying in Irish hotels is expected to overtake pre-recession peak levels by the end of this year, raising concerns over how overseas tourists might start viewing Ireland as an affordable travel destination.

New data from accountancy and business advisory firm Crowe Horwath detail an Irish hotel sector in rude health, but one in potential risk of overheating and damaging the company’s overall tourism product.

According to Crowe Horwath, last year saw average room occupancy rates increase from 67.8% to 71.1% and average room rates rise by €10 to €92.15.

Occupancy levels in Dublin hotels reached nearly 81% (from 77.2% in 2014) and room rates there topped €84, up around €5 in the year.

The company expects room rates to pass their pre-recession levels, of around €120, by the end of this year.

A previously strong sterling, an increase in overseas visitors, the retention of the 9% Vat rate and more conference/event business helped last year’s growth.

This year is expected to see further strong growth and Crowe Horwath partner, Aiden Murphy, sees room rates – particularly in Dublin – continuing to grow for the next few years.

However, Mr. Murphy said the recent Brexit vote and the weakening of sterling are concerns, as 22% of inward tourism numbers are from the UK.

This, alone, he said could make the Government’s target for ten million overseas visitors by 2025 seem “ambitious”.

He said a bigger promotional emphasis needs to be put on areas outside of Dublin and the regional airports, as destinations, and Dublin needs more hotel supply in order to stop room rates reaching the level where visitors start choosing other locations as cheaper alternatives.

“The effect Brexit and the recent falling sterling rate will have on the Irish hotel sector in 2016 is relatively unknown.

"Travel plans are likely to be unchanged for 2016 but future visitor numbers could be affected. As sterling weakens, the UK market will start to feel the full impact of increases in Dublin rates and UK visitors may opt for other more competitive sterling destinations,” he said.

He said Ireland needs to be better promoted as a holiday destination further afield than the UK.