Savills: Supply of new Irish hotel rooms likely to remain limited

Value of hotel transactions in Ireland fell 30% last year to €350m as the hike in global interest rates hit hard, says property adviser

Dublin's average hotel room price rose to €180, 27% higher that before the covid pandemic. Picture: iStock

The value of hotel transactions in Ireland fell 30% last year to €350m as the hike in global interest rates hit hard, and the supply of new rooms will likely be limited for some time, with a share of Dublin hotel accommodation remaining contracted to the State, property adviser Savills has said.

Its annual survey also confirmed that emergency accommodation contracted by the Government accounted for 12% of all hotel rooms in the Republic, with Ukrainian refugees accounting for most of the contracted rooms outside Dublin, and asylum seekers and homeless people accounting for most of the contracted rooms in the capital. 

Most of the contracted Dublin hotel rooms will not be transferred back to mainstream hospitality anytime soon, and "we expect average growth of only 3% per annum over the next five years", but with the number of hotel rooms in the capital rising to more than 30,000 by 2029, the Savills report said.

However, Dublin hotels continued to tap a strong recovery in occupancy rates after the pandemic, and the average hotel room price climbed to €180 in the capital, some 27% above the average before the onset of covid. 

"Some regional hotel trade was even stronger, with revenue per available room for a luxury set coming in around 50% higher than 2019 levels," the report said. 

Tom Barrett, Savills hotels and leisure director, said hotel property transactions will pick up in 2024.

"The total hotel transaction volume for 2023 was €350m; 30% below the historical average. Yet although inflation and higher interest rates pushed yields up and reduced the value of investment properties, demand for regional hotels persisted throughout the year," according to the report.

Strong trade, attractive yields, and the significantly higher replacement costs of regional hotels attracted owner operators, hotel groups, and high net-worth individuals into this segment of the market.

However, Tom Barrett, director of hotels and leisure, said hotel property transactions will pick up this year "with signs that interest rates have plateaued, providing investors and prospective buyers with firmer foundations on which to make decisions”. 

Separately, a PwC report found that retail accounted for the largest number of company failures last year, with firms in hospitality featuring as the second highest.