As many as 30 hotels with combined values of around €200m could be sold this year, according to Tom Barrett, Savills director of hotels and leisure. That would be a substantial increase on the 24 hotel transactions last year which are believed to have been worth about €150m.
Most of the transactions over the last 18 months have been one-offs, but some of those buyers have also expressed an interest in buying other hotels.
“As a symbol of Ireland’s boom and bust, the hotel industry is hard to beat. It was one of the biggest casualties of the property crash. With generous tax concessions oiling the wheels of growth, a proliferation of four and five star hotels fed into the taste for conspicuous consumption in the Celtic Tiger years, leaving the industry cruelly exposed when recession came.
“With the dust finally settling, fears for the future of the Irish hospitality sector have proved to be unfounded and over the last two years something of a phoenix has emerged from the ashes in the form of a hotel sector that is cost-focused, competitive and crucially, profitable,” Mr Barrett says.
As a former commercial director of Choice Hotels Ireland and finance director with Forte Meridien Hotels & Resorts, Barrett speaks with an insider’s perspective and argues the industry’s rise and fall was more nuanced than is generally perceived.
“In 1995, we had 25,000 hotel bedrooms in the country; in 2005, with steady growth and investment, that rose to 45,000 hotel bedrooms. Three years later, that figure jumped to 60,000 and most of that growth was in four and five star hotels. It was that tail of growth that created the perfect storm in 2008 when supply was up substantially and demand fell dramatically.”
The combination of over supply and an economic downturn caused a sharp drop in hotel room prices but these have seen steady recovery since late 2010.
Indeed he believes that one of the most extraordinary consequences of the recession is that many hotels are actually more profitable today than they were at the height of the boom.
“Most of the hotels we are selling are profitable and are making more than they did back in 2007. Today, there is a much greater focus on managing costs while before it was often about making a good impression. Today’s hotels have to look smart, but they also have to make money.
“That’s the bottom line,” he adds.
Hotels coming on the market since 2010 have ranged from small three stars to some of the country’s most prestigious operations.
What makes their sale different from the past is that they are being treated seriously as businesses in their own right rather than seen as speculative investments.
“In the past, when hotels were sold, it was invariably for redevelopment of some kind. Today, we are seeing trade in hotels as functioning, profitable businesses.”
Irish hotels are also attracting local and foreign investors, hotel franchise operators and people with no industry experience.
“All types of people are looking and buying; when you meet foreign investors for the first time, they tend to be focused on Dublin but that changes once they see what’s on offer beyond that,” he says.
He set up the Irish Hotels and Leisure division in Savills in late 2010, at a time when nothing was happening in the market.
Now he leads a team of eight and says a key to the improvement in the market has been the growing international confidence “People are buying into real, steady businesses and reaping the rewards,” he says. Source: Irish Independent