The hotel industry in Ireland has experienced a boom cycle: either a long-lasting period of high demand and a constrained supply or influxes of new supply which were easily absorbed. The positive dynamics of the market have resulted in a high level of transactions.
As an example: the 4-Star Ruby Molly Hotel in Dublin 7 reportedly sold to German group Deka Immobilien as a lease deal this year for €86m (€316k per key). Deka may be a global leader in real estate funds, but the Irish buyer pool is much smaller. hotel assets in general has been diverse. Capital has come in from various sources – high net worths, family offices, real estate funds and private equity – and closed transactions across both single assets and platforms.
Credit readily available (from national banks such as AIB and Bank of Ireland or private lenders) has also facilitated deal activity.
It is now up to us to decide whether there is a storm brewing. A storm of high transaction volumes, led by platform deals of large scale, or a hurricane of volatility in the trading market, which is what we are experiencing at this time. Irish hotels have been delivering sold profit & loss performance for several years running.
Why investors like Irish hotels
Ireland’s perception and actual ease of access (i.e. The transparency of the legal, financial and operational frameworks is particularly important for overseas buyers. It’s not only overseas buyers who have been active. Domestic groups like Cork based Cliste Hospitality, have also joined the acquisition wave.
With the acquisition of the 69-bedroom Keadeen hotel in Kildare. They expanded to 15The th Property under management. Whatever the buyer type is, Irish hotels have been offering a good investment thesis.
Ireland’s business-friendly environment, its gateway to the EU and the fact that it is a center for the financial and tech industries have all contributed to the strong tourism numbers. According to the Central Statistics Office for the full year of 2024, an estimated 6.6m international visitors travelled to Ireland, up 6.7% on 2023. At the same, the domestic markets have proven to be resilient and further strengthened trading.
The results were impressive, particularly in Dublin where occupancy rates have been over 80% during the past two years. An average daily rate (ADR) of €180 recorded in 2023 was already 27% above 2019 levels. These figures are astounding, even when you consider the recovery that followed Covid.
Transaction volumes and market performance
The combination of these factors, from an investor’s perspective, has allowed investor underwriting, to show improved performance, a further tightening potential of yields, and strong overall returns, at the very least, on paper.
Volumes have therefore soared to just shy of €1bn (including development sites and hostel transactions) for 2024. This place Ireland sixth on an HVS European Hotel Transaction volume comparison chart. Activity like this was last seen in Ireland in 2015, but the volume level has not been reached since the previous peak of €1 billion in 2006, just before the Global Financial Crisis.
This is what it says CBRE that transaction volumes could approach another €800m in 2025There are several anticipated platform deals and pending transactions on the horizon. A successful acquisition of Dalata Group, reportedly being bid by major players at a potential valuation of €1.7bn, would surely shatter any historic transaction volume records for the country in a single year.
Signs of Market Shifts in Ireland
Although we appear to have made good progress in a positive cycle for hotel performance, the sky is getting darker and more cloudy. In the year to December 2024, national RevPAR still increased by 0.5%. However, the Dublin market RevPAR already peaked in 2023 and fell by 2.2% in 2024.
Hoteliers can and will benefit from a quick turnaround. Trim costs to combat inflationary forces and/or soften RevPAR levelsThere are also other factors that could affect the outcome. According to the Irish Tourist Industry Confederation, (ITIC), recent geopolitical developments could threaten US tourism in Ireland.
This is nothing new, as it should be expected this market comprises up to 35% of the total Irish tourism spend each year. Even a very small shift in the US Dollar value against the Euro will have a negative impact. The shifts already took place and the effects are now being felt.
Ireland is another less-studied aspect. Housing shortage Its impact on the performance of hotels. The Government relied on Irish Hotels for their inventory to house the influx of refugees in Ireland and signed contracts that were backed by the government. This was a boon to hoteliers during the more difficult Covid era.
It is important to consider the future impact of a future void when these contracts end. In 2024 Fáilte Ireland reported that 28% All tourism beds registered were contracted by the state. It may not possible to fill these additional rooms with tourists due to the nature of the cycle.
The Capital is also a source of new supplies another 3,000 rooms are expected to be delivered in Dublin between 2025 and 2026.
Pathways for Prolonged Growth
Nevertheless, we sit in a period of relative calm with Irish hotels delivering sold profit & loss performance for several years running, which is driven by good overall fundamentals. With minor shifts to cost structures, new tech-driven improvements and/or positive policy changes (e.g. a fresh reduction in VAT) – we’ve seen precedents for even progressed cycles to be prolonged for years.
Dublin Airport is crucial to this positive outcome and to ensuring that the good times continue. If today’s passenger cap was raised to 32 million, this would result in a huge increase in demand for Irish hotel rooms. Government consultants say that existing airport infrastructure could handle 36m passengers per annum without additional work (or impact on service). The Irish hoteliers would benefit greatly from this massive influx of arrivals, as the passenger demand has already been reported to be at that level.
A policy change could extend the Irish hotel industry’s performance or even help it recover in the short term. Dublin’s hotel rooms are still insufficient, according to the consensus of experts. New supply would therefore continue to be taken up.
A solid base for global expansion
Ireland has been a popular home base for hotels for many years. The clear operating framework – coupled with access to a pool of talented professionals, entrepreneurial local Management teams and embedded culture of Irish hospitality – has given rise to successful homegrown platforms such as Prem Group and Dalata.
These platforms, which have a strong foothold in their home markets to generate cash flow, are also capable of expanding abroad (for instance, in the USA and UK). There could be many more expansion plans in the future. In 2024, the sale of a majority stake in the Dean Hotel Group portfolio to Lifestyle Hospitality Capital (LHC) One such strategy is when an investor takes an Irish hotel concept to new markets abroad.
LHC has already acquired an asset in Munich To fold into the Dean Brand. The ownership of several major Irish hotels platforms seems ready for a shift, but which deals will be made remains to seen. CoStar reported that Apollo Global Management withdrawn the sale of the circa €500M Tifco Irish hotel portfolio in 2024Refinance instead.
For the moment, dry powder and good credit are still available. To unlock major Irish platform transactions at this stage of the cycle, it will require a combination (e.g. Global alliances and rebranding, a plan for overseas expansion and sustained strong performances for hotels in Ireland are all important.
