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.
You can, for 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 is a top global real estate fund. However, Irish buyers are also a large part of the pool. 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 (national banks such as AIB, Bank of Ireland and private credit), has also been an additional facilitator of deal activities, although at a more reasonable loan to value ratio than previous cycles.
It is now up to us to decide whether there is a storm brewing. A storm of high transaction volumes, driven by platform deals of large scale, or a hurricane of volatility in the trading market, which could compromise this current relative calm. Irish hotels have been delivering solid profit & loss performance for several years running.
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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. Not only have overseas buyers been active; domestic groups such as Cork’s Cliste Hospitality also participated in the acquisition wave.
With the acquisition of the 69-bedroom Keadeen hotel in KildareThe company has now expanded into their 15th managed property. The investment thesis for Irish Hotels has worked well, regardless of the type of buyer.
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 a robust tourism industry.. According to Central Statistics Office for the full year of 2024, an estimated 6.6m international visitors travelled to Ireland, up 6.7% on 2023. In the meantime, the domestic markets have proven to be resilient and further strengthened trading.
The results were impressive, particularly in Dublin where occupancy rates have remained above 80% over the past two years. An average daily rate (ADR) of €180 recorded in 2023 was already 27% above 2019 levels. Even with the post-Covid recovery, these are staggering numbers.
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 2024This is the 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 reported by CBRE that transaction volumes could approach another €800m in 2025With several anticipated platform deals and pending transactions on the horizon, there is a lot to look forward to. 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.
The cycle of good hotel performance appears to be in full swing, but we are off the highs. There is also increasing cloud cover on the horizon. 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.
In the short term, hoteliers can and will Trim costs to combat inflation and/or soften RevPAR levelsBut there are still other factors to consider. According to the Irish Tourist Industry Confederation, (ITIC), recent reports indicate that the current geopolitical environment could threaten US tourism to Ireland.
It is not surprising that this happens. this market comprises up to 35% of the total Irish tourism spend each year. Even a very small shift in the US Dollar value compared to the Euro is detrimental. These shifts are already in place, so now the impact of them is beginning.
Ireland is another less studied factor. There is a structural housing shortage Its impact on hotel performance. 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.
One must now consider the impact a future void of these contracts will have when they terminate. In 2024 Fáilte Ireland reported that 28% The State contracted for all tourism beds. It may not possible to fill these additional rooms with tourists due to the nature of the cycle.
The Capital is also supplying new stock. another 3,000 rooms are expected to be delivered in Dublin between 2025 and 2026.
Nevertheless, we sit in a period of relative calm with Irish hotels delivering solid 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 a 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.
Ireland is a great place to base hotel companies. 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.
In addition to a stable base in the domestic market, these platforms are able to gain footholds in other countries (for example in the USA, UK, and BeNeLux). These expansion plans could continue to grow. 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 Dean will be merged into. It appears that several major Irish hotel platforms are ready to change ownership. However, it is still unclear which transactions will actually take place. 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. Re-branding and global alliances are key, as is a strategy for international expansion.
