Hotel sales slow in 2018 even as room rates soar
After years of strong turnover in the hotel investment market from distressed Nama-driven sales, 2018 was a “normal” year for hotel transactions. It’s odd, however, that this occurred against a backdrop of average Dublin room rates hitting a record €155.75 as occupancy levels reached 89.6 per cent and key metric revenue per available room (RevPar) increased by 9.7 per cent to €139.51.
“International funds and domestic investors are still chasing hotel assets,” says Tom Barrett, director of hotels and leisure at Savills. “So there is a good balance of buyers. The recently announced Budget 2019 increase in the VAT rate on the hospitality sector has put pressure on the industry and Brexit is adding plenty more uncertainty. But the outlook is stable for hotels.”
Deirdre O’Reilly, senior economist at Cushman & Wakefield, suggests that the limited number of hotel properties for sale over the past year has resulted in a “notable slowdown” in activity. “Investment in Irish hotels amounted to €36.5 million in the third quarter of 2018,” she says, “which brings the nine-month turnover total to €79.3 million, across just eight transactions. Compared to the same period of 2017, this is a 10 per cent fall in the value of sales recorded. This excludes any unconventional hotel sales such as company sales, loan sales and refinances.
“So the Irish hotel market continues to witness a drying up of distressed asset sales which characterised the market in the years 2014-2016, with both the volume and value of transactions slowing. Transactions to date this year have been mostly small-sized assets, with no big-ticket, €50 million-plus hotels for sale on the market. Just one hotel sale in the year to date was over €20 million in value.”
Recent hotel sales include the four-star Hilton Dublin Airport for €22.5 million to the Canada-based Westmont Group – its first venture into the Irish market – while UK hotel investor Propiteer bought the recently refurbished four-star Ibis Hotel just off the Red Cow interchange for more than €14 million.
23 Jan 2019