Mairea Doyle-Balfe, a Director with Crowe’s Hotel, Tourism and Leisure team with Marcus Magnier, Director of Colliers International.
Crowe presented an update on the Irish hotel sector to Colliers International on Tuesday 13 November 2018. Mairea Doyle Balfe, a Director on our Hotel, Tourism and Leisure (HTL) team, discussed the performance of the Irish hotel sector highlighting the trends over the last twenty years and how hotels achieved their strongest revenue and profits in 2017. The key takeaways from the presentation included:
- The growth in occupancies in Dublin and regional Ireland has largely been due to the significant growth in international visitor numbers to the island of Ireland. In particular, the North American market has grown from its previous peak of c. 1m visitors in 2007 to over 2m in 2017.
- The growth in international visitors, in conjunction with an improving domestic economy, has put pressure on Dublin and regional hotels particularly during the peak summer season. This has led to a growth in average room rates and a strengthening of the financial feasibility for adding hotel rooms to the Dublin and certain other regional markets.
- Dublin city centre locations such as Dublin 1, 2, 7 and 8 are in high demand by international hotel brands entering the Irish market due to sustainability in the tourism market within the capital. Regional cities including Cork and Galway are also being considered due to the growth in visitor numbers and hotel capacity constraints. Due to the capacity pinch points, especially during the peak season, it will be important to highlight less well-known tourism areas around Ireland to relieve the main destinations. Physical infrastructure improvements as well as marketing initiatives, such as Greenways and Ireland’s Hidden heartlands, should help hotels to attract guests and increase demand.
- Suitable sites for hotel development in Dublin continue to face strong competition from commercial office development. The Capital also faces additional challenges due to transport accessibility compared to other European cities, especially for the conference and short-break markets.
- The rate of Value Added Tax in the tourism and hospitality sector for food and rooms is to rise from 9% to 13.5% from January 2019. The tax was cut to 9% in 2011 to encourage growth in the tourism industry. As food is one of the main sources of revenue for regional hotels, this VAT increase will have a negative impact on department profitability next year. It is expected that within two years hotels will have passed on the VAT increase and will be in a position to continue positive profit momentum.