With rising tourist numbers and limited development of new hotels over the past few years, the capital’s hotel occupancy rates are soaring.
Visitors to Dublin increased by 12% in 2014 to 5.9m, including 4.1m from overseas, according to Failte Ireland figures, and so far in 2015, numbers are up by another 12% year-on-year.
But despite strong growth in demand, new supply of rooms has been thin on the ground. Just three new hotels of significant size have opened in the city centre in recent years: the Gibson in 2010, the Marker in 2013 and the Dean in November of last year. Between them, they delivered about 500 bedrooms to bring total capacity across the city to 18,500 rooms.
The average hotel occupancy rate in Dublin has climbed from 67% in 2010 to 81.8% for the year to September 2015, according to CBRE. Its figures also indicate that the average daily rate (ADR) during the month was €88.92, up from €77.01 a year earlier. Revenue per available room (RevPar) was €72.70, up from €61.22. Earlier this year, PwC forecast that Dublin would be the fastest growing city in Europe for RevPar in 2015 and 2016, with an 8.8% increase this year, followed by 8% growth next year.
A JLL report estimates that Dublin now needs 3,000 new hotel rooms as a matter of urgency. The Irish Tourist Industry Confederation, meanwhile, has stated that 5,000 additional bedrooms will be needed between now and 2020.
There’s not too much supply on the horizon. Just one hotel is set to open next year, when the conversion of Findlater House on O’Connell Street into a 198-bedroom Holiday Inn Express is completed. Given that the 185-room Clyde Court in Ballsbridge is closing at the beginning of January, there will be little in the way of net increase. New rooms will come from extensions at the North Star (52), Fleet Street (21) and Westin (9) hotels.
In its report, JLL has identified more than 3,400 new rooms in the pipeline for 2017 and beyond, including new hotel developments and extensions to existing properties. It notes, however, that just 50% of these have received planning permission.
Several applications are in with An Bord Pleanala, including a submission in recent weeks by Tetrarch to convert Sackville House in Dublin 1 into a 158-bedroom budget boutique hotel. According to Tetrarch managing director, Michael McElligott, the proposed hotel “will bring a new kind of affordable hospitality offering that has not yet been delivered in Ireland”.
Applications have also been submitted for a 169-bedroom hotel at Spencer Dock on the site of the former British Railway hotel and for a 107-bed hotel on Moore Lane. And newly rebranded U+I — formerly Development Securities — has submitted a planning application for a 182-bedroom hotel on the Charlemont Clinic site next to the Grand Canal.
Bam, meanwhile, has submitted amendments to previously granted planning permission for a 200-bedroom hotel at Blackpitts on the site of the old Tenters pub.
And there’s also currently planning permission for a 100-bed hotel on Camden Street on the site of the Camden Hall hostel, which was bought by JD Wetherspoon last December. The company has not yet revealed its plans for the site.
Dalata was also recently granted planning permission for a 367-bedroom extension to the Clayton Hotel Dublin Airport, which currently has 466 rooms, though the firm may not build all the rooms permitted.
Meanwhile, a number of applications for high-profile builds have been turned down, including plans by Tune Hotels, owned by Queens Park Rangers FC owner, Tony Fernandes, to construct a six-storey 170-bedroom property on the site of the old Ormond hotel. Initial permission for a new 130-bedroom hotel in the former Irish Lights building on Pembroke Street was also refused.
John Hughes, director, CBRE Hotels, reckons that about 1,500 new rooms are in the pipeline through extensions in Dublin. “More than half of them have been granted,” he said. “A further 15% would be planning applied for and the remainder would be at pre-planning stage.”
The Merrion hotel, for example, is currently adding 20 suites by extending into a building next door.
Dalata Hotel Group is one of the companies looking at opportunities to add rooms to its existing hotels. “We added an extra 18 rooms to our Pearse Street hotel this year through changing the use of space externally,” said deputy chief executive, Dermot Crowley. “At the Ballsbridge hotel, we’re looking at building additional rooms, some on the roof of the building. And we’re looking at the possibility of building new rooms at Dublin Airport. When we buy a building we look at how we can value engineer it to get more bedrooms into it.”
The company is also planning to develop new hotels in the capital. “We’re looking at five separate opportunities at the moment,” said Crowley. “In this kind of area they don’t all come to fruition, and we don’t want to open five new hotels by any means.
“We’ve been looking for new hotel sites in Dublin for 12 months and we’re still not close to securing any. There’s a lot of activity but that will be funnelled down to a much smaller number of rooms. There’s a lot of talk but it takes a lot of hard work to get a hotel open.”
A number of other developers have signalled their intention to build new hotels. For example, Johnny Ronan’s Ronan Group Real Estate is reported to be looking at renovating Bewley’s on Grafton Street and building a new hotel next to Tara Street Dart station. Paddy McKillen is also understood to be planning a hotel on North Wall Quay.
There is strong demand across the board for accommodation types, according to Tom Barrett, director, hotels and leisure, Savills. “From hostel through to five-star all the hotels are generally performing well,” he said. “What we don’t have here is much branded budget products such as Travelodge, Premier Inn, Holiday Inn Express. And we don’t have many boutique hotels — either at the budget or four- or five-star level. And I think that’s where there’s a lot of opportunity.”
Tetrarch, which recently completed the purchase of the Dawson hotel and also owns the Marker, has turned its attention to the budget area. “Although there is demand across all hotel categories, we see the greatest growth in demand being in the budget sector of the Dublin hotel market and for this reason it is our primary focus,” said McElligott.
Competition from office developers is an issue for potential hotel developers trying to secure sites, particularly in the main Dublin 2 and Dublin 4 office locations. “Rents for offices are more than €40 per sq ft, so it’s more difficult for hotels to compete,” said Hughes of CBRE Hotels.
Another problem is funding: in its report JLL notes that while banks are lending for investment in hotels, there is limited funding available for hotel development. Alternative lenders, meanwhile, are charging margins of between 8% and 10%, more than double those charged by banks. The length of time to get planning and the fact that many applications for hotel developments end up being appealed by third parties is also impacting on the pipeline.
“There are lots of people looking at trying to put hotels in but they’re not going to arrive in 2016 and not many of them will arrive in 2017 either,” said Barrett. “It’s going to be in the longer term. What’s happening in the meantime is that everyone who’s got an office or a meeting room that could be a bedroom is turning it into bedrooms.