€283 million transacted during the nine months to September 2016
Dublin, November 28, 2016 –
The Irish hotel market saw an exceptionally strong third quarter, with a very robust level of transaction activity recorded in the three month period. A total of €143 million worth of hotels transacted in the three months to September, exceeding that recorded in the first two quarters combined. This brings hotel investment turnover for the year to date to almost €283 million, across 36 deals. Despite the strong third quarter, the value of transaction activity in the nine month period was 13.5% lower than that recorded in the same period in 2015. In addition, the volume of hotels sold was 29% lower year on year.
The most significant hotel sold in the quarter and in the year to date took place in the capital. The 4 star Gresham Hotel on O’Connell Street in the city centre was sold to Spanish company, Riu Hotels, for €92 million. This is the largest hotel deal to take place in the Irish hotel market since the sale of The Shelbourne in 2014. The second largest deal in the year to date also took place in quarter three. The 5 star Lyrath Estate Hotel in Co. Kilkenny transacted for approximately €25 million to a consortium of Irish investors. Furthermore, the 4 star Radisson Blu Hotel, Athlone, was sold to iNua Hospitality for €9.5 million in the quarter. Activity in the year to date consisted mainly of a large number of small-medium sized deals, with 81% of the volume of hotel sales sub €10 million in value. Five hotels were in the €10 - €20 million lot size, while just two hotels were greater than €20 million in value.
A key feature of the market in the first half of 2016 was the increasing value of hotel investment outside of Dublin; however, the sale of the Gresham Hotel caused this trend to reverse. In the nine months to September, Dublin accounted for over half of hotel transaction activity. That said, in terms of the volume of hotels sold in the year to date, less than one in four hotels were located in the capital. Domestic buyers continue to prevail in the Irish hotel market, accounting for 27 of the 36 hotels purchased, or 75%, in the nine months to September. Notably in the third quarter, with the exception of the Gresham deal, all hotel purchasers were of Irish origin. Internationally, UK buyers were the most active in the year to date. The trend of 3 and 4 star hotels commanding the highest share of investment continues. Combined, they accounted for 88% of the total spend in the nine month period, representing 30 hotels. Just one hotel transacted in the year to date was 5 star - the Lyrath Estate Hotel.
In terms of supply, the third quarter of 2016 saw eight new hotels coming to the market in the three month period, bringing the total number of hotels available for sale at the end of September to 33. Notably, 14 of these hotels, or 42%, were sale agreed at the end of the quarter. Activity for the final quarter is expected to strongly boost total volumes for the year. With the sales of the 4 star Double Tree by Hilton, and the three 4 star Fitzpatricks hotels, The Beacon, The Spencer and The Morgan, expected to close in quarter four, end of year projections for total transaction activity look set to significantly exceed 2015 volumes. Development activity continues to strengthen; Dublin saw two large hotels complete construction in the third quarter, namely the 198 bedroom Holiday Inn Express on O’Connell Street in the city centre, and an extension at the Red Cow Complex on Naas Road which provides 154 extra rooms. A further 430 rooms were under construction in Dublin at the end of September across six hotels, and almost 200 rooms outside of the capital.
Commenting on the market, Kirsty Rothwell, Director, Head of Trading Assets, Cushman & Wakefield, said;
“With a requirement of approximately 6,000 new hotel bedrooms in Dublin city, there is certainly a need to develop more hotel rooms at a fast pace, to ensure that the supply constraint will not affect Dublin tourism. It is encouraging to see the Holiday Inn Express on O’Connell Street open its doors, the first new hotel in Dublin since 2014.”
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