Dublin, February 7th 2018.
The Irish hotel market has witnessed a very strong closing quarter for 2017, with a total of €171.2 million worth of hotels sold in three months to December, exceeding the first three quarters combined. According to research from Cushman & Wakefield, the impressive turnaround in the final quarter was boosted by three large hotel deals, which brought the total hotel investment turnover for 2017 to almost €260 million. This compares to the 2016 record high of €720 million.
The 2017 total excludes any unconventional hotel sales which took place during the year. For example, the Jurys Inn chain was acquired by Swedish hotel group Pandox and Israeli group Fattal Hotels for £800 million. The portfolio comprised 37 hotels, three of which are in Ireland with a combined value of approximately €150 million. Furthermore, any loan sales, hotel refinances and suites purchased within hotels have all been excluded, as they are not considered single hotel asset transactions.
While 2017 finished on a strong note, both transaction volumes and values were notably down when compared to the bumper levels witnessed in recent years. A total of 30 sales closed in 2017, compared to the 50+ deals recorded in each year between 2014-2016. This is largely owing to the slowdown in the significant deleveraging of distressed asset sales by various banks.
The most significant sale of the year was that of the 4 star Gibson Hotel in Dublin’s North docklands. Closing in the final quarter, the hotel was acquired by German-based investment group, DekaBank, for €87 million. This followed Deka’s acquisition last year of the Clayton Hotel Burlington Road, Dublin 4, for €182 million, which was also the largest hotel deal in 2016.
Other deals of note in the final quarter of 2017 included the 4 star Carton House Hotel & Golf Resort, Maynooth, Co. Kildare, sold to Irish American businessman John Mullen for €57 million. In addition, the 4 star Knightsbrook Hotel & Golf Resort, Trim, Co. Meath was acquired by Irish based Blackbee Investments for €17.55 million.
The hotel market in 2017 was characterised by smaller, single asset transactions and off-market deals. The majority of the volume of hotel sales, 63%, transacted in the €1-10 million price category, with a further 23% below €1 million in value. Moreover, one-third of the deals completed during the year consisted of off-market transactions.
Mirroring the substantial uplift in activity witnessed outside of Dublin in the overall commercial property market in 2017, regional hotels in Ireland also saw increasing interest. The share of hotel sales outside of the capital grew significantly from a 26% share in 2016, to 58% in 2017, despite the Gibson Hotel sale. Activity in Dublin declined, with only five hotel transactions in the twelve-month period.
Development activity in the Irish hotel industry continues to improve. The market has seen an uplift of 20.6% in the number of hotel rooms under construction at year end, to over 2,400 rooms in 33 hotels. This is in addition to the 158 rooms, in eight hotels, which completed construction in 2017 in various extensions and redevelopments. There are 13 new hotels currently under construction, out of which 10 are located in Dublin, a positive development given the shortage of rooms in the capital at present.
Cushman & Wakefield believe the year ahead looks promising for the Irish hotel market. The reduction in the CGT exemption holding period, from seven to four years, for assets purchased up to the end of 2014, should result in a rise in further hotel re-trades from 2018. Furthermore, the positive outlook for the economy bodes well for increasing tourism numbers, which are set to continue reaching record levels despite any slowdown in UK visitors from the weakness in sterling. With improving trading trends, this will directly impact the value of Irish hotels and further strengthen hotel investor appetite.
Commenting on the market, Isobel Horan, Associate Director, Trading Assets, Cushman & Wakefield, said; “The tourism sector in Ireland continues to remain very positive and we are beginning to see the first new tranche of bedrooms being delivered to the Dublin market. These bedrooms are critically important to the city for it to remain competitive as a tourist destination. They will easily be absorbed into the market without any impact on existing KPIs and profitability”.
About Cushman & Wakefield
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Cushman & Wakefield is the commercial partner of the Sherry FitzGerald Group in Ireland.