Ireland recorded a GDP growth at 7.9% in 2017 and 2018 is estimated to see a 6.4% growth. Dublin has become a hub for international companies in various industries, such as IT, financial services and pharmaceuticals. Alongside Amsterdam, Paris and Frankfurt, Dublin is one of the European capitals expected to benefit from the uncertainty around Brexit and its consequences for potential business relocation from London and the UK.
As the economy recovered, the hotel market followed suit. The increasing popularity of Dublin as a leisure destination, supported by the surge of low-cost airline routes, led to an increase in arrivals at Dublin Airport by a 10.3% CAGR between 2013 and 2017, reaching just under 30m passengers in 2017.
According STR, supply remained stable with only c. 600 additional rooms between 2013 and 2018, equivalent to only 2.9% of 2013 supply, which led to a spectacular RevPAR growth of 12.4% CAGR over the same period.
With such strong performance, it is no surprise that hotel industry stakeholders, including investors, operators, and brands, have developed a strong appetite for the Irish capital and the pipeline has blossomed as a result. STR now reports c. 5,100 rooms with a confirmed opening date in the pipeline, which represents a growth of c. 25% on current supply by 2021.
The number may initially appear alarming, but when analysed in more detail, there may still be opportunities for new actors to join the party in some areas and certain segments. The pipeline is driven by independent, upscale and upper upscale hotels, leaving room for economy and midscale brands to enter the market. We are aware that some hotels at the lower end of the market have historically achieved extremely high occupancy levels, suggesting strong unaccommodated demand in the city centre.
Furthermore, c. 20% of the new supply will be outside of the city centre, meaning its impact will not be felt by all existing hotels equally.
Despite several regeneration schemes that should stimulate demand, the pipeline is expected to have a negative impact on occupancy on a market-wide basis. However, as ADR will continue to increase, revenue per available should continue growing for the next few years.
As with any supply-induced headwind, the pipeline’s effect will not be felt equally everywhere and will be influenced on an asset and micro-location level basis by many other factors, including visibility, accessibility, property condition and brand distribution strength. Whilst well-invested hotels with good visibility and distribution channels appropriate to their target markets will weather the storm in the mid term, if at all, others may find themselves in need of strategic assessment, repositioning and investment in order to compete with the influx of next-gen product into this thriving future city.
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