Over a quarter of a billion euro was spent on buying Irish hotels last year, thanks to a number of major deals in the final quarter of 2017.
The €260m total compares to the record set in 2016 – €720m. Last year’s total saw €171.2m worth of deals done in the final three months, according to the latest research from Cushman & Wakefield, the commercial partner of Sherry Fitzgerald.
Cushman & Wakefield said 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 £800m. The portfolio comprised 37 hotels, three of which are in Ireland with a combined value of approximately €150m.
On top, any loan sales, hotel refinances and suites purchased within hotels have all been excluded, as they are not considered single hotel asset transactions.
The report said that while 2017 finished strongly, 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-plus deals recorded in each year between 2014-2016. It said that 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 four-star Gibson Hotel in Dublin’s Docklands. Closing in the final quarter, the hotel was acquired by German-based investment group DekaBank for €87m. This followed Deka’s acquisition last year of the Clayton Hotel Burlington Road, Dublin 4, for €182m, which was also the largest hotel deal in 2016.
Other deals of note in the final quarter of 2017 included the four-star Carton House Hotel & Golf Resort, Maynooth, Co Kildare, sold to Irish-American billionaire John Malone for €57m.
The hotel market in 2017 saw smaller, single asset transactions and off-market deals. The majority of the volume of hotel sales, 63pc, was in the €1-10m bracket, with a further 23pc below €1m in value. And one-third of the deals consisted of off-market transactions.
Regional hotels saw increasing interest. The share of hotel sales outside Dublin grew from a 26pc share in 2016, to 58pc in 2017, despite the Gibson Hotel sale. Just five hotels transacted in Dublin in the 12-month period. Activity in Dublin declined, with only five hotel transactions in 2017.
It said development activity in the hotel industry continues to improve. The market has seen a rise of 20.6pc in the number of 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 under construction – 10 of them in supply-starved Dublin.
Cushman & Wakefield said 2018 “looks promising for the Irish market. The reduction in the capital gains tax 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.”
It said “the positive outlook for the economy bodes well for increasing tourism numbers, which are set to continue reaching record levels despite any slowdown in British 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”.
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 key performance indicators and profitability.”