Hospitality sector exits 2021 with renewed optimism for the year ahead

Due to Covid-19 restrictions, Irish hotels were closed to all but essential activities from December 30, 2020 to June 2, 2021. The five-month lockdown has shrunk hotel finances, increased stress levels in the industry and endangered the very livelihoods of the staff. . Unsurprisingly, this unwanted disruption also had a significant impact on investor demand.

However, as the reopening took hold, hotel transaction activity picked up. To date, there have been five major hotel sales in Dublin in 2021, totaling € 325 million and an average price per room of just over € 300,000 per key.

These sales include The Morrison, The Moxy, Premier Inn Castleforbes, The Big Tree Hotel and Hilton Garden Inn IFSC.

Tendencies

The sale of the 163-room Big Tree Hotel on Dorset Street highlights three key emerging trends. They are:

1. New Joint Ventures: The Big Tree was acquired by a joint venture between MM Capital and Roundshield Partners LLP. This is an example of a partnership between a local asset manager and a UK investment fund to acquire a brand new hotel in Dublin.

2. Sustainable development: Environmental, social and corporate governance (ESG): the Big Tree is an example of a hotel classified as BER A and BREAAM “Very good”. Sustainability is now an essential pillar of any hotel buyer acquisition strategy.

3. Hotel Debt Repayment: The Big Tree buyer settled the purchase with a new mortgage in place at closing. Indeed, four of Dublin’s top five hotel sales this year had all been in place at close.

New openings

The second half of 2021 was marked by intense activity. Recent openings include The Wren and Keavan’s Port in Dublin city center, and a new 421-key Holiday Inn near Dublin Airport. Elsewhere, an upscale aparthotel, Beckett Locke, has just opened next to Point Village, while two large Staycity programs are nearing completion near Trinity College Dublin.

Outside of Dublin, Cork has just welcomed its very first ‘micro-room hotel’, in a prominent building on MacCurtain Street, called REZz Cork.

Two of the most interesting Irish hotels to open in recent months have been the Premier Inn on South Great Georges Street in Dublin and the Dean in Cork. The Premier Inn will offer budget accommodation, while the Dean is expected to achieve one of the highest rates in Cork City.

Few hotel sales in the provinces

While the Dublin hotel market saw a number of significant sales, provincial Ireland, on the other hand, experienced very limited activity. Of the 360 ​​million euros in transactions concluded this year, only 35 million euros were made outside the capital. Most of this business volume comes from the € 19 million sale of the Castlemartyr Resort in County Cork to Stanley Quek and Peng Loh, who also own the five-star Sheen Falls Lodge.

Outlook

We expect full-year hotel transaction volumes to reach around € 400 million for 2021. This figure excludes company-level M&A activity in the Irish hotel sector, with recapitalizations and sales of partial stakes in Irish hotel groups which are also starting to perform. We expect that this corporate deal activity will contribute an additional turnover of 100 million euros.

For 2022, we expect Irish hotel transaction activity to continue to increase. With record capital raising, record yields in industries such as offices and PRSs, and looming debt maturities, we expect an increase in the number of motivated sellers.

Despite the legitimate concerns of hoteliers about cost inflation and labor shortages, we still expect a further improvement in the performance of the hotel trade in 2022. While the business environment remains uncertain, there is a huge excess. savings from households around the world and, when triggered, tourism will be a major beneficiary of this spending.

Changing of the guard

We write regularly about hotel deals, but too seldom talk about the people behind them.

Arne Sorenson, president and CEO of Marriott, the world’s largest hotel chain, died in February of this year. Anders Nissen, one of Europe’s most charismatic owners and CEOs of the Scandinavian hotel group Pandox, died of Covid-19 in May.

Here with us, Pat McCann and his deputy Stephen McNally retired from the Dalata Hotel Group this year, leaving behind Ireland’s largest and only hotel group. Pat and I are both Arsenal fans (for our sins!) And as he retires I remember the quote from former Arsenal captain Tony Adams: on the back. “

Dan O’Connor is Executive Vice President of JLL’s Hotels and Hospitality Group and Head of JLL’s Irish Hospitality Division.

Peter M. Doran