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Deloitte survey finds increased interest from international investors in hotel sector

15 January 2024

Hotel room rates increased in the first ten months of 2023, with an average daily rate of €210 in Dublin City Centre, followed by €165 in the surrounding Dublin area and €160 in the rest of Ireland. These prices are not however deterring customers, and hotel occupancy levels are expected to be retained this year.

Deloitte’s 2023 European Hotel Industry Survey shows that Dublin is the eighth most attractive European city for hotel investment. London was the most attractive European city for hotel investment and Lisbon the second. Amsterdam dropped two places to third and Paris remained in fourth place. Milan and Edinburgh rose in the rankings, placing ninth and tenth respectively.

Breda McEnaney, Associate Director in the Travel, Hospitality and Leisure advisory team at Deloitte Ireland commented:

Despite three very challenging years for the hotel industry, these insights highlight the recovery of the sector, and that strong domestic demand has played a significant role in this. In 2024, we expect occupancy rates to remain robust and be comparable to 2023, while new supply coming back on the market might soften rates. 

Consumer demand has shifted to be experience-led, which is bringing more lifestyle brands[1] into the market. Interest from overseas visitors is expected to continue growing as climate change and extreme heat elsewhere in Europe contributes to a rise in Ireland’s popularity as a holiday destination. We are also seeing that events, concerts and sporting fixtures continue to drive demand.

Increased focus on customer personalisation is becoming critical. For example, we are seeing hotels like Citizen M entering the market with new concepts, putting technology at the centre of the customer experience. This means self-check-in, iPad control, and accessible, self-serving experiences for guests while not compromising on location. Getting the concept right (relevancy and purpose being the buzz words of the moment) will be essential, along with accurately positioning the hotel in the market.

The survey also highlights that private equity continues to be the main source of equity capital for hotel acquisitions in Europe in 2024 (31%) while sovereign wealth funds have jumped by 10% to become the third largest source of equity capital for hotel acquisitions.

Rebecca Robinson, Director in Corporate Finance at Deloitte Ireland, commented:

We can also learn where we expect this investment to come from, with more than half of respondents (56%) expecting hotel investment to be sourced from Europe. Funding from the UK (20%) and North America (39%) declined in 2023 due to slowing economic activity, but the Middle East and North Africa are increasingly becoming important sources of investment, with nearly 40% expecting investment to come from the region, a 22% increase compared with 2021.

US visitors vital in future development of hotel and tourism sector

Domestic holiday trips by Irish residents increased 7.6% in Q1 2023, compared to Q1 2019.In terms of international travel, 4.2 million overseas visitors enjoyed an overnight stay in Ireland during the period April to October 2023. On average, these overseas visitors spent 8.1 nights in Ireland, with expenditure of €1,300 per trip.

McEnaney added:

The increased demand that has been seen in terms of domestic holiday trips has given hotels a new baseline to work from, and an opportunity to deliver and expand their service offering.

While domestic travel has played a significant role in the hotel sector’s recovery, visitors from the US remain vital in the future development of this sector, spending 79% more on their trips compared to the average overseas visitor - and specifically spending an additional 83% on accommodation, while in Ireland.

Supply not meeting demand

There were approximately 66,200 hotel rooms in the Republic of Ireland as of Q4 2023, as completions in the twelve months reached over 1,800 rooms. According to Fáilte Ireland research, 12% of all registered tourism bed stock is under contract to the state.[2]

Commenting on these figures, McEnaney said:

While many hotels are benefiting from government contracts with business spread over a consistent 12-month period - which significantly combats seasonal fluctuations that would otherwise be experienced - it also means there is reduced availability of hotel bedrooms for tourism and other purposes, including corporate or leisure.

Outlook for 2024

McEnaney concluded:

Rising costs, higher interest rates, a shortage of skilled labour and increased staff costs are cited by most executives in the hospitality sector as the top risks they face in trying to grow this year. The top priorities this year are managing inflationary pressures, maintaining profitability, increasing cashflow, and hiring and retaining talent.

Owners and investors will have to assess any opportunities through a long-term lens and understand the demand dynamics that underpin the specific market they are operating in. Understanding customers has always been critical to the success of hotel operations, but now it is even more so. We’re seeing a growth in lifestyle brands entering the market that are experience-led, and tailored to specific audiences.

Notes to the Editors

Deloitte’s 2023 European Hotel Industry survey took place between September and October 2023, taking views of a sample of senior figures from the hospitality industry including owners, operators, lenders, developers, and investors.

For further information please contact:

Issued by Murray on behalf of Deloitte Ireland:

Nicola Cooke
087 780 6125