Sale of Gresham most significant in booming hotel market

The sale of the Gresham Hotel on O'Connell St in Dublin last September was the most significant deal of the year as the hotel market enjoyed an "exceptionally strong" third quarter with "very robust" levels of transaction activity.

A total of €143 million worth of hotels changed hands in the three months to September, exceeding that recorded in the first two quarters combined, according to a new report by commercial real estate agency Cushman and Wakefield.

This brings hotel investment turnover for the year to date to almost €283 million, across 36 deals.

Despite the strong third quarter, the value of transaction activity in the nine months was 13.5 per cent below that recorded in the same period in 2015. In addition, the number of hotels sold was 29 per cent lower year on year.

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The most significant deal in the quarter and in the year to date took place in Dublin. The four-star Gresham Hotel on O'Connell Street in the city centre was sold to Spanish company Riu Hotels for €92 million.

This was the largest hotel deal to take place in the market since the sale of the Shelbourne in 2014.

Small deals

The second-largest deal in the year to date also took place in the third quarter. The five-star Lyrath Estate Hotel in Co Kilkenny was sold for about €25 million to a consortium of Irish investors.

The four-star Radisson Blu Hotel, Athlone, was sold to iNua Hospitality for €9.5 million during the quarter.

Activity in the year to date has consisted mainly of a large number of small or medium-sized deals, with 81 per cent of the hotel sales for less than €10 million.

Five hotels were in the €10 million to €20 million lot size, while just two hotels were greater than €20 million in value.

A key feature of the market in the first half of this year was the increasing value of hotel investment outside Dublin. The sale of the Gresham Hotel, however, caused this trend to reverse.

In the nine months to September, Dublin accounted for more than half of hotel transaction activity. That said, in terms of the number of hotels sold in the year to date, fewer than one in four were in the capital.

Domestic buyers continue to prevail in the Irish hotel market, accounting for 27 of the 36 hotels bought, or 75 per cent, in the nine months to September.

With the exception of the Gresham deal, all hotel purchasers were of Irish origin. Internationally, UK buyers were the most active in the year to end of September.

The trend of three- and four-star hotels commanding the highest share of investment continued. Combined, they accounted for 88 per cent of the total spend in the nine-month period, representing 30 hotels.

In terms of supply, the third quarter of this year saw eight new hotels coming to the market, bringing the total number of hotels available for sale at the end of September to 33.

Fitzpatrick hotels

Activity for the final quarter is expected to strongly boost total volumes for the year.

With the sales of the four-star Double Tree by Hilton, and the four-star Fitzpatrick hotels, the Beacon, the Spencer and the Morgan, expected to close, end of year projections for total transaction activity look set to “significantly exceed” last year’s figure.

Development activity “continued to strengthen”, the report notes. The 198-bedroom Holiday Inn Express on O’Connell Street in Dublin city centre, and an extension at the Red Cow Complex on Naas Road providing 154 extra rooms were completed.

A further 430 rooms were under construction in Dublin at the end of September across six hotels, and almost 200 rooms outside of the capital.