Dublin’s hotel capacity crunch causing havoc

Supermac’s founder Pat McDonagh is among the wiliest operators in Irish business. There’s a refreshing directness about the man that would be anathema to the corporate clones who roll off MBA treadmills spouting nonsensical jargon. McDonagh, meanwhile, just keeps opening more restaurants, selling more burgers, making more cash. No jargon, no nonsense.

He has expanded his €116 million-a-year empire recently with the addition of four hotels, tapping into one of the hottest sectors of the economy. You’re loaded, I said to him this week, so why don’t you just buy a few more? McDonagh replied that he would, if only he could find the right hotels at the right prices.

Dublin, which needs an estimated 5,000 new hotel bedrooms, is where the real opportunities lurk. The current lack of beds is beginning to constrain the city's commercial growth. The Irish Tourist Industry Confederation (ITIC) this week called it a "capacity crunch".

Eyesore

Would you buy sites and build accommodation in Dublin, I asked McDonagh, or flatten a few of your takeaways and redevelop them with hotels in their place? It would seem a suitably wily thing for the Galway man to do.

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“I’d much prefer to buy. The process of developing a hotel is hard. It’s too long, too cumbersome. Certain people just try to block everything. The whole process just becomes too laborious and too intense,” he said.

Last month, I spoke to another successful west of Ireland businessman, John O’Sullivan, chairman of the Hodson Bay hotel group, which operates three properties in Galway and Athlone.

Hoping to capitalise on the chronic shortage of rooms in Dublin, O’Sullivan recently applied for permission to develop a 263-bedroom hotel on a derelict site around the corner from St Patrick’s Cathedral. The site is currently an eyesore in the heart of one of the most historic quarters of the city.

Keen to nudge along any proposed hotel developments in the city, the State tourism agency, Fáilte Ireland, even wrote to urge planners to sanction it because tourism "is being threatened due to a shortage of hotel bedrooms".

The city council approved the project but An Taisce appealed it to An Bórd Pleanála on the grounds that it was “grossly excessive” in scale. The board’s planning inspector recommended approval, albeit with a storey knocked off the original plan, but the board still said no. Back to the drawing board for O’Sullivan.

An Taisce is a conservation charity – wading into planning applications is its bread and butter. The knowledge that An Taisce may object to any major proposed scheme in the city helps to rein in the propensity to try to overbuild sites. It is a necessary counterbalance to market forces.

But at what stage does its trigger-happy obsession with objecting to proposed hotels – in the middle of a capacity crunch – trip over into obstructionism? Is An Taisce contributing to a roadblock for the swift development of much needed hotel infrastructure in the city, that would create jobs and enable expansion of the city’s economy?

In recent months, An Taisce has objected to a swathe of proposed hotel schemes apart from O'Sullivan's proposal. These include a 300-bed scheme in Bow Lane near St Stephen's Green, which got permission; on the site of Clerys in O'Connell St; another on a separate site owned by Tetrarch behind Clerys; on Ormond Quay; and an extension to the Hilton by the Grand Canal. There are many other examples, too many to mention.

Purse strings

While the planning difficulties don’t help, a lack of development capital is perhaps the main reason why new hotels are not being built in the capital. Despite the banking sector’s suggestions to the contrary, Irish-based institutions have yet to turn back on the tap for hotel development finance.

Figures provided recently to ITIC by the property consultancy, CBRE, suggest there are 49 “shovel-ready” hotel schemes with full planning permission waiting to be built in Dublin, comprising more than 4,600 rooms.

Why are Irish banks not funding these projects?

Pat McCann’s Dalata, which is due to build 600 new rooms in the city in coming years, is a listed company and so has its own access to debt and equity. It is interesting to note that two of the sites it has acquired in Dublin were bought from developers who had full planning permission but were stymied by a lack of debt finance to build out the schemes.

If Irish banks won’t open their purse strings, ITIC suggests that the city’s hotel opportunities could be packaged together and marketed to financiers abroad.

The lack of hotel capacity in Dublin doesn’t simply mean tourists have a hard time finding a bed for the night. It also becomes more difficult to attract major conferences from abroad. Foreign direct investment is affected if executives have nowhere to stay while in the city.

Apartment stock is also being taken out of the residential system via Airbnb to plug the hotel accommodation gap, exacerbating the city’s housing crisis.

When Shane Ross, the Minister ultimately responsible for tourism, is finished baiting the judges, perhaps he might turn his attention to this, arguably more pressing, problem.

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FOOTNOTES

– The Web Summit in Lisbon is over, and it appears to have been a major success. Paddy Cosgrave has confounded his critics after moving it from Dublin, and presumably made himself another big pot of money.

Cosgrave is notoriously sensitive to criticism, but he had little answer to an acerbic account of the summit this week in the Atlantic. The headline – "Watching the world rot at Europe's largest tech conference" – set the tone.

Writer Sam Kriss takes a glorious swipe at the nauseating culture of self-congratulating techies, with their "slimy culture of hero-worship in which thousands are sent dizzy by the slightest whiff of an Elon Musk or a Jeff Bezos".

He excoriates them for their reliance on elitist, mindless patter that is ultimately nonsensical: “This isn’t meaning, in any of its usual senses, something that exists to be understood, but the zombie signifier, words building and feeding on each other to form a system terrifyingly self-sustaining and utterly opaque.”

Rather than doing anything of significance, he believes many tech start-ups want to “secure just enough money to land unharmed when the crash finally happens. Very few of the ideas are actually new; they’re just bits of other, more successful companies cobbled together”.

“Web Summit is where humanity rushes towards its extinction,” Kriss concluded.

Cosgrave shared the "great piece" on Facebook and Twitter and said it was a "brilliant piece of writing... I think it scratches on a bigger issue: the promise of technology".

– I hear the Irish division of UK construction project management consultancy, Gardiner & Theobald, has been bought out by its local management team.

Managing director of the local division, Kevin James, and fellow director Anthony McCarthy have purchased the Irish arm, which employs 22 staff in Dublin, from its UK parent.

The company has previously advised on projects such as the revamp of the Shelbourne Hotel, the building of Google’s Dublin headquarters, and the redevelopment of the old Irish Times building on D’Olier Street.

The new owners apparently have plans to grow the business. No word yet on how much they paid for it. But a G&T rarely comes cheap these days.