Last year's report by accountants Howarth Bastow Charleton on the Irish hotel sector revealed an industry in rude good health. Profits are up. So too are occupancy rates. Jurys, one of two hotel groups listed on the Irish Stock market, reached a share high of 500p last month and its pre-tax profits for the six months ending in October, 1997, rose to £7.9 million, an increase of 36 per cent on 1996 figures. Ryan, the second listed group, was trading about 50 per cent lower, although its shares were still regarded as good value.
It is generally believed the Doyle group could take the plc route in the near future. Meanwhile, new hotels are opening at a rate which would have seemed unthinkable in the 1980s. Recent high-profile announcements include a 211bedroom Holiday Inn just off Dublin's O'Connell Street and the decision by the Fitzpatrick Group to reapply for planning permission for substantial hotel on Leeson Street following the failure of its initial application.
In 1984, there were 65 hotels in Dublin. In 1996, there were 104, including 17 new hotel openings in that year alone, adding about 1,000 rooms to the existing stock of 6,770 rooms. A similar number of hotels were opened in 1997. High-profile openings that year included the £17 million Stakis Hotel at Charlemont Street and the £8 million Brooks Hotel at Drury Street. With the ESRI predicting growth rates of 6 to 7 per cent for 1998, and with a lot of the growth in the hotel industry being driven by the business sector, hotel development is likely to continue.
A Department of the Environment review of the construction industry predicted "significant investment" in the industry.
Few of the new hotels being built are five-star operations. Even though the five-star market is relatively open - the main Dublin players remain the Conrad International, the Shelbourne, the Berkeley Court and the more recent Alexander Hotel and the Merrion - only the Four Seasons Hotel, proposed for a site on the Royal Dublin Society grounds in Ballsbridge, is likely to enter the five-star range. The four-star market is already quite crowded and is likely to remain so. The majority of this year's new openings are in the three-star sector.
"You will have chief executives using five-star hotels but for every one of those, there are other people in the less high-spending sectors, so there is a pyramid effect," says John Power, chief executive of the Irish Hotels Federation. "The three-star property is now a very fine product. The quality of the bedroom is excellent by any standard."
Hotel are also adding extensions to existing premises. In 1997, 40 rooms were added to Fitzpatrick's Killiney Castle, 60 additional rooms in the Forte Crest Hotel at Dublin Airport and a major refurbishment of Buswell's Hotel on Molesworth Street by the Sean Quinn Group.
The only blot on an otherwise uninterrupted vista of success was last year's decision by the Hilton Group to abandon its plans to open a major hotel at the junction of Westmoreland Street and College Street in Dublin. This followed objections from conservationists and a prolonged battle over planning permission which resulted in costs of over £1 million. Treasury Holdings, which was due to develop the hotel, is now seeking an alternative partner for the £35 million project.
That the Hilton affair was probably the exception to the rule was indicated by the fact that, in the same month, a major hotel planned for the site of the Tara Street fire station in Dublin proved to be such a hot prospect that it was sold twice and leased within the space of a few weeks. In September, 1997, the 63-bedroom Ormond Hotel on Dublin's north quays sold for £2.3 million.
In 1996, the Dublin hotel sector recorded its highest profit levels, according to the Horwath Bastow Charleton report. The survey of the hotel industry in the Republic and the North revealed that pretax profits per room in Dublin were £6,404, almost twice as high as that in other regions in the Republic. The average rate of room occupancy in Dublin was 75.7 per cent, compared with 69 per cent elsewhere in the country.
According to a survey conducted last October by American Express, room rates in Dublin's deluxe hotels had increased by 20 per cent in 12 months, even though inflation is running at only one per cent. The average room rate, according to American Express, had increased from £122 to £147 per night. The luxury sector is where the big profits potentially lie. The rate of profit per room in luxury hotels is over twice as high as that in first-class hotels and three times as high as mid-price hotels. Economy rooms have the lowest occupancy rates and also offer the lowest rate of profit per room.
The main problem with luxury hotels is the cost of their development. A luxury hotel room costs £130,000 to develop (the Hilton group was facing development costs of £200,000 per room for the proposed College Green hotel) while an economy room costs only £30,000. Quality sells, as profit rates indicate, but quality calls for considerable investment. If there is a downturn - and when the economy inevitably begins to suffer, the hotel industry will suffer too - then there will be casualties. The luxury hotels, with their higher development costs, staff costs and room rates, are likely to suffer more than their economy three-star counterparts.
THE Dublin hotel industry is heavily dependent on the business customer, which insulates it to some degree from the vagaries of the tourist market. While the majority of hotel guests nationally are tourists, Dublin hotels have 24 per cent more business customers than hotels elsewhere in the country and a substantially lower number of tour groups. The Jury's group, for example, has a client mix of 50 per cent corporate, 25 per cent tourist and 25 per cent from other sources. The mix is likely to be maintained.
"The `business' business is strong," says Mr Power. "The tourist sector is strong and the new tourism marketing initiative is a major success. The seasonality is still a big challenge, in that the tourist season is still highly peaked outside Dublin in particular."
Bord Failte and the Northern Ireland Tourist Board's joint marketing campaign, Tourism Brand Ireland (TBI), is aimed at attracting more high-spending tourists to Ireland. Tourism growth is running at about eight per cent, according to recent Bord Failte figures.
"The policy is that Irish tourism has been driven by revenue rather than numbers for a few years," says Mr John Brown of Bord Failte. "There is a concentration on high-yield business in all markets in which we operate. We are targeting specific high-yield groups: special interests like golf; the conference and incentive business, where employers reward staff with holidays; and the people who use car-hire, the `car-hired' segment."
The TBI initiative also aims to increase the length of the tourist season and spread the benefits of tourism throughout the whole country. "Hotels in Dublin have a high occupancy rate but that is not true of the whole country," says Mr Brown.
With this in mind, the question of marketing comes to the fore. A number of hotels have already begun to organise themselves into groups for marketing purposes, under groupings such as `manorhouse hotels' and `village hotels'. The Irish Hotels Federation has repeatedly warned that a sound business plan and good marketing are crucial if hotels are to remain in business for the long term and Mr Power welcomed the announcement last year of a £50 million injection of funds by the Government for marketing initiatives. "The £50 million is a major shot in the arm for the industry," he says. "The challenge is now to properly use it. If properly used, it will have a major impact on the seasonality and regional issues, which go hand in hand."
Like the Irish Hotels Federation, Bord Failte is also sounding a cautionary note about the importance of proper marketing. "It's a competitive industry and people have to be quite aggressive about it," according to Mr Brown. "If they don't involve themselves in marketing, if they don't appoint marketing staff or put money into group or individual marketing, there is ample evidence that they will suffer."
