By Dublin dubbed hottest European city for hotel investment

£100m deals brighten the outlook for investors

Dublin has topped a list of the hottest European cities for hotel investment compiled by Savills, thanks to rising visitor numbers and a constrained development pipeline.

Savills, which considered factors such as stock levels, GDP growth and yields to rank cities according to their attractiveness to investors, says the Irish capital also offered good relative value.

“Top-ranking Dublin has been one of the best-performing European cities in term of [revenue per available room] growth over recent years, which looks set to continue as new development remains constrained,” says Tim Stoyle, head of valuation at Savills.

London also features in the top 10. According to Savills, the Brexit vote has been beneficial to hotel operators in the capital because the weaker pound has attracted more tourists to the capital.

However, it is also one of the most expensive hotel markets in Europe for investors, says Savills.

“If you’re an investor looking for value for money but with the same attractive operational fundamentals, you might find Dublin more attractive,” says Marie Hickey, a director in Savills’ commercial research team.

Savills adds that investor interest in hotels is growing across Europe.

“Dublin has experienced a recent rise in institutional investment and markets such as Milan and Madrid are being driven by private equity investors and owner-occupiers looking for hotels with development and income growth potential,” says Rob Stapleton, director in the hotels team at Savills.

Temple Bar Hotel

A Singapore-based real estate firm recently bought the Temple Bar Hotel for nearly £50m to reinforce Dublin's hotel growth

The strong demand has caused yields to harden over the past year. However, Savills says opportunities still exist to acquire hotels in various markets that offer good prospects for income as well as capital preservation and capital growth.

“The analysis highlighted that there are still a number of cities in Europe that offer good value prospects in light of the outlook for operational performance going forward,” says Stoyle.