Ten years ago, recession-hit Dublin was not high on the hit list for many property investors and development in the Republic of Ireland’s capital almost ground to a halt. But now the story could not be more different. The European Commission estimates that the Irish economy grew by 7.3% last year – the highest growth rate of any European Union country.
More than 4m sq ft of office space is now being built in the city – a high not seen since before the financial crisis – and recently completed space is being occupied by the likes of Microsoft, Google and JP Morgan. Residential development is gradually beginning to catch up, too, with several large schemes in the works.
There is one type of property that is yet to become part of this boom, however. Despite tourism reaching new highs in recent years, there is a significant under-supply of hotels in both Dublin and the Republic of Ireland as a whole.
In 2016, Bord Failte, the National Tourism Development Authority of Ireland, estimated that 5,000 hotel rooms were required to boost Dublin’s existing stock of around 19,000. But according to a Deloitte report, only an additional 300 had been delivered by the beginning of 2018.
This lack of supply is particularly acute when it comes to branded budget hotels, which make up only 2% of the Irish hotel market, compared with almost 25% in the UK.
Premier Inn wants to change that. We have recently embarked upon a major expansion programme in the Republic and plan to open up to 2,500 hotel rooms in Dublin in the next few years.
Although we will initially focus on the capital, other major cities such as Cork, Galway and Limerick also have strong fundamentals and provide us with possible avenues for expansion beyond the capital.
Find out more - Room at the Inn: Premier Inn’s Republic of Ireland expansion
Since 2007 we have had one hotel at Dublin Airport that we acquired as part of a portfolio. We have extended that hotel and it is performing at around 90% occupancy, which – along with the wider economic growth in the city – has given us the confidence that there is a market for Premier Inn there.
As the largest hotel brand in the UK with more than 780 properties, we believe Premier Inn has a unique opportunity to establish itself as a major player. The name is already well-recognised by international tourists who have stayed with us on trips to the UK, as well as by many Irish nationals.
Earlier this year, we kickstarted our expansion plan by acquiring our first site in the city centre – a 97-bedroom hotel development at 41-46 South Great George’s Street in Dublin 2, where we entered into a leasehold turnkey deal with the developer, Greenleaf Group. Premier Inn will invest around €19.6m (£17.5m) in the scheme, which is expected to open by late 2020, and we envision it being the first of many. A deal for a second, larger hotel in Dublin 1 with around 200 rooms is already well progressed.
We want to open hotels with between 100 and 250 bedrooms and are seeking sites of between 45,000 sq ft and 150,000 sq ft in locations such as the Docklands business district, the shopping quarter around O’Connell Street and other parts of the city centre.
Anyone who has done business with us in the UK will know that we pride ourselves on our flexibility and the way we operate in the Republic of Ireland will be no different. We are willing to sign freehold or leasehold deals and acquire existing assets or office-to-hotel conversion opportunities.
But a buoyant market brings its own challenges. When looking for city centre sites, our main competition is from alternative uses such as offices and residential. With those markets so hot, it can be difficult for us to compete on land values in the most sought-after areas.
This is why Premier Inn is also keen to be part of mixed-use schemes – a model that has proved successful in the UK. Rather than competing with those alternative uses head to head, we can complement them. We can pre-let a substantial amount of space, providing early investment and a level of certainty that in our experience can be the difference between a scheme going ahead or not.
Premier Inn is keen to be part of mixed-use schemes – a model that has proved successful in the UK. Rather than competing with alternative uses head to head, we can complement them
It is inevitable that others will want to take advantage of the opportunities presented by the Irish hotel market. We are already starting to see other national and international hotel brands seeking space in Dublin city centre and expect to see a number of hotels come on stream in the next two years. So could this eventually lead to an oversupply?
While there are a lot of hotel rooms in the pipeline, either through sites being acquired or planning applications submitted, at the end of the day it will come down to delivery. We do not believe all of the rooms being planned by others will actually be opened.
The projected economic and tourism growth in the Republic also gives us confidence. Tourism Ireland has reported that there were 10.65 million overseas visitors in 2017 – the highest number on record. Ultimately we believe tourism and hotel supply will grow side by side.
We want to be the number-one branded budget hotel in Ireland, but we need the help of the Irish property market to do that. People are already aware of our product and are coming to talk to us about acquiring sites and being part of schemes, and we are keen to have more of those conversations.
But as we always say when we open a new Premier Inn, the real test is whether people actually come and stay. Given the incredible growth in Dublin in recent years and the strength of our offering, we firmly believe that they will.
Kevin Murray, head of acquisitions (north and Ireland), Whitbread
- Highly acquisitive with live requirements across the UK
- Moving into the Republic of Ireland – the next growth opportunity following the successful launch of Premier Inn in Germany in 2015
- Operating at scale and speed – fast board decisions on sites based on comprehensive property understanding
- One of the biggest property owners in the UK
- Flexible for the right sites – with established formats and brands
PW Perspectives Supplement Winter 2018
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Plenty of room for growth in the Irish hotel market