Hotel group Dalata prepares for hospitality VAT rate of 13.5%

Hotel group Dalata is preparing for the reduced 9 per cent rate of VAT for the hospitality sector to revert to 13.5 per cent on September 1st as signalled by the Government but says the impact of the policy on room pricing for the remainder of the year is uncertain.

Group chief executive Dermot Crowley also said that Dublin, Dalata’s biggest individual market, is no less safe than other big cities but continues to grapple with similar post-pandemic issues to other urban centres.

The Dublin-listed group, which operates the Clayton and Maldron brands in Ireland and the UK including three properties in Northern Ireland, reported a 29 per cent year-on-year increase in hotel revenues to €284.4 million for the six-month period to the end June in half-year results published on Tuesday.

US president Joe Biden’s visit to Ireland and the Champions Cup rugby final in May significantly improved occupancy rates at Dalata’s portfolio of Dublin hotels in the first half of the year, with the hotel group reporting a sharp increase in room rates and revenues in the capital over the period.

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Profits before tax slipped 3 per cent to €42 million amid a 5 per cent rise in central costs to €7.2 million, associated with a jump in staffing and pay increases for existing employees as well as increased marketing spend.

Chief executive Dermot Crowley hailed the group’s first-half performance as “exceptional” against a challenging backdrop.

“We have responded to the challenge of rising costs through cost and revenue management initiatives, a focus on reducing utility consumption and adopting innovation across all areas of the business,” he said.

Speaking to The Irish Times, Mr Crowley said the group is preparing for the reduced rate of VAT for the wider hospitality sector, introduced during the Covid-19 pandemic, to revert to 13.5 per cent in September.

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“We haven’t heard anything to the contrary,” he said. While it is “difficult to work out” the probable impact of the policy pricing, he said the move “is not positive” for the sector. “I think that that debate often gets mixed up with the pricing. It was seen as a temporary reduction but the reality is at 9 per cent, the rate in line with countries like Portugal, which is 6 per cent, Spain, Italy, and France where it is 9 and 10 per cent.”

Mr Crowley said the issues around safety and security in Dublin city centre are concerns given recent high-profile incidents. However, he said: “All cities have challenges post-Covid ... You would be concerned about crime in any city. I don’t think Dublin is any worse than any other city.”

Looking ahead, Mr Crowley said he expects revenue per available room (Revpar) for July and August to moderate to around 5 per cent compared with the same months last year.

The average nightly price of a room across Dalata’s portfolio of hotels in Ireland and Britain jumped almost 10 per cent to €139.50 from €126.89 last year, with the group achieving like-for-like Revpar, a key performance metric in the sector, of €112.09, up 23 per cent from 2022.

In Dublin – where the group’s portfolio consists of eight Maldron hotels, seven Claytons, and other properties including the Gibson – average room rates climbed more than 13 per cent over the period to €157.47 per night with occupancy levels topping 83 per cent.

Revenues across Dalata’s Dublin portfolio were 35 per cent, or €38.8 million, in advance of the first half of 2022 at €149.4 million.

The group’s regional Irish portfolio – comprising 13 Clayton and Maldron hotels in Cork, Galway, Limerick, Wexford, Portlaoise and Sligo – also performed “very strongly” with revenues up by 23 per cent from last year at €52.6 million.