Irish-listed hotels group Dalata has acquired the four-star Clarion in Sligo town for €13.1 million.

The Clarion is a four-star hotel which has 162 bedrooms, including 89 suites, bar, restaurant, extensive meeting and conference facilities, leisure centre and swimming pool.

A popular wedding venue, the hotel, which generated earnings before interest, taxes, depreciation and amortisation (ebitda) of €930,000 last year, opened in 2005. The property was formerly home to a psychiatric hospital that accommodated up to 1,100 patients until its closure in 1992.

Property consultants Savills were agents on the deal, which went on the market with a guide price of €7 million in late October. The business was sold on the instructions of Aiden Murphy of receivers Crowe Howarth.

Dalata said it is to invest up to €750,000 in a refurbishment programme on the property, which will be rebranded as a Clayton hotel upon completion.

"We are very familiar with this hotel as we have been managing the property on behalf of the Receiver, Crowe Horwath since April 2013. The hotel is benefiting from the recovery of both the local and national economies," said Dermot Crowley, deputy chief executive of business development and finance, Dalata Hotel Group.

“We believe that the introduction of the Clayton brand will further enhance the offering at the hotel and we are very excited about its addition to our portfolio of Clayton hotels in Ireland,” he added.

Davy said in a note to investors that it expected Dalata to make a good return on the property.

“The investment being made implies an initial yield of 6.7 per cent. Given that management targets an initial return on capital in year one of 8.5 per cent, this suggests that management sees good scope to improve the profitability of the hotel over time,” it said.