The head of Ireland’s largest hotel group said he expected room revenue in Dublin to continue growing next year in spite of supply increases and industry data that indicated rates would decline.
Speaking to The Irish Times, Dalata chief executive Pat McCann dismissed a suggestion from travel research company STR that revenue per available room (RevPAR) would decline in 2019. "I don't believe that, I believe there will be more growth," he said, adding that supply would service demand in the Dublin market by 2020.
Mr McCann was speaking after the company released interim results showing occupancy in its Dublin hotels increased from 82.3 per cent to 86.2 per cent in the first six months of this year, while RevPAR advanced by more than €10 to €105.47.
While the Dublin performance was broadly positive, regional RevPAR underperformed the market with facilities in Cork, Galway and Limerick all growing at below-market rates.
The company beat analyst expectations and announced its maiden dividend on Tuesday but also warned that revenue could take a hit if the Government chose to raise the VAT rate on hotel rooms.
With 15 hotels in Dublin, 12 in the rest of Ireland and nine in the UK, Dalata posted a 10.6 per cent rise in revenue to €180.6 million and said profit rose 8.3 per cent to €35.4 million in its interim results. The results allowed it declare an interim dividend of 3 cent per share, payable on October 12th.
But the company, which operates the Clayton and Maldron brands, warned it could see a 2 per cent revenue hit if the VAT rate on hotels was increased.
The current 9 per cent rate was a response to the financial crisis and the mooted return to the 13.5 per cent rate is expected to reduce group revenue but the exact hit is “dependent on what is increased and how much recovery we can get from our customers”, Mr McCann said.
“To my mind, it doesn’t make sense to tinker with it,” he noted, adding that the VAT rate was not necessarily an issue for a player with Dalata’s scale, but would have a negative impact on smaller market players.
Tara Towers
The group, with hotel assets exceeding €1.1 billion, is in the throes of adding 1,500 rooms this year and a further 2,000 rooms next year. One of its planned openings is on the site in south Dublin of the Tara Towers Hotel, where Dalata is building a 140-bedroom facility.
The group has also received permission for a development of 69 residential units on the site. Mr McCann said the company was in negotiation with “a number of parties” to sell the residential units to and hoped to close a deal by the middle of October when construction is due to start on site.
He also noted the company had agreed an extension to the lease on the Ballsbridge Hotel site to March 2020, on the back of high demand in the Dublin market.
Outside of the Republic, Dalata said it signed an agreement with real-estate investor Catalyst Capital to lease a 276-bedroom hotel to be built in Manchester. While its London portfolio outperformed the market, earnings at Dalata’s UK arm advanced only 1 per cent to £9.9 million (€10.98 million)
“Overall while this is a solid update from Dalata, given the strength of the Irish hotel market year to date the maintenance of guidance for the full year may be somewhat disappointing,” said Goodbody analyst Gavin Kelleher in a note to clients.
He added that long-term growth for the business remained positive “with UK room openings announcements on track and the group continuing to be a beneficiary from the continued undersupply in Dublin hotel market”.
