Dublin is the Republic of Ireland`s capital city located on the shores of the Irish Sea which separates the country from the United Kingdom…
Dublin is the Republic of Ireland`s capital city located on the shores of the Irish Sea which separates the country from the United Kingdom. In contrast to other key European capitals, Dublin is a small city with a population of just over 1.1m inhabitants compared to London (7.4m) and Paris (11.2m). Steeped in culture and folklore, with bustling streets and friendly locals, Dublin is a popular short break destination and has been described as one of Europe`s most down-to-earth capitals.
In recent years the country has experienced a remarkable economic boom yet despite this hotel performance in Dublin has not witnessed any significant growth. Revenue per available room (revPAR) at year-end 2004 was virtually identical to that in 2000 at €90. Year-to-May 2005 performance is still in a lull with revPAR down 2% compared to the same period last year. However, there is real optimism on the horizon that significant investment in the city over the next few years will provide a welcome boost for hoteliers.
Jump in visitor arrivals fuel construction boom
Overseas visitor arrivals to Ireland continue to increase. In 2004 Board Failte estimate that the country welcomed 6.4m overseas visitors, an 8.5% increase up from 5.9m in 1999. Nearly 58% of overseas arrivals (3.6m people) visit Dublin and since 2000 the city`s share of overseas visitors has increased from 54% to 58% in 2004.
Reflecting this rise in overseas visitor arrivals, passenger traffic at Dublin Airport has increased 34% since 2000 with 18.5m people expected to pass through the airport terminal in 2005. During 2004 the airport opened up 35 new routes and now serves 150 destinations – both charter and scheduled. Low-cost airlines dominate the market in the guise of Ryanair and Aer Lingus, however new European airlines such as Transavia, Hapag Lloyd Express and Germanwings all debuted during 2004.
To cope with future demand, the Irish government has recently granted permission to build a second terminal. By the time the terminal is completed in 2009, the airport will be able to handle up to 32m passengers per year. Initial talks are also underway regarding the construction of a third terminal and an additional runway. Should permission be granted these would operational by 2014.
Infrastructure in and around the city is also expected to get a boost with plans in the pipeline for construction of a new outer ring road motorway to ease congestion in the outlying parts of the Greater Dublin Area. This should help take pressure off the M50 which is one of the main motorways linking Dublin and rest of Ireland. In addition, the construction of a Port Tunnel, due for completion in 2006, linking the port with the M1 motorway will keep heavy good vehicles out of the city and easy traffic congestion. The Irish government is woefully aware that having attracted significant inward investment to the country they must deliver infrastructure that helps support business. Other such examples include extending the railway to the airport, as Dublin is the only EU capital without a rail link from its air terminal to the city.
30,000 more conference delegates every year
Initial talks regarding the construction of a National Conference Centre in Dublin began back in 2000. Since then, progress has been slow, however in May, the Minister for Arts, Sport and Tourism finally requested submission of tenders. Dublin is currently the only capital city in Europe without this type of venue and according to the Dublin Chamber of Commerce each year the city is without this facility, €50m in economic activity is lost. The preferred contractor is due to be announced by the end of the year with completion of the facility scheduled for 2008.
Once opened, the centre will have the capacity for 30,000 delegates per year, in addition to the 120,000 visitors who already come to the city for conferences. The expected influx of corporate business in Dublin created by the new conference centre should help drive occupancy levels upward. As a conference and incentive destination Dublin is an attractive option having excellent airlinks with both North America and Europe. Also compared to other European destinations average room rates are relative low. In a recent survey published by Business Travel Buyer magazine, Dublin was ranked as the cheapest of 10 cities for hotel accommodation.
Sport always draws a crowd
Ireland has long been known for its wealth of golf courses and the International Sports Tourism Initiative, co-ordinated by Board Failte, has assisted in bringing many prestigious events to the country. In terms of golf, a number of European Tour events are held across the country, and the American Express World Gold Championships were held in Mount Juliet in 2002 and 2004. In September 2006 the Ryder Cup will make its debut in Ireland at the K-Club in County Kildare approximately 20 miles from Dublin city centre. The event is estimated to attract 40,000 people per day over the three day tournament, and will further help raise the city`s profile on the international stage.
Lansdowne Road, the historical home of Irish Rugby is currently being redeveloped and when completed in 2008 will undoubtedly add to the sporting prowess of the city. The new and improved facility will have a capacity for 50,000 people and will be able to attract major national and international fixtures. Whilst the stadium is being renovated permission has been granted for rugby games to be played on a temporary basis at the nation`s Gaelic football stadium Croke Park, where traditionally only Gaelic football has been permitted.
Dublin revPAR will welcome boost
Since the late 1990`s the Dublin hotel market has gone through rapid transformation. Once dominated by primarily domestic hotel chains – Doyle and Jurys Hotels – the two companies combined in 1999 to form the Jurys Doyle Hotel Group. Since then a number of international brands have opened in the city including Westin, Four Seasons and Days Inn. Brands such as Marriott and Radisson have been attracted to more provincial locations.
Whilst overall revPAR in the city remains virtually unchanged from 2000 at €90, there has been a marked difference in occupancy and average room rate performance. The addition of new supply to the market has caused occupancy to fall from 79% to 72%; however this has been offset by €9 rise in average room rates to €124. Given the luxurious quality of the new supply, the increase in average room rates is not surprising. What is more concerning is that, if the impact of new supply is removed, average room rates have fallen €3 during this period.
As the graph below illustrates, 2002 marked the poorest performance for the hotel market as occupancy tumbled to 69% and revPAR fell to €85. A number of factors contributed to this poor performance including the overall demise in international tourism post the events of 9/11, the launch of the Euro and associated transparency of pricing across Europe. Since then performance has continued to improve – albeit slowly – with revPAR improving year-on-year. The first five months of 2005 however have been less encouraging with revPAR down 1.7% to €83 caused by declines in both occupancy and average room rates. Encouraging performance outside the city, around the airport area in particular is still experiencing some growth with revPAR up 0.4% driven by increasing average room rates, which are some 50% lower than in the city centre.
Dublin revPAR performance 2000- 2005
Tapping into the Dublin market
Despite limited hotel performance growth, operators have not been deterred from entering the market. As the table below indicates both chain properties and independents are adding new supply to the city.
New hotel supply planned for Dublin
In addition to new supply, there are also a number of renovation projects underway. The Shelbourne Hotel on Stephens Green just south of the city centre has closed its doors for 18 months for a major overhaul expected to cost €18m. Further north of the city along the coast in Malahide the Grand Hotel is currently awaiting planning permission to add 64-rooms to its existing 150-rooms.
One of the key reasons for the level of new supply entering Dublin is due to the capital allowance tax scheme offered on new builds. This has contributed to the construction boom across Dublin, but the scheme is due to conclude next year. The capital allowance scheme provides a 15% tax break over 7 years on all new builds and renovation work. The scheme was terminated in December 2002, however all planning permission applications submitted by the end of 2004 also benefit provided all work is completed by July 2006.
When will the tide turn for Dublin?
The future looks bright for the Dublin hotel market. The increased level of investment in the city matched with improving tourist arrivals bodes well for the hotel industry. In addition the recent go ahead to build a National Conference Centre in the city, will help Dublin attract major international conference and events, which should provide a welcome boost for hotel performance.
Notes: All analysis in Euros.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
