The hotel industry has gone through a massive amount of change in the last 10 years.
1. Impact of an over-build due to massive government led tax incentives.
2. Worldwide recession impacting all financial assets.
3. Collapse in room rates across all sectors.
4. Change in vat rate down to 9%.
5. An incredible successful “Wild Atlantic Way”
6. A massive switch in ownership with hotels moving from Irish owned and operated to large funds and SPV’s being set up.
7. Unprecedented growth mostly over 3-4 years from 2015 to 2018.
8. Massive re-investment in hotel assets with extensions and refurbishments
9. Large increase in employment levels with some serious shortages especially in the area of qualified chefs.
10. Increase in Vat rate back to 13.5%.
11. Lots of new builds coming on to the market with even more now with planning permissions.
It seems we have come full circle back to 2007, when Limerick has a 63% increase in its bedroom stock in just 2 years. Cork currently has over 16 planning permission in place for extensions and new builds.
Gathering stats for the hotel industry started with me helping the industry measure the impact of Cork becoming the European City of Culture back in 2005, and have captured the high, lows and highs again ever since.
When the world’s economy’s collapsed the hotel industry was a big victim, as lets be fair large tax breaks help build the industry but also contributed a lot to the over build of assets in dubious commercially viable areas.
Hotel also became the trophy assets of our builders, with helicopters and cars not being grand enough we found a lot of hotels being built for enormous sums of money, with very unrealistic payback models. They were also not able to deal with any shocks and we unfortunately had less of a bump in the road and more of sink hole that you couldn’t avoid hitting and it just depending on how far down the sink hole you went whether you came back out or not.
Rate was fundamentally the first thing to go and remarkable occupancy levels returned relatively quickly but rate grew very slowly from 2009 to 2014.
ARR growth from 2009 to 2014 was only 2.7%, with occupancy up 14% for the same period.
The economy really turned for hotels from 2015, with which has to be described as incredible and realistically unsustainable growth. We hit a perfect summer of a shortage of hotels, due to the lack of finance for new builds, hotels assets now being geared much lower, an incredible successful Wild Atlantic Way. The industry grew occupancy and rate all at the same time leading to massive increases in RevPAR with double digit growth for 3 years in row.
Rate growth from 2014 to 2018 was 45%. Overall RevPAR has grown by over 90% over the 10 year period