Crowe hotel survey 2018 aiden murphy and mairea  20doyle balfe

Irish hotel sector performs strongly as occupancy levels at all-time high across Ireland

Crowe, formerly known as Crowe Horwath, Ireland’s leading accountancy practice and advisors to the Irish hotel sector, launched the 23rd edition of Ireland’s most comprehensive annual analysis of the Irish hotel sector today. The Crowe Ireland Hotel Survey, compiled from an analysis of Irish hotels’ 2017 accounts, shows that key performance metrics have enjoyed a period of sustained improvement with a seventh consecutive year of growth in turnover. Record profit levels, room occupancy levels and average room rates have been recorded in all regions. Notwithstanding such a strong performance in the sector, the levels of profitability recorded are necessary to provide a sustainable business model to allow for a €1.5 billion investment required to deliver an additional 11,000 rooms which are required within the next seven years. Failure to deliver this capacity will impact on competitiveness and Ireland’s ability to maximise revenue from the tourism sector.

Hotel room rates have increased in all regions, up 6.9% on average rates achieved in 2017 when compared with 2016. Rooms in Dublin hotels had an average rate of €136.96 in 2017 some 6.8% higher than the price achieved in 2016. During 2017, the South West and Western Seaboard regions were the strongest performing areas, with average room rates for both regions rising to €100.67 and €87.49 respectively, a growth of 8.0% in the South West and 9.7% in the Western Seaboard area.

During 2017 average room rates in Dublin increased at half the rate achieved in 2016 showing some moderation in growth even though very little new capacity came on stream as only 237 new rooms were added during the year according to the Fáilte Ireland hotel register. For the first time since 2011 average room rate growth in regions outside Dublin was higher than the capital pointing to a broader, more balanced recovery in the sector across the country. Profitability in the capital too increased at a lower rate when compared with other regions. Dublin hotels increased their profits on average by 12% whereas the largest increase in profitability was achieved in the South West at 17.4% growth with Western Seaboard at 17.0% and Midlands and East at 13.9%.

Occupancy levels across all regions have increased too with all regions bar Midlands and East now reaching over 70% occupancy. However, the Midlands and East are just shy of the 70% mark at 69.5%. Overall, the average room occupancy levels across all hotels are now at 75.4%, an all-time high, while Dublin remains the area with highest occupancy levels at 83.5% in 2017. At this level, every room in Dublin is occupied six nights every week, a performance metric which is considered very strong in the sector.

Of all classifications, Luxury hotels saw the biggest increase in room occupancy in 2017, with a 2.7 percentage point increase on 2016 figures. Their average room rate rose to €218.02, an increase of 6.2% on last year’s record level of €205.24. While First Class (four-star) hotels have the highest level of room occupancy at 76.2%, economy hotels saw the biggest growth in the average room rate, growing to €68.43 and an 11.8% increase on 2016 figures.

The unemployment rate in Ireland has dropped by approximately 3.2% between 2015 and 2017 to 6.7%. Labour-intensive sectors such as hotels are facing the increasing challenge of staff retention and a shortage of skilled workforce, due to competing sectors offering higher pay. The hotel sector needs to respond to this challenge to help retain staff and attract staff to the industry, however, this will result in higher costs.

The sector saw a historical pay high in 2009 of 42.3% of revenue against our current rate of 34.5% of revenue. With the emphasis on increasing pay, if the hotel sector was to return to such highs like in 2009 this would reduce profitability across all regions. Payroll cost increases are currently the most significant and largest threat to the hotel sectors profitability in Ireland.

Among the other findings in the study are:

  • 2017 represented the seventh consecutive year of turnover growth for Irish hotels.
  • Profit levels are higher across all regions, recording an increase of 12.5% year-on-year.
  • The Midlands and East region continues to be the highest turnover-generating region per available room (€81,913 in 2017).
  • 9 million visitors travelled to Ireland in 2017, a record high and a 3.6% increase on 2016 – the previous record year.
  • Profits growth are the highest in the South West region, an increase of 17.4% year-on-year, while Dublin saw the lowest levels of growth in profits, at 12.0%.
  • Dublin’s average room rates have stabilised and are now growing at a slower pace, as the Dublin originated recovery for the sector rolls out to all regions.

Commenting on this year’s survey, partner at Crowe, Aiden Murphy said: “The growth in the Irish hotel sector improved again in 2017, with increases in occupancy levels, average room rates and profitability not just in the capital, but across all regions. With occupancy levels at between 70% and 80% across the country, new capacity estimated at 11,000 rooms is required through hotel extensions and new builds in order to satisfy demand and maintain our competitiveness.”

Speaking about the outlook for 2018 Mr Murphy added: “Notwithstanding some headwinds with a weaker currency in our largest tourism market, the UK, outlook for the sector remains positive. After seven consecutive years of growth and sustained projected growth expected in the coming years it will be important to address the capacity constraints if Ireland is to fully reap the benefits of Ireland’s high quality and internationally renowned tourism product.”.

Commenting on the findings of the Crowe Report, Brendan Griffin TD, Minister of State at the Department of Transport, Tourism and Sport said: “The findings of this survey show that there is continued improved performance in hotels nationwide across all key performance indicators. It is great to see the improved viability of the sector, as it is a large employer and now again has the potential to support the expansion in capacity that our growing tourism industry requires.  It is important, however, that Ireland remains competitive in all markets and that we continue to offer our visitors good quality products and services. In particular, it is crucial that we avoid any reputational damage in the area of value for money.

The Government and the tourism agencies, Fáilte Ireland and Tourism Ireland are continuing to support the tourism industry within the framework of the Government tourism policy “People, Place and Policy”. My Department is currently in the process of drafting a Tourism Action Plan for 2018-2020, in consultation with the industry. This plan will help to continue to develop our tourism offering and to drive growth and innovation within our tourism services and products.”

For more information or for a copy of the Irish Hotel Survey, please log on to Crowe.

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