Dublin facing three-year wait until it has enough hotel rooms: Dalata boss
The Dublin hotel market will be undersupplied with rooms for at least another three years due to construction cost inflation and more expensive funding, according to the chief executive of Ireland's largest hotel group.
Pat McCann of Dalata Group plc also said there's a "lot of talk" around Brexit and suggested firms are squandering money on advice when no one knows what's going to happen.
Dalata has four operations here - a Clayton Hotel in Belfast city centre, along with Maldron hotels in Belfast, Belfast International Airport and in Londonderry.
It is also a frequent customer of Co Tyrone building firm McAleer and Rushe, which last week announced it had won planning permission to build hotels for Dalata in Birmingham and Glasgow.
Last year McAleer and Rushe completed construction of the Maldron in Belfast city centre. Mr McCann dismissed suggestions from Savills that 3,000 new rooms would come on stream in Dublin next year, and said it was likely to be about half that.
Dalata also anticipates that just 1,200 of the projected 1,600 of new rooms expected in 2019 will be opened.
Mr McCann said that demand in Dublin is being driven by investments by multinationals such as Amazon and Google in the capital.
He said they are a "key driver" of demand in mid-week hotel use, while the expansion of air routes between Dublin and North America also immediately results in additional demand.
But he insisted that some of the planned hotel projects in the capital will not proceed. "Two things have happened: building inflation for material and labour will probably make some of these projects questionable," he explained.
"What you'll find then is that funders will start to question whether they make sense or not. That's going to be the challenge."
He added that there may be a better return for investors in residential projects.
"It's easier to find builders who can build residential than it is to find builders who can build hotels, and there is a big difference," said Mr McCann.
He was speaking as Dalata announced a strong set of full-year results for 2018.
Its revenue rose 11.8% to €393.7m (£337.48). It also reported a 13% increase in pre-tax profits in 2018 to €87.3m (£74.83).
In regional Ireland, revenue per available room rose 5.2%, and by 3.1% in the UK.
Mr McCann said that the reversion of the VAT rate for hotels and other sectors to 13.5% from 9% in the last budget had been largely absorbed by customers.
He said it had been passed on to corporate customers, along with a general increase, with little pushback.
The group had a total of 39 owned and leased hotels in Ireland and the UK in 2018.
Dalata said that Brexit has had no impact in its business, but chief financial officer Dermot Crowley said the uncertainty had eased competition for prime city development sites in the UK.