14 Hotel Investments May 14, 2017
Total Page:16
File Type:pdf, Size:1020Kb
The Sunday Business Post 14 Hotel investments May 14, 2017 Luxury Carton House Hotel hotels: five in Maynooth, years of big Co Kildare, has deals and been put on big players the market Most recently in the headlines as the venue for Rory McIlroy’s wedding, Ashford Castle hotel was sold in 2013 for €20 million. The Trump International Golf Links and Hotel Doonbeg was bought by you-know- who for €8.7 million in CHECKING IN AND 2013. Kennedy Wilson paid €120 million for The Shelbourne, and around €30 million for the Portmarnock Hotel, both in 2014. CASHING OUT of a touring route from Donegal down Stronger air links with North America to Cork and the scenery involved make Ireland very attractive.” As for the visitors from our nearest have made high-end hotels seriously neighbour, British visitor numbers are down by 6.5 per cent year-on-year, and profitable, and analysts say the buyers the long term impact of that remains to Dublin’s five-star be seen. Intercontinental Hotel who got them cheap could be about to was bought by a group Outlook for the backed by billionaire make a killing John Malone (above) future for about €50 million in 2015. The previous individuals and funds alike have checked As we saw from the impact of the re- year, it snapped up The into posh hotels sales. The early movers cession on luxury hotels, this market is Westin for €65 million. capitalised on bargain price-tags from intrinsically linked to a prospering econ- bank and Nama firesales, and now find omy – here and overseas. The forecasts, themselves sitting on potentially re- in as much as they can ever foretell, are Malone cast his eye warding returns, albeit having had to in Dublin’s historic Gresham Hotel, which went for more than €90 million positive. over Mount Juliet, many cases plough a wedge of capital “The Irish domestic economy looks but Tetrarch Capital Róisín Burke into reviving the faded grandeur of their good, with Davy predicting five per cent ultimately acquired acquisitions. growth, and it’s been pretty sustained to it, as it did Mount he entire Irish hotel busi- Many of these distressed buyers will date,” said Damien Gaffney, head of the Wolseley. ness has made a major move to cash in over the next while, and hotel operation at Tetrarch, which owns comeback in the past deal rates for luxury hotels are expected four luxury hotels. The five-star couple of years, but the to continue to be brisk, even as prices rise. “The luxury market over the last three Powerscourt Hotel is stand-out performer has There are only 35 five-star hotels in or four years since we’ve been in has been the luxury market. Ireland, and only five in Dublin. That shown sustained growth. Most of our now also Tetrarch- From four and five-star has helped drive room rates higher and business is domestic, and the health of the owned, as is The country resorts to swish produced attractive returns. Irish economy is most important to us.” Marker, which was city properties, upscale hotels have deliv- But there are market threats and uncer- Gaffney said that aside from Mount bought as a shell in Tered vastly greater profits and revenues tainties attached to these plush prospects Wolseley, where it wants to recycle its 2011, done up and than their mid-range or budget peers too. The British tourist market is Ireland’s capital, Tetrarch has no plans for further opened in 2013. It since the recovery. biggest, and weak sterling and Brexit may disposals but he thinks this process is all adds up to circa As such, they have been desirable already be having an impact. going to accelerate for other owners. €50 million worth of assets for investors looking to buy into And the costs involved in new builds “I would imagine given the timeline, upmarket hotels. Ireland’s recovery. is limiting opportunities for new luxury this will happen. A lot of the portfolios “They are by some way generators of hotel developments, despite the demand Trump International Golf Links and Hotel Doonbeg in Co Clare bought in 2012/13 would have a hold the highest profit right now,” said Aiden for more, some in the market say. period of three to five years, and a lot of The same year, the Murphy of Crowe Horwath, an accoun- funds are coming up on that now. You’re Chinese Kang family tancy firm that runs a annual survey on going to see people moving some of those paid some €20 million the industry. “It has been a phenomenal The deals will things on, and they will be happy to exit.” for the Fota Island turnaround.” go on, with new Gaffney and other industry figures Resort in Co Cork. Over the last three years particularly, think there is a dearth of five-star hotels profits at top-grade hotels have been ris- dealmakers compared to other destinations. He said American games ing by around 12 per cent a year. Tipped to sell for around €60 million, that in recent times “there haven’t been developer Adrian No wonder then that even as property Dublin’s historic Gresham Hotel ulti- any five-stars delivered into the city”. Carmack bought the values climb, hotels continue to change mately went for over €90 million towards This is leading to a lot of investment in five-star Heritage Hotel hands regularly, often in deals worth the end of last year. A shortage of this type the existing five-star market, with Mi- tens of millions and in hotly contested of property pushes up prices, according chael Smurfit’s K Club adding on rooms in Laois for about €5 auctions. to Murphy. and Mount Juliet doing the same. In Dub- million. Two of the latest on the market – Car- “If you had two Greshams, you’d sell lin, the Merrion is extending. ton House and Mount Wolseley – have them in the morning because of the very The picturesque surrounds of Mount Wolseley Hotel in Tullow, Co Carlow Murphy suggested that because there’s Lough Erne Resort attracted substantial interest, and wealthy significant shortage of rooms due to the a premium to be had at the upper end, was sold to a fund mismatch between opportunities to in- 72 per cent, back from a low of 54 per some four-stars may start repositioning connected to the vest and supply in that marketplace. Very cent in 2009. as five-star offerings by upgrading their Chicago-based Saliba little can be bought in terms of a hotel At the very top end, this has been driv- facilities. family in 2015 for €11 property in Dublin at the moment.” en by overseas, but especially American “But even at current profit levels, there million. Going forward, there will be a different visitors. won’t be a business case for a new five- profile of buyer from the distressed asset One in four guests at five-star hotels star hotel –it will be upgrades and ex- acquirer, Murphy also said. is from the US. In other hotels, the figure pansions,” he said. Denis O’Brien bought “In the past, there were a lot of forced is one in ten. Ballinahinch Castle in sales or exiting. Now more medium to The increasing strength of the tourism Connemara in 2013 for CONGRATULATIONS long-term investors will come in and market, especially in terms of American The threats to be around €6.5 million. TO more opportunistic ones will exit. What visitors who stay longer in luxury hotels considered probably has happened to some of these and spend more, feeds into the investor RONAN DALY JERMYN hotels is they may have been refinanced appeal of the luxury hotel, said Murphy. “The build cost per square foot versus out of tax deals and some of the current “In 2012 we had one million visitors revenue is prohibitive,” said Gaffney of THE 2017 AIB PRIVATE BANKING IRISH LAW FIRM OF THE YEAR owners, with values going to a higher a year. Now that is up by 60 per cent, to the prospect of Tetrarch or anyone else point, may be saying ‘We’ll trade the hotel 1.6 million in 2016. There’s great connec- developing a new five-star hotel. and take our profit’.” tivity from the US; the number of flights “You would have to be able to deliver CONGRATULATIONS TO THE 2017 AWARD RECIPIENTS The new entrants to the market will inbound each year has grown, leading rates far above present levels. For that find far fewer bargains, however. to competition, and flight prices have reason, we’ve never entertained getting CONNACHT/ULSTER IRISH LANGUAGE LAW SCHOOL OF THE YEAR “We’ve now come to a point whereby come down. into building, except the Marker, which JP McManus, (above), SOLICITOR OF THE YEAR PRACTITIONER OF THE YEAR UNIVERSITY OF LIMERICK the prices being paid are equivalent to “And the Wild Atlantic Way has reso- was kind of pre-baked.” also joined the luxury BREEGE MCCAFFREY - Sponsored by Foras Na Gaeilge the replacement price of the asset,” said nated very well in the US. The prospect Tetrarch is building hotels in Dublin hotels club, buying DM O’CONNOR AND CO SAMANTHA GERAGHTY - P. LEGAL BOOK OF THE YEAR SOLICITORS O’CONNOR & SON THE LAW OF COMPANIES, Murphy. “So it is coming to a high point for but they will be boutique budget and Adare Manor for about DR THOMAS B COURTNEY what people would pay, whereas before it other formats that are underserved, not €30 million in 2015.