Industry & Business

Fáilte Ireland Calls For Investment in Hotels Across Key Cities

Fáilte Ireland Calls For Investment in Hotels Across Key Cities

Fáilte Ireland Calls For Investment in Hotels Across Key Cities
December 03
10:08 2018

Fáilte Ireland has highlighted major investment opportunities in hotel stock in key cities. Its latest report on the current and future availability of accommodation shows that there is significant opportunity in Kilkenny for further bed capacity, while Galway also has scope for greater accommodation supply, following strong year-on-year growth in the number of overseas tourists coming to Ireland.

If Ireland’s recent strong performance continues, then overseas tourist numbers will be up more than 20% over the next five years, which will put pressure on current accommodation stock levels, particularly in urban areas which traditionally grow at a faster rate, amplifying any accommodation squeeze.

The Analysis of Tourism Accommodation in Cork, Galway and Kilkenny report commissioned by the national tourism body was carried out by Fitzpatrick Associates Economic Consultants and looks at the current and projected level of bed stock across all accommodation types. The analysis focuses on hotels predominantly, as they constitute the primary source of accommodation in each of the cities, accounting for more than 80% of bed spaces.

The report highlights that the biggest squeeze is in Kilkenny, where 41 new rooms are likely to come on stream by 2022 to add to the current supply, an increase of just 4%, which presents a strong opportunity for investment in this sector.

Galway, which is currently at 82% annual occupancy, also has significant room for investment. With an estimated 17% increase in hotel bed stock over the next five years (500 new hotel rooms), this increase is likely to fall short of expected demand growth.

Looking at Cork, the report shows that there is a steady pipeline of new hotel stock coming on stream for Ireland’s second city. With current figures projecting a 35% increase (over 920 new hotel rooms) in Cork by 2022, this positions the city well to take full advantage of all future growth potential.

Fáilte Ireland’s CEO Paul Kelly said: “This year the Irish tourism industry has once again made another significant increase in its contribution to the Irish economy. We estimate phenomenal growth of 8% in revenue this year, and our economic modelling predicts that tourism will have spurred employment growth of a staggering 20,000 jobs in the year, bringing the total number up to 260,000. This performance is very much reflected in the growing visitor numbers and high occupancy levels we’re seeing in Dublin, Cork, Galway and Kilkenny.

“In 2019 we believe that there is potential to grow by a further 5% in overall tourism revenue, an upward trajectory that is likely to continue in the coming years. The challenge of sustaining this growth in the long-term is to ensure Ireland has an adequate accommodation supply, particularly in these four key cities. While there is a future supply of hotel beds in the pipeline for Cork and Galway, looking at the current and projected levels of visitor demand, there is certainly still a strong case for more investors and businesses to move into the sector and consider each of these cities for investment.

“This is particularly true for Kilkenny, where the current projection of hotel rooms is unlikely to match the growth levels we’re expecting in the market over the next five years. Galway could also benefit from increased capacity as projected growth in the city exceeds the current planned increase in beds. Getting a future view of supply and demand in this way allows us to be ahead of the curve in calling for investment now, and ensuring that cities don’t suffer excessive price inflation down the line. At Fáilte Ireland, our efforts are focused on driving growth into the off-season where there is more capacity and bandwidth to accommodate increasing visitor numbers.”

Overview of report findings by city:

  • Cork:
    • The median projection is for 934 new rooms to open in Cork within the next five years. This represents hotel stock growth of 35%.
    • If robust growth continues, and one or more of the other developments that currently have planning or are in planning come to fruition, then this figure could grow to nearly 1,200
  • Galway:
    • The central projection is for an additional 490 rooms or 17% growth in hotel room stock.
    • This is made up of:
      • a net addition of 56 rooms in 2018
      • 234 rooms across six different hotel projects to be added to Galway’s stock by end-2020
      • at least an additional 200 rooms post 2020
    • The bulk of additional rooms are expected to be in 4-star hotels.
  • Kilkenny:
    • Modest stock growth of 41 rooms or 4% is anticipated for Kilkenny city and its immediate hinterland.

Earlier this year, Fáilte Ireland published An Analysis of Tourism Accommodation in Dublin, which estimated that, from 2018-2020, a net addition to the Dublin stock will be 4,900 (when we also consider hotel closures), including over 3,000 already under construction, representing – by Fáilte Ireland’s estimates – private sector investment in Dublin of €815m.

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