Hotels charged average room rate last year of €118 but warning that industry costs to climb
The average charged for a hotel room, average revenue and operating profit per room, all rose last year at a healthy clip. However, the challenges facing the industry include higher costs from the Vat rise, threats of an economic slowdown, and any renewed Brexit slump in sterling which could discourage visitors crossing the Irish Sea, a major survey has found.
In the 24th year of the Crowe survey of the hotel industry in Ireland, the industry posted an average room occupancy that ticked lower to just over 75% but all the other metrics of the industry were healthy. A hotel room last year cost an average of over €118.25, and earnings per room before other costs rose to €17,520 across the industry.
The survey found that two-thirds of hotel guests came from Ireland and the UK but over half was accounted for by guests from Ireland, a market that has ballooned in the past year. Nonetheless, most hoteliers rely on visitors from Britain and the North, which means the business is vulnerable to any further downturn in the value of sterling.
Sterling slumped 15% from around 72p in the immediate wake of the UK vote three years ago to leave the EU, but the currency later clawed back some of those losses last year. However, the threat of a new British prime minister taking the UK out of the EU without a deal at Halloween has started to weigh on sterling again, which has fallen sharply back to 90p against the euro in the last two weeks.
“This kind of exposure to these markets poses a potential risk for the industry when the possible economic impacts of a hard Brexit, weakening sterling and knock-on implications on the Irish economy, including a possible fall in disposable income are considered,” the survey said.
At almost 84%, Dublin hotels had the highest room occupancy rate, as well as the highest average room cost of €145.80 and average earnings per room before other costs of €24,820 last year. It was followed by the southwest with a room occupancy rate of 71.3%, average room cost of €107.80 and average earnings per room of almost €12,965. The midland and east with an occupancy rate of 69% trailed the western seaboard’s 70.4%.
Aiden Murphy, partner at Crowe said the 2018 metrics showed a healthy year for hotels in Ireland. However, last year “has marked a turning point also, with the period of double-digit growth coming to an end,” he said.
“From 2019 onwards the 50% hike in Vat to 13.5% on rooms and food sales will make it a challenging year if cost increases experienced in 2018 continue at a similar pace,” he said.
