Growth Trend Softens In Hotel Sector

17 Jul 2019 | 09.09 am

Growth Trend Softens In Hotel Sector

Crowe Ireland Annual Hotel Survey

17 Jul 2019 | 09.09 am

Ireland’s hotel sector enjoyed good revenue growth in 2018 but increased overheads are denting margins, according to an analysis by accountancy firm Crowe.

The annual Crowe Ireland Hotel Survey, compiled from an analysis of Irish hotels’ 2018 accounts, shows that the sector experienced an eighth consecutive year of growth in turnover. Increased profit levels and average room rates have been recorded across all regions.

Crowe partner Aiden Murphy said 2018 marked a turning point for the industry with slower growth and increased costs, weakened sterling and Brexit uncertainty.

The report concludes that the sector recorded the lowest level of profit growth in seven years at a rate of 7%, down from 12.5% in 2017. Revenue from rooms and food sales grew at the lowest levels in five years, at 5.9% and 2.6% respectively,  due to increased competition for restaurant and events customers from non-hotel outlets and no increase in occupancy levels.

The average nightly room rate nationally rose to €118, an increase of 6.3% from 2017. Rooms in Dublin hotels had an average rate of €146, 6.5% higher than the price achieved in 2017. 2018 occupancy levels of 75.1% were consistent with the previous year at 75.4%.

Luxury/five-star hotels saw the biggest increase in the average room rate in 2018, with a €10 increase over 2017 figures to an average room rate of €228. Over the five years from 2013 to 2018, the average room rate is up €80 for five-star hotels, €37 for four-star hotels, €32 for three-star hotels and €22 for two-star hotels. Crowe says top-end hotels are attracting a greater number of higher spending visitors who demand the highest quality service and product offering.

The Irish domestic market accounted for 55% of all guests last year, as domestic trips  increased by 13.4% year-on-year. Since 2013, the market share of hotel guests from Northern Ireland and the UK has dropped by 25%, but to-date the surge in demand from US visitors has balanced this out, according to Crowe.  In 2018, 17% of all Irish hotel rooms were occupied by North American tourists.

2018 saw hotels in the Western Seaboard region experience different trading outcomes depending on their location, with hotels in Clare, Galway and Mayo doing well but hotels in Donegal, Sligo and Leitrim faced challenges associated with weaker sterling.

Hotels in the Midlands and East regions also had varied experiences, with Cavan, Monaghan and Louth being hit by the Brexit impact while Dublin doorstep counties of Meath, Kildare and Wicklow performed well due to spillover from Dublin.

According to Crowe, utility costs grew at 8% and on average hotels are seeing a 10% increase in annual insurance premiums. For the second year in a row, payroll costs also increased at a greater rate than total revenues.

Aiden Murphy commented: “For 2019 the 50% hike in VAT to 13.5% on rooms and food sales will make it a challenging year if the cost increases experienced in 2018 continue at a similar pace. Rising costs such as insurance, payroll and utilities combined with the potential impact of a hard Brexit will make 2019 and future years more challenging for the sector.”

• For a copy of the Irish Hotel Survey, see www.crowe.ie

Photo: Aiden Murphy (right) with minister Brendan Griffin and Crowe’s Roisin Martyn. (pic: Maxwell Photography)

 

2018 2017 2016
Room Occupancy 75.1% 75.4% 74.0%
Average Room Rate €118.27 €111.25 €104.11
RevPAR €88.79 €83.88 €77.04
Total Revenue per Room €74,856 €71,393 €66,688
Departmental Profit per Room €37,496 €35,629 €32,655
Gross Operating Profit per Room €21,331 €20,034 €17,918
Gross Operating Profit per Room (%) 28.5% 28.0% 26.9%
EBITDAR Profit per Room €17,519 €16,377 €14,558
EBITDAR Profit per Room (%) 23.4% 22.9% 21.9%
Executive Summary and Highlights – Region
Dublin 2018 2017 2016
Room Occupancy 83.9% 83.5% 82.3%
Average Room Rate €145.82 €136.96 €128.27
RevPAR €122.35 €114.36 €105.57
Total Revenue per Room €77,298 €72,984 €66,927
EBITDAR Profit per Room €24,818 €22,952 €20,492
Midlands & East 2018 2017 2016
Room Occupancy 69.0% 69.5% 68.5%
Average Room Rate €105.51 €98.03 €91.40
RevPAR €72.80 €68.13 €62.61
Total Revenue per Room €84,682 €81,913 €77,967
EBITDAR Profit per Room €14,543 €13,463 €11,821
South West 2018 2017 2016
Room Occupancy 71.3% 71.6% 68.9%
Average Room Rate €107.80 €100.67 €93.25
RevPAR €76.81 €72.08 €64.25
Total Revenue per Room €67,352 €64,330 €59,876
EBITDAR Profit per Room €12,964 €12,064 €10,273
Western Seaboard 2018 2017 2016
Room Occupancy 70.4% 70.9% 68.3%
Average Room Rate €93.83 €87.49 €79.77
RevPAR €66.09 €62.03 €54.48
Total Revenue per Room €63,067 €60,718 €55,678
EBITDAR Profit per Room €12,014 €11,091 €9,479

 

 

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