Hotel Investment Outlook

Amárach Research
December 2013

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 a timely study

Our survey of over 70 hotel operators, investors and

professionals gives us a timely insight into:
• The main drivers of hotel property performance as we enter
2014 on a more positive economic note
• The outlook for the sector and the key factors that will
driver growth in the medium term

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Timing is everything in investment, and right now the
consensus on hotel property is very positive…

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the right time to buy

63%

19%
10%
6%

already past right now next year in 2-3 years

Q. When is/was right time to buy hotel property in Ireland?

Source: Amárach Research, 2013

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 If ‘now’ is the right time to buy hotel property, then
what does that say about hotel asset prices?

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fair value

70%

20%
10%

above fair value fair value in current market below what they're really
worth

Source: Amárach Research, 2013

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 What then is driving the demand for hotel property,
and what are the main constraints?

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the main constraints

59%

40%
36% 35%

21%

lack of bank competition from lack of investor lack of cost of fit out/
finance international finance appropriate refurbishment
investors properties
Q. What are main constraints on buying hotel property?

Source: Amárach Research, 2013

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the main drivers

74%
66%

37% 34%

11%

location price trading condition star rating

performance
Q. What are main drivers of hotel property purchases?

Source: Amárach Research, 2013

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 What about the provision of finance for hotel
purchases or refurbishments – now and in the future?

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the trend in finance

59%

43%

23% 23% 23%

17%
11%
1%

worse same better not sure

past 12 months next 12 months

Source: Amárach Research, 2013

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 If funding is getting better, then where will the best
growth prospects be next year?

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growth prospects

Fastest rising hotel asset values in 2014:

Dublin Greater Main
City Dublin Tourist Galway
Centre Area Centres
77% 31% 29% 14%
Source: Amárach Research, 2013

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 Finally, what one thing has to change to drive hotel
property values in next 2-3 years?

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 driving value ahead
“There has to be sustained growth in RevPar performance for another
12 months in order to give confidence that the recent trend upwards is
durable. There also needs to be a more pronounced recovery outside
Dublin to justify a higher valuation.”

“Average room rates need to increase by at least 3 - 5% per year for the
next few years and capitalise on recent increased demand.”

“Nama have to stop beating down rates, if you cant get the room rate
you can't get the return on your investment.”

“Dealing with the still tax based hotels as they come out of the
structures and their viability for continued operation.”

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 a turning point

We can be very positive about prospects for hotel

property values going into 2014:
• Finance is expected to be more available, while values are
seen as fair for now
• But there are challenges – both on the supply side and on
the demand side – including legacy issues
• Nevertheless, 2014 looks like being a turning point after
seven difficult years

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 T. 01 410 5200
E. michael.mcloughlin@amarach.com
W. www.amarach.com
B. www.amarach.com/blog
Tw. Twitter.com/AmarachResearch

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