There is further recovery expected in the hotel sector in 2015, according to industry experts, iNua Hospitality. Reflecting on the performance of their own hotel acquisitions to date – Radisson BLU Hotel & Spa, Little Island, Cork and Radisson BLU Hotel & Spa, Limerick – the group is reporting strong double-digit profit growth of their portfolio in the first year of operations.

iNua Hospitality is led by expert financier Noel Creedon who reflects on the performance of the sector in 2014:

“With significant growth in profitability from two or three years ago, there has been a solid recovery in values experienced across the board in 2014. Ireland has certainly benefitted from a strong domestic economic recovery, while a return of corporate and meetings demand has resulted in significant RevPAR growth (widely considered the most important performance metric in the hotel industry for investors). The strong upturn in ADR (Average Daily Rate) is very promising albeit a return to pre-crisis profitability levels is yet to be seen. Having improved operating fundamentals in both our hotels in 2014, our forecast for Q1 2015 is looking promising and we are hopeful of a continuing growth story for iNua Hospitality investors. Booking pace is strong in both of our hotels, momentum is good and economic activity is improving. These factors, coupled with no new supply coming on stream, should drive further growth going forward”

While hotel sales bottomed out in 2009 with only two sales recorded, there has been a significant up lift in activity since 2012, which continued into 2013 with 35 hotel sales completed at an estimated value of over €200 million (Source: Savills Report, specifically commissioned for iNua Hospitality, September 2014). While there is still some way to go to regain the ground lost during the economic downturn, particularly outside of Dublin, iNua Hospitality is already looking to raise €10/15 million in Q1 2015 to acquire further hotels in Ireland.

With an obvious two-speed recovery at play between Dublin and the rest of Ireland, future projections indicate that there are unlikely to be any new hotel developments outside of the capital. There will be a need, however, to upgrade existing hotels in key regional locations such as Cork, Limerick and Galway. iNua Hospitality is currently undertaking a multi-million euro upgrade at its hotel in Limerick.

Results of initiatives such as The Gathering have contributed positively to driving visitor numbers upwards, which is a key factor in the growth of the hotel sector. Further investment in regional tourism infrastructure – such as The Wild Atlantic Way – is also likely to assist in the regional recovery. This, when married with improved economic conditions, improved consumer sentiment, continued growth in overseas visitors and the current reduced VAT rate of 9 per cent for the hospitality industry, will ensure that the growth of the hotel sector stays on an upward trajectory. iNua Hospitality have also begun researching opportunities in the European market.

“We know there is significant appetite for hotels in Europe,” Creedon explains, “and whilst economic growth has remained significantly slower across Europe, any improvement in the economic backdrop still has the potential to rejuvenate the European hotel sector and encourage further investment in 2015. International private equity buyers have taken advantage of low interest rates and a strong upturn in sentiment. However, despite both a good number of portfolios and single assets having completed, we believe there are still opportunities to be had.”

This appetite is not without its risks, Creedon advises:

“A lack of economic growth across the Eurozone along with global geopolitical issues and challenges are all concerns. That said, we are likely to see yield compression as a lack of new product and high demand will continue to underpin investment appetite.”

Key highlights for iNua Hospitality in 2014

In January 2014, iNua Hospitality made its first acquisition, purchasing the Radisson BLU Hotel and Spa in Little Island, Cork. With a guide price of €8 million following an original valuation of €37 million in 2005, this sale represented excellent investor value while importantly securing the future of the Cork hotel and its 150-strong staff. The hotel is reporting a RevPAR increase of over 14 per cent for 2014. In June, iNua Hospitality bought the Radisson BLU Hotel & Spa on Limerick’s Ennis Road for €3.5million. Early reports show that the hotel performed in line with forecasts for the critical summer months since acquisition in June. The hotel is reporting a four per cent year-to-date RevPAR increase with a significant further increase expected following an investment in the refurbishment of the hotel, due for completion by March 2015. Among the enhancements to the property are renovation of the 154 guestrooms rooms, a rejuvenated Bridal Suite, redecorated meeting rooms, a revamping of the Porter’s Restaurant and a significant uplift to the ballroom, lounge and lobby areas.