Since the financial crisis, the Irish hospitality sector has experienced a challenging trading environment as a result of reduced demand due to the economic downturn and the legacy of excessive debt. The sector was also negatively impacted by an oversupply of hotels in the market due to attractive tax breaks offered on hotel developments. A large number of hotels were transferred to financial institutions or placed in receivership and require essential investment in order to preserve and, more importantly, develop business. However, the above institutions are often disinclined to advance funds to meet these requirements. This negatively impacts trading, which reduces values and leads to assets being realised at heavily discounted prices.
The key value driver is that hotels are now valued on an enterprise basis rather than an asset basis and have become available to investors for purchase as a result of ongoing deleveraging. Significant signs of continuing economic recovery are being witnessed in the Irish hospitality & leisure market.