Horwath Bastow Charleton Survey Reveals Stellar Year for Hotel Industry in Ireland and Predicts Continued Growth Towards 2012

Horwath Bastow Charleton, one of Ireland's leading Chartered Accountancy and Business Advisory practices, specialising in the hospitality industry, today announced the results of the annual Ireland and Northern Ireland Hotel Industry Survey. The results have shown another robust revenue performance by the Irish hotel industry during 2006, with 5,500 new hotel rooms being added to the market. Hotels in Dublin continue to break records and results of the survey have shown that hotels in the capital have reached an all time occupancy high of 76.8%. While the overall news for the hotel industry is good a sharp rise in operational costs has however resulted in a decline in profitability for the sector.

“The greater pace of cost increases over revenue growth in recent years has negated the ability of hotels to translate revenue to profit,” said Aiden Murphy, Partner, Horwath Bastow Charleton. “Hotel valuation will, like any other business be based on earnings ability and with operational costs including utilities and payroll on the increase the challenge facing hotel owners going forward will be to maintain profit growth to enhance the value of their hotel asset.”

While profitability has declined in 2006, the performance of the sector has been robust. Even with the introduction of 5,500 new hotel rooms in Ireland demand for hotel accommodation continues to increase year on year with occupancy levels reaching 69.8% in 2006.

Continued Murphy: “Strong economic performance and the continued success in attracting overseas visitors to Ireland has generated more hotel room demand and we foresee that this success will continue. Similarly the advent of open skies could bring an additional 1million US visitors to Ireland which will be a major boost to the hotel sector.”

Star Performers:

· The Dublin hotel market remains well ahead of all regions in terms of overall performance. Occupancy levels have reached a record high of 76.8%. Dublin hotels earned on average €5.43 extra for every room sold in 2006 bringing the average room rate for Dublin to hotels to €120.38 (net of VAT) or €136.63 gross. September 2006, saw occupancy levels reach 87.1% .

· Mid-Price hotels with profit before tax of 19.3% mid-price hotels are the most profitable hotel grade in the country. Occupancy levels for mid-price hotels are highest in traditional domestic holiday month of August (85.7%), proving to be the most popular hotel grade for the domestic holiday market.

· The luxury market has excelled in 2006 with room occupancy increasing to 70.7% (compared to 66.4% in 2005.), reaching a peak level of 82.2% during the month of September and at the height of the Ryder Cup. Average room-rates for the month of September reached their highest levels ever at €200.93, up 19% year on year. Results also reveal that 40% of the luxury market is domestic, demonstrating that Irish consumers are spending more on luxury breaks than ever before. The domestic market accounted for 26.3% of the luxury market in 2001.

· The busy Christmas period is now identified as an important month within the low season with shopping trips, Christmas Parties and weddings identified as key activities. Whilst December remains a low period for occupancy rates, the average room rate achieved is the fifth highest for the year, indicating that destination led demand allows for higher tariffs to be charged and a greater profit per room to be achieved.

· The Midland & East region does not exhibit the same level of seasonality trends as the South West and Western regions and continues to perform consistently across the year. Mini-break activity by the domestic market has contributed to average occupancy levels of 63.1%.

While the overall performance of the hotel industry in Ireland is robust the Western Seaboard continues to struggle and is not performing in line with other regions. Average room rates remain the lowest and whilst occupancy has increased year on year, profitability continues to decline.

Said Murphy: “Improved access and continued investment in the infrastructure of the western seaboard is essential for this region to grow. Year on year, the west remains the least profitable of all regions and average room rates continue to lag behind those of its counterparts. It is essential therefore that government supported tourism marketing and product development continues in this region.”

Positive Outlook

According to Horwath Bastow Charleton the demand for hotel rooms in Ireland will continue to increase and with a slowing of new supply of hotel rooms coming on stream the opportunities for reasonable and sustainable revenue growth will exist.
The arrival of the National Conference Centre will be a major boost to the hotel sector in Ireland, with visitor numbers of approximately 567,000 per annum expected by 2012. Coupled with this new target, the change in government policy regarding VAT for conference business will have a positive affect in attracting the key business tourist to Ireland.

“VAT changes will reduce costs for delegates and increase Ireland’s competitiveness in this growing sector,” said Murphy. “Business tourism is a high yielding sector and represents a major opportunity in potential growth. “

The National Conference Centre will further boost the ability of Dublin hotels to attract business/meeting related markets. Studies have shown that over 30% of an international association attending a 3 day conference in Ireland will stay on as tourists either pre or post conference. Therefore the international bias of conference delegates to host events at the National Conference Centre will have a positive ripple effect on hotels in Dublin and throughout the entire country.

Continued Expansion

Where opportunities exist for hotels to increase their room count it can have a dramatic effect on profit levels and Horwath Bastow Charelton predict that the hotel sector is likely to see many properties expand and add bedroom blocks in order to achieve a higher return and increase profitability.

Said Aiden Murphy, Partner Horwath Bastow Charleton: “We encourage hotels to explore opportunities to expand their room capacity in order to achieve maximum profitability levels. By researching areas to expand and by putting in the place the groundwork for development, including planning permission, hotel owners can immediately add to the value of their property.
1-49 50-99 100+
Rooms Sales Mix (%) 28.3 35.4 46.5
Profit Before Tax (%) 13.6 14.5 19.7

The Internet

The results of the survey have also shown that use of the Internet as an advance booking tool has increased circa 10% over the last 2 years.

Advance Reservations (%)
2003 2004 2005 2006
Internet 13.6 16.4 20.8 25.6


Said Murphy: “The substantial increase in Internet usage as a booking tool by consumers places an onus on hotels to focus on search engine and web site optimisation. In an era of increasing operational costs, the Internet also offers hotels a low cost alternative to other traditional marketing channels.”

The Horwath Bastow Charleton Ireland and Northern Ireland Hotel Industry Survey is carried out on an annual basis. Information contained in this report is drawn from the financial year ending 2006. Leading hotels throughout the island of Ireland are surveyed on a number of topics including: room occupancy average; average daily room rate; revenue per room and profit before tax per available room.

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About Horwath Bastow Charleton

Horwath Bastow Charleton is one of Ireland's leading Chartered Accountancy and Business Advisory practices. Horwath Bastow Charleton is the representative firm in Ireland of Horwath International, a worldwide group of independent accountancy firms with over 400 offices in 370 cities and 16,000 staff.

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For further information / copies of the full survey please contact:
Deirdre McNamara
Direction@JWT PR
01 6765678 / 087 2391199 deirdre.mcnamara@direction.jwt.ie