Wednesday, December 6, 2023

Hotel sector grows modestly in October, but only outside Dublin

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Occupancy and room rates in Irish hotels rose modestly in October, but all of the growth was based outside Dublin, according to data from hospitality analyst CoStar.

The occupancy rate across the Republic was 81.4 per cent, which was up 1.3 per cent on the same period last year. The average daily room rate was €162.10, which represented an increase of 1.5 per cent on last year.

Revenue per available room, which is a performance indicator calculated by multiplying a hotel’s average daily room rate by its occupancy rate, stood at €131.90, which was up 2.8 per cent on 12 months earlier.

Within the capital, all the performance indicators were negative year-on-year. Occupancy was down 0.4 per cent to 86.5 per cent, while the average room rate was down 0.1 per cent to €172.60. Revenue per available room was down 0.5 per cent to €149.29.

By way of comparison, occupancy levels were down 0.2 per cent in Britain and 2.5 per cent in Northern Ireland. There was pronounced growth in room rates however, which rose 4.1 per cent in Britain and 8.5 per cent north of the Border.

Goodbody analyst Dudley Shanley noted that growth in revenue per available room continued in the UK and regional Ireland during October, but pointed out the pace of growth on a year-on-year basis “is slowing”.

“Revenue per available room in regional Ireland, which represents about 17 per cent of rooms, was up 6.1 per cent year-on-year at €109.54,” he added.

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Following the last trading update from Dalata – the largest hotel operator in the State – Goodbody said it expected the company to grow its revenue by 9.5 per cent in 2023.

It said the forecast was driven by projected growth in revenue per available room of about 13 per cent in Dublin; 14 per cent in regional Ireland; and 12 per cent in the UK.

Off the back of the latest data from CoStar, Mr Shanley said Dalata “remains well on track” to “at least” meet those projections.

It is also on course to meet its projected full year adjusted earnings before interest, taxes, depreciation, and amortisation of €216 million, which would represent an increase of 18 per cent on last year.

Mr Shanley said Goodbody estimates the company’s adjusted return on capital employed – which is a measure how good a business is at generating profits from capital – is over 9 per cent and “heading towards 10 per cent”.

“Based on the returns profile, the experienced management team, the strength of the business in Ireland, the growth opportunity on offer in the UK and Europe, the free cash-flow generation and the conservative balance sheet position, we believe that Dalata Hotel Group should at least trade at net asset value,” Mr Shanley said.

Goodbody’s share price target is €6, which suggests a 43 per cent upside from the current level.

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