Dalata is the big beast in the Irish hotel trade. It floated on the stock exchange ten years ago, has 53 hotels across Ireland, the UK and continental Europe, and recorded more than €600 million in revenue last year.

It has access to a deep reservoir of capital and can etch out the sort of cost efficiencies that most hotel operators can only dream of.

Dermot Crowley has led the business for three years but has been instrumental in its development for much longer. He was the obvious choice to succeed Pat McCann as chief executive, and like, McCann, he has articulate views on the trends within the Irish hospitality and hotel industry.

I caught up with Crowley while researching a feature on the sector. Days before we spoke, the five-star Shelbourne Hotel in Dublin had just been sold for €260 million. Days later, the Mount Juliet hotel and golf resort in Co Kilkenny and the Slieve Russell hotel in Co Cavan were put on the market. The former is expected to fetch €45 million, while the latter is on the market for €35 million.

Last year, the value of hotel properties changing hands in Ireland reached €350 million, down on previous years. This year, according to CBRE, the figure will top €1 billion, a number not seen since the days of the Celtic Tiger.

When we spoke, I was keen to ask Crowley what had changed. 

His answer was informative. When he started in the hotel trade, investors preferred commercial property, retail property and residential property investments. Now, the commercial market is stressed and retail property is under pressure. Hospitality has moved up the value chain. 

“It is a more acceptable asset class,” he told me. 

And he is not wrong, judging by the valuations being achieved by premium hotels such as the Shelbourne.

But the more you delve, the more you realise that the situation is much more complicated. 

Yes, valuations for hotels at the top of the market are surging. But, around the country, hoteliers are dealing with a decline in room rates and occupancy. Revenue per room, even in Dalata, is down in the first four months of the year. Many rural hoteliers have simply decided to give up, and have handed over the keys to the state to use their properties for emergency accommodation. Some 12 to 13 per cent of hotel beds are now being used for emergency accommodation. But in places like Clare, the figure is much higher at 33 per cent. 

“Many hoteliers are facing a crunch and this is a much more simplistic option than continuing to trade as normal. They are tired of keeping the show on the road, and that struggle has taken its toll,” Elaine Fitzgerald Kane, a hotelier and chair of the Irish Tourism Industry Confederation told me last week. “Some have simply had enough.”

According to Fitzgerald Kane, the increase in costs is outpacing that of revenues. “The cost of doing business is higher. People need to be paid properly. But the costs are going up ahead of the market. Vat. Labour costs. Pension auto-enrollment. The list goes on,” Fitzgerald Kane says. 

“And it is hard to push up prices because prices are at a threshold. If they go higher, people will question the value. It is a difficult place and there are issues around the sustainability of the sector.”

The hotel industry is a microcosm of the twin-track nature of the wider economy. We know that the public finances are booming. Yet, people are simply not feeling it. 

Take a look at the latest numbers issued by the Department of Finance. The government is forecasting a budget surplus of €8.6 billion this year and cumulative surpluses of €38 billion over the next four years on the back of windfall corporate tax receipts.

The projected budget surplus of €8.6 billion is equivalent to 2.8 per cent of national income and follows a surplus of €8.3 billion last year.

And yet, without windfall corporation tax receipts, the country would be running deficits (how long we can classify taxes from multinationals routing intellectual property through Ireland as windfall is for another day).  

Without those bumper payments from two or three multinationals, Ireland would be spending more than it is earning. 

The actual performance of the real economy is effectively being masked by the overperformance of Apple and Intel. 

Inflation has been brought under control. But prices of essential services such as heating and rent have increased far beyond wages. People are earning more money, but less is available for disposable spending, on items such as hotels.

This was something Dermot Crowley of Dalata had strong views about. He has real concerns for some smaller hospitality operators, particularly bars and restaurants outside of the main cities. Crowley fears many of those local players are being hit by rising costs and an erosion of margins.

Plus, he also suspects there is an issue around narrative. The way Crowley sees it, people look at the headlines about so-called price gouging by hoteliers during big-ticket events and assume prices are inflated throughout the year. 

“Prices go up and back down. People see the headlines about prices during a big event and they don’t look at the prices the rest of the time. The narrative is framed by headlines. But you can get value. The average room rate is much cheaper than people think,” Crowley says.

The message, however, is struggling to get through.

The hotel industry is a microcosm of the wider economy. At first glance, it seems to be thriving. However, the more you peel it back, the more vulnerabilities emerge. 

*****

Elsewhere last week, Tom spoke with the co-founder Eoin Hinchy. Tines has tripled its revenues since mid-2022 and is now working with some of the world’s biggest companies including Mars, Snowflake and Canva. But, fresh from raising a further $50 million, Hinchy explained why it is only starting.

International law firms poured into Ireland post-Brexit with different ambitions and agendas. For the biggest players like DLA Piper and Dentons, Dublin was another step in a growing global footprint targeting multinational clients. Others like Hogan Lovells and Bird & Bird saw room for more niche plays putting down markers in the regulatory and technology spaces respectively. Francesca looked at how they are building their teams. 

Last month, the Belfry Redress Group wrote to the Central Bank asking why some investors were refunded and others not. Now, the Central Bank wants to know more. Tom had the story.