Costs curb hotel profit growth in Irish Republic

Rising costs have curbed profits growth among hotels in the Irish Republic despite soaring sales, claims the latest market survey by consultant ASM Horwarth.

Total revenue per room in 2005 grew by 10.5% to €57,640 (£39,985) and profit before tax per room increased by 9.7% to €10,238 (£7,102).

But spiralling wage and utility bills reduced profit as a percentage of sales to 17.8%, slightly down from the 17.9% recorded in 2004.

Dublin was the most profitable area, with average profits and room rates respectively 200% and 150% higher than in the weaker Western Seaboard region.

Mid-priced, three-star hotels (which represent nearly 40% of the Republic’s stock) outperformed other sectors. Although urban luxury hotels did well, those in rural locations saw a slide in profitability.

Bedroom numbers in the Republic have soared from 26,400 in 1996 to 45,640 in 2005, which saw 1,000 added to the total tally.

Nevertheless, hoteliers have managed to hold occupancy levels to 68.9% in 2005, which is just 0.1 percentage point below 1996 and 2.9 percentage points ahead of 2004.

Although up to 9,500 bedrooms are scheduled to come on stream by 2008, the report suspects that the property boom may sideline up to 3,000 of them for alternative use.

It forecasts that 2006 will prove to be “one of the most active and competitive years in the history of the Irish hotel industry” thanks to the Ryder Cup golf championship, which will be hosted by the K Club at Straffan, County Kildare.

By Angela Frewin

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