Will Dublin’s Hotel Market Be Shaken Or Stirred By The Arrival Of The Hoxton?
Boutique hotel brand The Hoxton is one of the most exciting new names to appear on the Dublin hospitality scene in the past decade, yet before the first martini can be poured, the city’s hotel market stands at a crossroads.
Several international operators are circling the capital seeking lifestyle luxury opportunities amid a slowing development pipeline, but soaring costs, high inflation and long-term staff shortages continue to dog the industry.
Going into 2022, the hotel market had been in full post-pandemic recovery.
Property agent Colliers pointed to a record 10.8 million overseas and out-of-state visitors to Ireland in 2019, while domestic trips surpassed 11.6 million, with combined revenues reaching more than €9.5B according to Fáilte Ireland. And 2022 had enjoyed the results of pent-up demand, with hotel earnings further boosted by delayed weddings.
Now the question is whether The Hoxton will be a catalyst for wider regeneration or the last headline operator to target Dublin until macroeconomic concerns allay.
Dublin’s current offer is broadly split between traditional luxury and mainstream volume hotels and there have been plenty of would-be new entrants scouring the city for new sites. Certainly, The Hoxton is not the only game in town.
Strong Hotel Investment
Hotel investment activity began to recover from the pandemic during 2021 with the successful sale of several prominent hotels including the Hilton Garden Inn to Henderson Park as part of a larger Hilton portfolio, and the €65M sale of the Morrison Hotel, Dublin 2, to Zetland Capital.
Overall, 18 hotels transacted during 2021, according to Colliers, with total sales of approximately €400M. In 2022 several hotels have changed hands, including the €35M Hendrick Hotel, Smithfield to TPG; Killashee House Hotel in Kildare to FBD Hotels for €25M; and Ballymascanlon House Hotel in County Louth for €15M to Thomas Röggla/TMR Hotel Collection.
New operators are also progressing in Dublin. Preparatory work has already started near St Patrick’s Cathedral for a 247-bedroom CitizenM, while in the city’s fruit markets district work has begun on The Ruby Molly, the first Irish property from Ruby Hotels, which is promising to bring its ‘lean luxury’ hospitality to the city in 2023.
“Many buyers are particularly focused and excited by hotel opportunities that offer value-add potential,” Colliers Residential Country Homes & Leisure Director Marcus Magnier said of current priorities.
More opportunities are also opening up. The departure of AIB from its Lower Baggot Street premises has cleared the way for the potential development of a boutique hotel or bar and restaurant and it is being offered to the lettings market by agent CBRE on behalf of the MHL Hotel Collection, owner of the adjacent five-star Westin Hotel.
Having failed to secure a buyer at a guide price of €12M in October 2021, a site with full planning permission for a boutique hotel next to the Vicar Street music venue in The Liberties is back on the market at €10M. Planning covers a 185-bedroom hotel with a rooftop bar and restaurant with outdoor terrace in Dublin 8.
The owner of Dublin city pub The Temple Bar has bought the adjacent Temple Bar Lane boutique hotel for reportedly just over the €11M price Irish real estate and development group MM Capital had been seeking when it placed the property for sale through JLL in February.
Meanwhile, budget brand Point A opened its first Irish hotel on Parnell Street at the start of the year, and German chain Motel One plans to open a 310-bed hotel on Abbey Street by the end of 2022.
Savills said aparthotels are also set to grow from 3.8% of the city’s hotel stock in January to 6.8% by the end of December, with close to 2,500 new hotel rooms to open across the city this year, though several projects in edgier areas such as The Liberties may be in doubt, as some international funders cool their enthusiasm.
The Hoxton Comes To Dublin
The biggest news is the deal by European private equity giant Deutsche Finance International and property investor BCP Capital to sign an agreement with Ennismore for Ireland’s first Hoxton Hotel, a 129-room venue to be located on the site of the Central Hotel on Exchequer Street, opening in 2024.
Hoxton already operates across several locations in London, Europe and the U.S., with further openings planned for Brussels, Amsterdam, Edinburgh, Berlin and Vienna.
In Dublin, plans for the refurbishment and expansion of the Central Hotel and neighbouring buildings will restore the hotel and its well-known Library Bar as part of the redevelopment, financed with a loan from a fund managed by an affiliate of Apollo Global Management. There will be a significant increase in the footprint of the existing bar, night venue and restaurant space.
“We fell in love with the product and the location of Central Hotel," Deutche Finance International Managing Director Paul Nearchou said. "It was a landmark statement building in one of the more vibrant locations within Dublin. And the plan there was to add value through refurbishment and extension as a boutique lifestyle hotel. We saw a gap between luxury and five star and the more affordable three to four star."
Dublin has been evolving as a creative location, but it didn't have this product, Nearchou said. "And that's what inspired us to buy the hotel and basically try to create this amazing ground-floor space, which we're going to do with multiple F&B outlets, and bringing back the Library Bar."
Covid also changed the partners’ thinking. Originally they were going to develop the offer themselves but, following the pandemic, the companies decided to “de-risk that operational component” and partner with The Hoxton.
“What appealed to us about Hoxton was obviously the strength of its brand, and a loyal customer base, both in the UK. but also growing within Europe and the U.S. as well. We believe in the long-term fundamentals of the Irish hotel market and we thought it'd be a great way to capture both Europe and the UK but also U.S. tourism, which is important for Ireland,” Nearchou said.
The developers have bought some of the retail units on the ground floor to create the hospitality area, designed both for the existing base of customers and Dublin locals.
In terms of the future, Nearchou believes there will be some “short-term noise and uncertainty” in the market, and predicted there is going to be some pulling back from the proposed hotel pipeline.
“We see that as an opportunity, we are continually looking at opportunities to acquire or reposition hotels within Dublin,” he said.
Broadening The Hotel Offer
Operators such as The Hoxton have thrived through combining venues where people stay, dine, drink and work in the communal areas and the company is confident that its offer is a good fit for Dublin.
“We’re always on the lookout for neighbourhoods where we can bring something to the table, within cities and communities that inspire us," The Hoxton Chief Operating Officer Rob Andrews said. "Dublin has been on our radar for a while with its rich cultural legacy, unique creative attitude and iconic nightlife scene — in short it felt the perfect fit.”
The group will be collaborating with creatives, artists, musicians and designers from the surrounding neighbourhoods to create “inclusive cultural partnerships and events for both guests and locals”.
“We will have the open-door lobby, fun and original restaurants and bars, and our very first nightlife venue. Our approach to hospitality is that of an ecosystem, whereby everything under our roof supports each other,” Andrews said.
“One thing that tends to stand out is that, for many, ‘luxury’ is not defined by the material but by the experiential — guests are looking for genuine engagement and an authentic sense of community,” he added.
The Hoxton announcement has come at a time when Dublin’s strong economic growth could be cooled by global chills, especially as a number of the digital media giants look to shed staff.
“Even though there is talk about redundancies in the tech sector, it’s worth remembering that many of the new offices in the pipeline have not opened yet, so it’s very possible that the demand will continue to grow. Hotel room rates and high occupancy levels have reflected that,” CBRE Hotels Senior Director Dave Murray said.
“However, right now there are conflicting issues. Undoubtedly international groups are seeing the opportunities, especially that gap between five star and volume hotel offers. And food and beverage is especially strong in those types of venue, if they can attract city residents,” he added.
While Ireland may steer clear of the recession forecast to impact the UK, Murray reflected that inflation, energy costs and staff shortages will be an issue for Dublin hoteliers. Indeed, rocketing energy bills plus a damaging staffing crisis are forcing many hotels to rethink their strategies, with an estimated shortfall of chefs nationally of between 7,000 to 8,000.
IHF Warns Over Staff Shortages
The Irish Hotels Federation recently warned the cost of electricity for many hotels is up 400% since before the pandemic, and 300% on gas. It also said laundry costs were up almost 30% in the past year, while food and drink costs are up 22% and 12%, respectively.
Regardless of demand, those challenges will remain. However, Cushman & Wakefield Partner, EMEA Hospitality, Ed Fitch said the fact that Dublin attracts both business and leisure visitors will protect it from the worst of more general downturns.
“Dublin is a U.S.-facing city in terms of its attraction to the American market and the fact is that even if visitors are travelling elsewhere, they will need to spend at least the first and last night in Dublin, as it’s the gateway to Ireland,” he said.
Fitch said that the strength of the office market in Dublin and a relatively modest hotel pipeline, plus the city’s leisure appeal, will continue to underpin the market and will see hoteliers move beyond the D2 and D4 postcodes to find alternative “zone of viability” city centre locations.
“Dublin is a relatively small city by major European standards and land is at a premium and the hotel sector is still quite dominated by independents," he said. "Even the building The Hoxton is taking is small by their standards, so you can see that the city has enough allure to attract operators even if they have to make compromises to their usual requirements. And for other international operators, the same may well be the case."