From an economic perspective the outlook for the Galway hotel sector remains positive. The latest Irish labour market data show all-time high employment of 2.71 million across the economy while average weekly earnings grew by 4.6 per cent compared to the same period in 2022, both of which supports the outlook for leisure spending in the county.
Tourism trends also continue to look positive. Real estate experts, Cushman & Wakefield, estimate that on a twelve-month rolling basis inbound passenger arrivals into Ireland surpassed pre-COVID levels in the final quarter of 2023.
Furthermore, Oxford Economics’ latest forecasts for international visits into Ireland continue to point to sustained growth, with increases of 5 per cent and 7 per cent respectively expected for 2024 and 2025, with the weakness of the euro versus the US dollar continuing to help US tourist numbers in particular. Occupancy and RevPAR (Revenue Per Available Room ) data for the hotel sector edged higher in the second half of 2023, reflecting the positive macro and tourism picture, as seen in the graph compiled by Cushman & Wakefield, that visually outlines Galway's hotel revenue for the last two years.
No significant fallout following the restoration of 13.5 per cent VAT rate
Over the past twelve months Galway hotel occupancy averaged over 80 per cent, a very strong result. Furthermore, the latest occupancy data also suggest that we haven’t seen any significant fallout as a result of the restoration of the 13.5 per cent VAT rate last September. The sector still faces cost challenges, however energy cost pressures began to ease somewhat in the second half of 2023 and Cushman & Wakefield expect this to continue in 2024 which should provide the sector with some cost respite.
From a Galway perspective, in terms of planned hotel developments in the county the most significant hotel project is the 175-room hotel currently under construction as part of the Crown Square development on Monivea Road. There are also a number of hotels beds in the pipeline, and Cushman & Wakefield anticipates delivery in the short to medium term.
Use of hotel rooms for alternative accommodation
Another factor across the broader hotel sector in Ireland is the use of hotel rooms for alternative accommodation purposes. Cushman & Wakefield expect many of these rooms to remain in alternative use for the time being although the Galway market has not been as impacted by this factor as some other counties on the western seaboard.
Investor interest expected to grow
Finally, investor demand for hotels has strengthened over the past year with a total of €307 million worth of transactions taking place in 2023, the sale of the Maldron Hotel in Oranmore for €13 million representing the most notable deal in a Galway context. With the economic outlook and trading backdrop for the sector remaining positive, we expect investor interest to grow further in 2024.
Linda Boyle of Cushman & Wakefield Galway said, “The outlook for hotel sector is optimistic, with record employment, growing international visits, and increasing Occupancy and RevPAR levels; however rising operational costs continue to be a concern. There is strong interest for Galway city hotel locations from both national and international occupiers, however there have been relatively limited opportunities in the market in recent years.”
