There are some interesting findings in CBRE’s latest European research into the hotel market, and certainly grounds for optimism for the sector across the continent.
The standout statistic from the research published this month was that two-thirds of Europe’s hotel investors intend to increase their spending in 2024, while more than two-thirds of investors aim to increase their hotel allocations this year based upon the rising tourism rates and stabilising interest rates that are boosting investor confidence.
In light of this research, it is perhaps a good time to reflect on how the Northern Ireland hotel market has performed over the past decade, and assess whether this renewed European-wide confidence will be mirrored in the region’s hotel sector.
Historically, as we look back at Belfast in 2013/14, there were approximately 3,200 hotel beds. This was boosted then by the opening of the Etap Hotel, Bullitt Hotel, Titanic Hotel and the major extension to Ten Square, as well as the Maldron and AC Hotel in City Quays opening in April 2018.
Supply was further boosted by The Grand Central Hotel, Hampton by Hilton, Holiday Inn Express and extension to the Crowne Plaza in June 2018, bringing the room numbers to just under 5,000. Further extensions to some of the city centre hotels and the completion of Room2 in Queen Street means the current number of hotel beds available in the city is sitting at just over 5,100.
There is currently planning granted and submitted for a further 1,500 rooms approximately, although only 248 are currently on site and in the construction process. Up to 228 rooms are being provided in Titanic Quarter by Mariott Aloft and Marriott Residence Inn brands, with a further 20 boutique rooms being supplied by Ducales in Hill Street, Cathedral Quarter. The boutique hotel will be open by this summer whilst the Marriott brands will welcome guests before the end of 2025.
Whilst there is continued interest in the North West region ahead of The Open Championship being staged at Royal Portrush Golf Club again in 2025, Belfast seems to be following the European trend identified by the CBRE research of the central business district being the most attractive area for hotel developers.
These city centre areas were initially less favoured in the immediate aftermath of the Covid-19 pandemic when out-of-town leisure and resort assets appeared to be in the highest demand. Now, however, investors are recognising the long-term demand fundamentals of Europe’s gateway cities with 86% of respondents viewing them as attractive investment prospects.
The survey also underscores a clear preference amongst investors for luxury and upper upscale hotel segments with a majority of investors viewing them as the most attractive. This inclination towards luxury hotels is supported by the robust operating performance of these establishments in key European markets, where luxury hotels rebounded swiftly after Covid and have also outperformed the overall market, buoyed by a strong, pent-up demand.
Luxury hotels have demonstrated resilience in the face of high inflation rates and have therefore effectively positioned themselves as a hedge against inflation.
Belfast does not yet rate in the top 10 hotel destinations in Europe, which includes London and Dublin as well as cities in Spain, France and Italy. In our view, however, with the correct investment, Belfast can move up that list.
We anticipate continued interest in hospitality generally in Northern Ireland, although there is still a major challenge in the form of increased borrowing costs and the rising cost of capital.
This is without doubt the primary challenge to the sector, with the Northern Ireland Investment Fund, managed by CBRE Capital Advisors, being required to step in and provide construction finance for both the recently-completed Room2 and the under-construction Marriotts in Titanic Quarter.
The CBRE research also identifies the cost of renovating current structures into hotels as being challenging, and this is amplified in Belfast where there may be difficulties in providing water and the other increased amenities necessary to turn previous office buildings into hospitality use.
Looking forward, though, with the continued confidence in demand, it is hoped that the financing gap in Belfast can be solved and the city can continue to attract tourism and business travel on a large scale.