Dublin or quit?

The numbers in Dublin's economic equation don't quite add up. For tourism, things have never been better. Visitor numbers to the city in 1999 were 4.4 million, up by a staggering 42% from 1998. And the economy is booming - but that's the problem. The punt's weakness relative to the US dollar and sterling may be fuelling the growth, but inflation is now at its highest for 15 years. At the end of September, Ireland's central bank warned that the economy was vulnerable to a recession.

Against this backdrop, several international hotel chains are putting the finishing touches to their Dublin hotels. Are they opening their doors at the peak of the wave? And if the crash comes, who will survive it?

The Dublin market is no longer the preserve of independent operators and Jurys Doyle that it has been. "Hotels in Dublin have had it quite lucky. Competition will definitely intensify," says Meenaz Lilani, sales and marketing director, UK and Ireland, for Westin. Despite the competition, she predicts that the company's Dublin hotel, which is to open next spring, will achieve 65-70% occupancy in its first year.

Of the international brands, the 191-bedroom Conrad International was one of the first to open in Dublin in October 1989. Last August, Radisson SAS opened its 151-bedroom hotel. And in January, Clarion, the four-star brand of Choice International, will open as part of the International Financial Services Centre on the north side of the River Liffey. This will give Friendly, which holds the franchise for the Choice brands in Europe, its seventh hotel in Dublin, the others being another Clarion, four Quality hotels and a Comfort Inn.

A Four Seasons project that had been delayed is now under way and the group is aiming for a February ribbon ceremony at its 259-bedroom property in the Royal Dublin Society show grounds in the Ballsbridge area. And opposite Trinity College in central Dublin, Westin's 163-bedroom hotel will be ready for business by early April 2001. There are a further five hotels of three- and four-star level due to open by the middle of next year, offering another 468 bedrooms.

And there is little sign of hotel fever abating. Houston Investments, spearheaded by hotelier Peter Stephenson and property developer Paddy Kelly, has invested IR£18m (£14.28m) in two hotel developments with the intention of offering the management contracts to international brands.

Until now, Dublin's market has been largely served by Irish group Jurys Doyle and independent hotels, such as upmarket boutique hotels the Clarence, the Morrison and the Shelbourne. "Jurys Doyle has had a very big presence, but the big international brands are now coming in," says Peter Cashman, chief operating officer of Choice hotels. "It is a sign of a city maturing, and Dublin needs the big brands to bring it credibility."

Christina Deeny, sales and marketing director at the Merrion, concurs. "We are really excited about Four Seasons opening," she says. "It will give a mark of quality to the city and we look forward to it."

Dublin's growth and development from a city with hospitable people and a good "craic" into a short-break holiday Mecca has been relatively rapid.

Until 1997, visitor levels to the city were growing by 200,000 per year. In 1998, that figure doubled and, in 1999, an additional 1.3 million visitors came to the city. The strength of the US dollar and the sterling pound relative to the Irish punt make Ireland, and Dublin in particular, an attractive holiday destination.

At the Merrion, Deeny estimates that 50% of its guests over the summer came from the USA, with 25-30% coming from the UK and a further 20% from Europe.

But the Irish economy will have a bearing on the situation. Inflation climbed to 6.2% in July, with Irish analysts warning that it could reach 7% and would certainly average 5.25% this year.

As part of the European Union, and being tied to the euro, Ireland can do little about its woefully inadequate 4.25% interest rate. That rate favours the slow growth of France and Germany but it is doing little to dampen the flames of the Irish fire. Warnings of recession hit the headlines in the summer.

But Peter Cashman, chief operating officer at Choice Hotels, believes the economy is merely catching up. "It is overheating at the moment, and there will be a correction - when that will be is the question," he says. "But the economy was much slower than the rest of Europe; now we're catching up."

Key to the belief that the economy is sustainable is the understanding that its base has fundamentally changed. "The Irish economy has moved from an agricultural- and local industry-based economy to an internationally oriented, hi-tech economic base. Ireland is no longer just leisure-based," says John Brennan, general manager of the Four Seasons hotel.

Deborah Griffith, director at Arthur Andersen, agrees with this analysis and expects a slowing down of the economy rather than a crash. "It is a tough one to predict," she says, "especially since some of the hotels are not coming on line as quickly as we expected."

At the moment, life is pretty fine for hotels in Dublin, according to Arthur Andersen's benchmark survey. While occupancy has changed little in the first six months of 2000, compared with 1999 (from 76% to 77%), the average achieved room rate is up by IR£12 (£9.52) to IR£86 (£68.25). And with the likes of Four Seasons charging IR£300 (£238.09) for a double, this will certainly rise again next year.

It bodes well for the new operators going into the market but, in the event of a downturn, who will suffer?

"The focus is on where you get the business," says Jacqui Sandford, director of sales and marketing at Radisson SAS. "If the economy changes, then smaller, independent operators will find it difficult to sustain market share. They do not have the GDS systems that we have."

Westin's Lilani agrees. "We can't underestimate the loyalty the independent hotels have built up, especially in the USA," she says, "but the brand strength is in the worldwide sales and marketing, revenue management and loyalty programmes - like Starwood's Preferred Guest, which has five million members."

So do the independents think that they'll suffer in the event of a slump? "We have established our name in Dublin," says Deeny at the Merrion, "and, as part of Leading Hotels of the World, we may not be a brand but we are part of an upscale, de luxe family." In the past year, 15-20% of the hotel's reservations came through Leading Hotels.

But there is still a cloud on the horizon - a serious skills shortage. Rumours are that staff are being paid wages equivalent to those in London hotels, and the new hotels are looking for creative solutions. Radisson SAS has acquired visas for 10 staff from its Beijing hotel to work in Ireland. "They want experience in Europe to improve their communication skills and they already have a commitment to the brand," says Sandford.

At Four Seasons, 60 of the 300 staff have transferred from the brand's other hotels worldwide - all are Irish or of Irish descent.

At Westin, Lilani is hoping the company's training schemes and international name will help attract staff. "We want to achieve that Irish charm in our front-line customer-serving employees," she says. "Our guests expect that Irish welcome."

The competition Lilani spoke of is certainly present in Dublin, but it seems that it is the competition for quality staff, rather than guests, that will determine the real success stories of the Irish capital.

FACTS:

Ireland

Population: 4 million

Interest rate: 4.5%

Inflation rate, as in July 2000: 6.2%

Minimum wage: IR£4.40 (£3.49)/hour

Dublin

Year Visitors Total overseas

visitor spend

1999 4.4 million IR£577m

1998 3.1 million IR£525m

1997 2.7 million IR£474m

1996 2.5 million IR£440m

1995 2.3 million IR£418m

Visitors by origin, 1999: UK, 1,638,000; Europe, 775,000; North America, 566,000

Average length of stay: 4.7 nights

Tourism jobs contributing to Irish economy: 30,994 (1998)

DUBLIN'S HOTEL TRADING FIGURES

January-July 2000

Occupancy: 77.3%

Average achieved rate: IR£86 (£68.25)

Room yield: IR£66.49 (£52.76)

January-July 1999

Occupancy: 76.7%

Average achieved rate: IR£74.43 (£59.07)

Room yield: IR£57.06 (£45.28)

January-December 1999

Occupancy: 76%

Average achieved rate: IR£77.35 (£61.38)

Room yield: IR£58.78 (£46.65)

Source: Arthur Andersen hotel benchmark survey

Source: Caterer & Hotelkeeper magazine, 19-25 October 2000