Have Irish hotel sale prices peaked with the Shelbourne’s €92 million profit?

Shareholders in Kennedy Wilson must have been delighted to learn last week that the California-based real estate company had made a $99 million (€92 million) profit on its decade-long investment in the five-star Shelbourne Hotel in Dublin.

Trophy assets such as the Shelbourne can be cash-hungry investments, requiring expensive maintenance of listed buildings that swallow a lot of cash for upgrades that often aren’t visible to customers. There was also the small matter of a two-year pandemic that severely restricted trading at the property.

Kennedy Wilson seems to have timed the sale to Archer Hotel Capital perfectly, given the stock market filing last week showing that the Shelbourne’s revenues declined by 12 per cent in the first quarter of this year due to a softness in occupancy, and reduced food and beverage sales.

[ Shelbourne Hotel sale nets Kennedy Wilson $99m profit ]

The Shelbourne’s sale price has not been revealed but it was on the market for a reported €260 million. That equates to almost €1 million per key for a property with 265 bedrooms. By comparison, Tetrarch is seeking €45 million for the Mount Juliet hotel and golf resort in Co Kilkenny, equating to €360,000 per bedroom, while the liquidators of Irish Bank Resolution Corporation (IBRC) are offering the 224-bedroom Slieve Russell resort in Co Cavan for €35 million, or €156,250 per key.

And Archer paid €115 million in 2019 for the 192-bedroom, five-star Conrad Hotel, on the other side of St Stephen’s Green to the Shelbourne. That was just under €600,000 per key.

[ Shelbourne Hotel revenue climbed 18% in year before sale ]

In a recent interview with the Sunday Times, Singapore businessman Stanley Quek, who owns a number of Irish hospitality assets, including the five-star Castlemartyr hotel in Cork, expressed surprise at the price achieved for the Shelbourne. “I don’t know how you are going to make money from that,” he said.

Fair to say that he’s not alone among those in the sector who are wondering the same thing. In the fullness of time, Archer’s backers might be asking the same question.