Dublin hotels second in Europe for occupancy as new levy threatens supply; office leasing holds steady

Hotel occupancy leads Europe

Dublin hotels recorded an occupancy rate of 84.1% in the year to April, second only to Edinburgh's 84.6% and well above the European average of 71.1%. The city saw 146 "compression nights" where occupancy exceeded 90%, representing 40% of the year. Savills noted this was more than any other major European city. US visitors, accounting for about 20% of overseas arrivals, generated 41% of international tourism expenditure.

What makes Ireland's performance particularly impressive is that it is not driven by a single factor. Strong business travel, international tourism, major concerts and sporting events and the Wild Atlantic Way all play an important role, but equally important is the depth and diversity of demand across the market.

New hotel levy adds upfront costs

From July 1, Dublin City Council doubled development contributions for hotels to €244 per square metre. Colliers analysis shows this will add materially to upfront costs. For a typical 150-bed hotel, the contribution rises from €1 million to €2 million. The firm warns that marginal schemes may be paused or repriced, and some consented projects could be shelved.

In a market already constrained by elevated construction costs, tighter and more expensive debt, planning delays and utility connection bottlenecks, a step change of this scale can be the difference between a scheme proceeding and being shelved.

Office leasing steady, rents rising

Dublin's office market saw 800,000 sq ft of take-up in the first half of 2026, in line with the five-half-year average. A further 1.1 million sq ft is reserved, with half in Dublin 2. Enterprise Ireland agreed terms on 100,000 sq ft at 160 Townsend, and OpenAI is set to take 88,000 sq ft at the Tropical Fruit Warehouse. Knight Frank expects prime rents to reach €70 per sq ft by year-end and €75 for pre-lets.

Despite a significant increase in leasing activity across Dublin's CBD in 2025, occupiers moved an average of only 1.1km, highlighting a clear preference to remain close to established talent pools, clients and amenities while upgrading the quality of their accommodation.

Investment and development opportunities

A separate listing on Aungier Street offers two adjoining protected structures with full vacant possession for over €1 million, with potential for residential or mixed-use redevelopment. Meanwhile, Savills sees regional hotel investment as the next growth chapter, driven by demand for authentic experiences.

International visitors increasingly want authentic experiences centred around heritage, food, golf, wellness and the natural environment. Demand for those experiences already exists, but in many parts of the country, the supply of high-quality luxury accommodation hasn't kept pace.