Rate-led growth, stronger inbound tourism and returning accommodation supply are supporting the sector, but profitability remains the key challenge, reports Gerardo Larios Rizo, head of Hospitality Sector at Bank of Ireland.
Ireland’s hospitality sector has delivered a resilient performance in the first half of 2026, with hotel revenues continuing to grow despite a more complex operating environment shaped by cost inflation, changing consumer behaviour and evolving accommodation supply.
According to Bank of Ireland’s latest Hospitality Sector H1 2026 Insights and H2 2026 Outlook report, growth has been driven primarily by room rates rather than occupancy gains, with several regional destinations outperforming larger urban markets as hoteliers focus on converting revenue growth into sustainable profits.
“H2 is about margin conversion, not volume recovery”
The report found that average daily room rates (ADR) remain the principal driver of revenue per available room (RevPAR) growth across most markets. Dublin maintained strong occupancy levels at 82% during the first half of the year, while regional destinations including Limerick, Kilkenny and Galway recorded some of the strongest RevPAR increases.
Limerick led the field with RevPAR growth of 9.4% year-on-year, followed by Kilkenny at 7.8% and Galway at 6.9%. Cork also delivered growth, although at a more moderate pace, while Belfast returned to positive territory and Derry/Londonderry continued to face trading pressures.
Inbound tourism has provided another welcome boost. Trips to Ireland increased by 18% in the five months to May 2026, with European visits rising 24% and North American visitor numbers increasing by 15%.
North American travellers continue to represent an important market for Irish hospitality businesses due to their significantly higher spending levels. Bank of Ireland’s analysis shows average visitor expenditure from the USA and Canada reached €1,219 during the period, substantially higher than visitors from Great Britain and continental Europe.
Significant shift in accommodation supply
Gerardo Larios Rizo, Head of Hospitality Sector at Bank of Ireland, said the sector’s performance reflects a changing market where revenue growth alone is no longer enough.
“H1 was not simply a demand recovery story; performance was rate-led, uneven by geography, and increasingly dependent on operators’ ability to convert RevPAR into margin.”
The report highlights a significant shift in accommodation supply as tourism bed stock previously contracted by the State gradually returns to the market. Fáilte Ireland data shows that registered tourism accommodation under Beneficiaries of Temporary Protection and International Protection contracts has fallen from 13% of national tourism bed stock in summer 2023 to 3.7% in May 2026.
While this is expected to improve tourism capacity over time, the report notes that the impact will vary by location and is unlikely to create an immediate increase in commercial accommodation supply.
Domestic demand also remains an important pillar for the industry, particularly in regional destinations and during shoulder seasons. Irish consumers continue to support local tourism businesses, although operators are reporting shorter booking windows and a rise in last-minute reservations.
At the same time, investment activity across the sector is becoming increasingly focused on refurbishment projects, energy efficiency improvements and guest experience enhancements rather than speculative new-build developments.
New trends in hospitality
Technology adoption is also moving up the agenda.
According to the report, artificial intelligence, automation tools, revenue management systems and energy monitoring technologies are becoming increasingly important for protecting margins and maintaining service standards.
The outlook for the remainder of 2026 remains positive, particularly in Dublin where occupancy is forecast to remain stable at 83.8%, with RevPAR expected to rise by 1.1% for the full year.
Bank of Ireland’s base case scenario points to low-to-mid single-digit RevPAR growth during the second half of the year, driven largely by room rate increases. Stronger demand from North America and Europe, favourable exchange rates and major events could provide further upside.
However, the report identifies consumer confidence, higher airfares, geopolitical uncertainty and continued operating cost pressures as key factors for operators to monitor closely.
Larios Rizo said the industry’s focus now needs to shift from volume growth to profitability.
“H2 is about margin conversion, not volume recovery. Trading momentum is positive, but operators will need to convert RevPAR growth into cashflow while responding to shifting supply, value-conscious consumers, and persistent cost inflation.”
The report recommends that hospitality businesses focus on protecting rate integrity, maintaining disciplined cost control, investing in projects with clear returns, and using technology to improve efficiency.
It also notes that international brands, alternative accommodation providers, hostels and technology-led operators are increasing competitive pressure across the market, reinforcing the need for clear positioning and strong guest experiences.
For many operators, the challenge for the remainder of 2026 will not be attracting guests, but ensuring that growing revenues translate into stronger margins and long-term financial resilience.
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