The Big Interview: Cliste’s Paul Fitzgerald on what hospitality can learn from Lidl

The founder of the firm which manages 14 hotels around Ireland talks about off-market deals and the cost crunch that is crippling businesses

Paul Fitzgerald: ‘Hospitality has a lot to learn from the likes of Lidl and Aldi in terms of how they treat their staff’ Picture: John Allen

In the Dublin One hotel just off Dorset Street in the north city centre, Paul Fitzgerald is assessing the health of the Irish hospitality sector. It’s almost three years since we last sat down for an interview, and the chief executive of Cliste Hospitality is reflecting on the the ups and downs of business in the interim.

“When we met back in 2021, like all hospitality businesses we were trying to frame our post-Covid strategy, but the floor we were standing on was really fluid,” he says.

“We were hearing predictions that hotel occupancy levels in Dublin wouldn’t be back to pre-pandemic levels till 2025 or 2026, and that international tourism would be slow to recover, when actually things roared back. That rapid recovery that we saw really spoke to the resilience of Irish hospitality.”

That was the good news. Less welcome, and far less predictable, was the spike in costs that businesses across the country have faced.

“There was this weird dynamic where you had good momentum on the top side of your profit and loss account, but the middle was really creaking,” Fitzgerald says.

“Wage pressures began to increase, your energy costs were going through the roof. You were seeing great growth in your occupancy levels and your average daily rate, but from a profitability perspective, none of it was dropping down to the bottom line. It was being sucked out in the middle.”

Operating their businesses as efficiently as possible in order to mitigate those cost pressures will, Fitzgerald says, be one of the key challenges facing hospitality operators this year. It’s a challenge that he hopes to be helping more of them with by the end of 2024. Cliste, which Fitzgerald set up with Sean O’Driscoll in 2019, now operates or manages 14 hotels around Ireland, including the Muckross Park in Killarney, the Radisson Blu in Cork, The Gasworks in Belfast, and Ariel House in Dublin.

In his own words: The growing challenge posed by online travel agents

I don’t think hoteliers fully realise where things are going when it comes to online travel agents, and how much of an existential challenge they could pose. They get a sense of comfort when they see that their occupancy rates are at 80 per cent, and that their average daily rate is looking good, but that’s the top line. When they do their accounts they’re scratching their heads over why the commissions they are paying out are so high, and when they drill into it, they see that it’s because of what they’re paying to Expedia or Booking.com. These guys are getting really, really aggressive, and the industry is going to have to step up to compete. Your own website needs to be very sleek, and you need to be able to guarantee that someone will get the best rate there. It also needs to be tailored to upsell. When someone is booking a room, are you giving them the opportunity there and then to book a spa treatment, a table in your restaurant, or a bottle of wine when they arrive? While they’re on your website they are a captive audience, so make it easy for them to spend more with you. The operators that are doing that are the ones who are really successful. Guests’ expectations are getting higher and higher, and if operators don’t realise that, and adapt to it, they aren’t going to survive.

The range of properties in the group is illustrated by the latter – a 37-bedroom guesthouse in a Victorian redbrick in leafy Ballsbridge – and the one we are meeting in, a 163-bedroom, ultra-modern property close to O’Connell Street.

Other venues, including the Big Tree pub in Dublin and The Hibernian in Kilkenny, bring the total Cliste portfolio to 20. Fitzgerald expects that figure to be 23 or 24 by the end of this year, and says he has a further two or three deals “warming up” for 2025.

The firm offers services including hotel management, pre-opening project management, consultancy and corporate finance. Fitzgerald sees opportunities for growth across all four areas, but says there are some particular opportunities at the moment in terms of the latter.

“We see our role as being that link between the investors who are chasing opportunities, and the operators who are seeking capital. With interest rates where they are, private equity is sitting on its hands, and that has let some high net worth investors get access to the type of assets they might not have been in the running for a few years back,” he says.

“We’re having some interesting conversations in that space around well-placed regional hotels, or similar-type assets in large capital cities. Most hotel deals are done on an off-market basis, and there is certainly movement there.” A good example of this kind of deal, Fitzgerald says, happened in Dundalk in Co Louth, where Cliste manages two hotels – The Fairways and The Gateway – on behalf of the O’Callaghan family.

“The Gateway was previously the Crowne Plaza, but when Tifco put it on the market, the O’Callaghan’s went for it. If that was a more normalised market, I suspect that private equity would have swooped in,” he says. Fitzgerald has also seen changes in Cliste’s consulting division as a result of the rising costs facing operators.

“A lot of our consultancy clients used to come to us asking for help with things like digital marketing, but now we’re seeing an increasing amount of people looking for advice on things like how they’re operating their food and beverage outlets, and whether they’re rostering their staff correctly,” he says. “Food and beverage in particular, that’s not a sector with an elastic price model. There’s a limit to what people will pay for a steak, or a plate of fish and chips, before they start voting with their feet and walking away. You can’t keep raising prices, so you are going to have to make sure you’re running your bars and restaurants in as efficient and smart a way as you can.”

Cliste owns 12 of its 20 properties directly, with the remaining eight managed by it on behalf of clients. It employs 1,700 staff, and Fitzgerald says that while challenges remain around recruitment, staff churn rates have normalised post- Covid.

“That’s not to say it couldn’t be better,” he says. “Hospitality has a lot to learn from the likes of Lidl and Aldi in terms of how they treat their staff and what they offer them – good pay, good benefits, great training programmes, career progression. That’s where we need to be as a sector.” Across the group, there are 23 bars and restaurants, 84 meetings and events spaces, nine convention centres, seven leisure centres and six spas, while Fitzgerald expects Cliste properties to host around 450 weddings this year. It’s a deliberately varied offering, he says.

Paul’s CV

Role: Cliste Hospitality chief executive

Age: 48

Family: Married to Emer with three children: Katie (12), James (10) and Hannah (8)

My working day: I’m in our head office in Cork probably two or three days a week. On the other days I’m out and about, either visiting our properties or talking to investors and other stakeholders. It’s a nice mix. If I can, I like to get in an early morning 5k run on the treadmill, and I and try to be back to full my underage soccer coaching commitments in the evenings

My perfect weekend: A hill walk in the Ballyhoura mountains with the golden retriever, or a visit to a new and exciting hotel to see where the market is moving.

Early bird or night owl: Early bird.

X, LinkedIn or Instagram: I’m trying to wean myself off X.