‘This is where we step in’: What happens when family hotels meet an uncertain future
Born on the cusp of the pandemic, Cliste founders speak to Emer Walsh about their growing portfolio
Paul Fitzgerald, CEO and Séan O’Driscoll, Director of Hotels of Cliste Hospitality. They have €112m turnover under management. Picture Chani Anderson
Family-run businesses are the foundation of Ireland’s regional hospitality industry. Rural hotels operate a large revenue mix, unlike big city venues focused on simple room revenue maximisation.
Town hotels, often the only of its kind for miles, are more than just simple accommodations. They’re community staples; venues for weddings, business forums, sporting occasions, graduations and more, passed down through families for generations.
But what happens when the next cohort doesn’t want to carry the baton?
“We frequently meet hoteliers who say, ‘We are a second-generation hotel family, the next generation simply doesn’t want to continue in the industry and are looking for a pathway out,” says Paul Fitzgerald, who co-owns Cliste Hospitality.
“This is where we come in.”
Born from the management buyout of iNua in 2019, Cliste Hospitality was co-founded by Mr Fitzgerald and Sean O’Driscoll. The hotel management and consultancy agency was launched just four months before the world went into a pandemic-induced lockdown, but despite early setbacks, the group has managed to grow its portfolio to 14 hotels in its short lifetime.
Looking forward, the pair have little interest in slowing down, with ambitious plans for the next few years.
“Right now, we have €112m-€113m turnover under management. We want to see that get to €150m+ over the next couple of years,” says Mr O’Driscoll.
Originally from Youghal, Mr O’Driscoll is a hotelier by trade who caught the bug working summers in his local Walter Raleigh Hotel. From then, the industry veteran has worked everywhere from Geneva to the Muckross Park Hotel, where he was general manager for six years before the venue itself was acquired by Cliste in 2015.
Mr Fitzgerald, on the other hand, is the non-hotelier of the duo. Originally from Turners Cross in Cork city, the Cliste co-owner studied commerce at University College Cork after falling in love with finance and accounting as a teenager. Upon graduating, he joined PwC, working there for five years across its Cork, Dublin and London offices.
Following stints in the motor and fast-moving consumer goods sector, Mr Fitzgerald was introduced to the hotel trade, where he has remained ever since.
“Our dynamic really works,” Mr Fitzgerald tells the Irish Examiner. “It’s good to have a seasoned hospitality person and someone like me.”
The pair’s diversified expertise saw them grow their portfolio to nine hotels before the arrival of covid, with the team restoring its acquisition strategy in 2022, adding five more venues to the organisation.
Cliste acquired its 14th hotel at the end of last year and expanding for the first time into Northern Ireland with the acquisition of the Gasworks Hotel in Belfast.
In addition to its regional locations, which include the Radisson in Sligo, the Hillgrove in Monaghan, Tullamore Court in Offaly and the Muckross in Killarney, the group’s portfolio also extends into the capital with venues including the Dublin One Hotel, Ariel House in Dublin 4, the Big Tree Bar and the Botanical Restaurant, all acquired in the past five years.
However, such speedy expansion did not come without significant challenges.
“We had the perfect storm in 2022,” Mr Fitzgerald recalls.
“We had the war in Ukraine, then we had the exponential increase in energy prices which trickled down to inflationary pressures across the business, so the cost of inputs generally became very difficult.”
Yet, despite these added hurdles, consumer demand held tight, easing pressures for the business. This year, however, things have changed.
“Things have definitely gotten tougher in recent months,” Mr O’Driscoll explains. “I think consumer mood has changed. The past two years post covid, people were mad to go on holiday, to meet friends and eat out.
“I think as mortgage interest rates rose and with energy bills remaining high, people are watching their spending now. We have definitely seen a change in the last three months where people aren’t dining out as much. Even demand for summer, while it is strong, it is not as strong as last year.”
This lull in demand has coincided with a significant rise in costs, Mr O’Driscoll explains, noting a series of changes facing the industry.
Séan O’Driscoll, Director of Hotels and Paul Fitzgerald, CEO of Cliste Hospitality pictured at the Radisson Blu Hotel in Little Island. Picture Chani Anderson
“Energy bills doubled for a period in 2022, so we went from spending €3m on energy to then spending €6m. While they are down, they are still 50% higher than they were before covid.
“Labour costs have come up substantially, and while we have no problem with the rise in minimum wage, it has a knock-on effect. When it goes up, all wages go up. Combining minimum wage, sick pay, and PRSI, we estimate that labour costs will rise by around 10% this year.”
VAT ‘cannot be passed on’
In addition, Mr O’Driscoll said that these expenses, coupled with the restoration of VAT to 13.5% will see total costs rise by around 20%, costs he says cannot be passed onto the consumer.
“There was a view that the VAT will just get passed on. The VAT cannot just get passed on.
“The consumer did not want prices to go up by 4.5% and I think the evidence since October shows that businesses have had to swallow it themselves.”
Echoing calls from many of the sector’s representative bodies, the Cliste duo are also urging for a 9% VAT rate to be restored, with Mr O’Driscoll telling the Irish Examiner, “I think the economic argument is one piece, but the social argument is also important.”
“Politicians need to understand that these places play a critical role for communities.”
“It is unacceptable that in a strong economic climate, we have allowed 500 restaurants to close in the last nine months. I hope the Government do something about that and protect the ones that remain.”
In addition, Mr O’Driscoll has criticised the cap at Dublin Airport, arguing that restricting the number of those flying into the capital will have significant impacts across the country.
“I think every industry has to reduce its carbon footprint but the reality is, we are an island. Whether it is tourism or the international sector, if people cannot access the island, we have a problem.”
Despite the many hurdles the hospitality faces, Cliste has ploughed full speed ahead, acquiring its 14th hotel at the end of last year and expanding for the first time into Northern Ireland with the acquisition of the Gasworks Hotel in Belfast.
While not ruling out international expansion in the longer term, the pair have their sights set on Ireland for now, with all four corners of the country offering something unique for the group.
“Northern Ireland is definitely one region we are interested in, along with the western corridor and the Wild Atlantic Way,” said Mr Fitzgerald.
“Being a Cork company as well, we always keep an ear to the ground for local opportunities and those around the Munster area, while also keeping an eye on Dublin.”
“We have plenty of scope on the island of Europe, and we aim to have 20 to 25 hotels under management in the next two to three years.”
