With the Irish hotel market still in a period of sustained growth, its overall performance is being examined from the outside by powerful worldwide hotel chains. In the last few years it appears that, in general, these chains have liked what they have seen - with a number of the big operators taking the step of introducing themselves to the market.

The likes of The Clarion/Choice Group, Granada, Four Seasons, Radisson SAS and now the Westin/Starwood Group all have a firm foothold in our market. Why these operators have come here, and whether more will follow, is a moot question.

The hotel market here is small in comparison with other European countries, with only 844 registered hotels in the country. About 141 of these are in Dublin and of these, only 79, with over 50 bedrooms, can be considered large.

More interesting to the big operators is that 29 per cent of this city market is controlled by one group, Jurys Doyle, with the Granada Group now a distant second - with 6.5 per cent. Forty eight per cent of the market is owned by roughly 10 different operators, so with such limited competition, our market is ripe for invasion by the international groups.

Add to this the relatively small number of five-star hotels in the city - currently standing at eight and holding only 14 per cent of the city bedroom market (including the yet to be opened Westin) - and we quickly realise that real quality is in short supply. We have an abundance of two to three star hotels dominating the market, at 60 per cent of overall stock, but what makes the overseas groups want to expand here, particularly with the perceived limited scope of the market?

The answer is quite simple. The market may be small, but its fundamentals are in order. A foreign chain will be buying into a market that has been growing steadily, if not spectacularly, for a number of years. At least 21 new hotels per annum have been added to the stock in the last eight years. Even more impressively, the bedroom stock has risen by 64 per cent since 1993, going from 23,200 to 38,084 bedrooms.

The industry has, meanwhile, shown remarkable resilience when it comes to attracting new business. Hotel occupancy rates in Dublin city have consistently stayed above 70 per cent since 1995, and above 65 per cent nationally. Most of this business is generated from tourists (37 per cent), but business usage, at 35 per cent, is now catching up in line with the growth of the business-driven economy. More importantly, profits per average hotel room are rising, despite increasing labour costs and costs of running a hotel generally.

The London hotel market has also had seven years of sustained high occupancy levels and showed a remarkable 81 per cent for 2000, despite having added over 10,000 new bedrooms to its stock since 1995. Obviously, London has benefited from strong new millennium figures and a vibrant economy and is still confidently holding the position of being a premier worldwide hotel destination.

In reality, the London market had been slipping for a few years prior to 2000 and all the celebrations surrounding the millennium were a real shot in the arm. In comparison, most European capitals maintain occupancy levels in excess of 70 per cent - just as Dublin does.

This being the case, what has attracted the big chains to Ireland? Primarily, set-up costs here are relatively cheap in comparison to London and other European capitals. There are also a number of lucrative tax allowances associated with new hotel development and there is, with our occupancy levels, a lot of room for future growth.

Onlooking international groups are licking their lips at the prospects of entering such a market and indeed, already have 13 large hotels in prime locations across the city. In their view there is limited opposition in the city - and indeed across the country - and this leaves the door open for them to bring in their own recognised standards and products.

So what can these groups bring to the party? Firstly, they have impressive management and operational expertise, running efficient hotels and providing a quality of service not always found in home grown accommodation.

In addition, they build new, state-of-the-art hotels to order. Hotels produce more profit if they are efficiently and economically laid out, with up-to-the-minute facilities and a heavy emphasis on functionality. New bedrooms in today's market are designed for luxury and/or convenience, are well mixed in terms of available room types and have all the modern accessories including phones, faxes, internet, et cetera.

Designing a new hotel in a chosen location gives the operator the opportunity to design a facility aimed directly at the target market. Whether it be for tourist or business customers, such a hotel can be tailored to suit the target's needs.

Established hotels in Ireland have often evolved into what they are now, or may have been designed for different customer needs than are needed today. However, they often have great difficulty redesigning their facilities, and can get caught between two stools in terms of what's required and what can be given.

Central reservation systems operated by the big chains give them a big advantage over local direct-enquiry based business, which accounts for over 50 per cent of local hotel bookings. In general, central reservations can account for an extra 20 per cent of business in the international hotels in Ireland, and this is even more important in times of local market slowdown.

What then does the future hold for locally-based Irish hotel operators? Can they continue to compete? Business is still good, but outside competition has arrived in force and is looking set for growth. The big hotel chains that are already here are looking to expand. But the real key to continued growth is convenience, quality of service and value for money.

Jurys Doyle, as a prime example, has proven this repeatedly, having become what they are not only by competing on room price, but by maintaining high levels of quality and service. Whether this is home grown or imported, such distinction is what will really win business long-term.

Looking to the future, will there be many new players in the market? It is likely that the international groups which have already located here will want to expand in the city and nationally. There may well be a few more from Norway, Sweden, Germany, France and other countries which will also want to invest with the introduction of the euro next year.

The average number of bedrooms in Dublin five-star hotels is now at 204, and we can expect a few more of these amenities to be developed over the next two to three years - although they will not necessarily be quite so large. There is room in Dublin for small, exclusive five-star hotels with 20 to 30 rooms only, and as the city becomes even more popular with stars and celebrities, this type of private quality accommodation will be in greater demand.

The main provincial cities - Cork, Limerick and Galway - can also expect new top-of-the-range hotel developments. In all, we can add a further 1,000 to 2,000 rooms to our existing five-star stock without oversupplying the market.

The three and four-star market can also expect further growth, and towns in the provinces - including Portlaoise, Letterkenny, Carlow or Kilkenny - are all being looked at by home grown operators and international players alike.

The future for the hotel industry looks good, and with the outside players and those at home vying against one another for business, clients in diverse target markets should have no shortage of suitable accommodation to choose from. Whichever operator delivers on quality hotel amenities will always win the custom.

Cormac Megannety is associate director with Hamilton Osborne King