A report has found that average hotel room rates here are now higher than at their peak in 2006.

Accountancy firm Crowe Horwath also found that hotel occupancy levels are back to pre-recession levels.

The report shows Dublin continues to out-perform other regions - with average room rates increasing by 14.7% - almost twice the level of western seaboard hotels, which saw a growth in average nightly room rates of 7.5%.

It says the outlook for the sector remains strong - however significant capacity issues in the capital could cause "competitiveness challenges" with double digit average room rate increases now in a third year.

The report warns that this growth could potentially hurt a value-for-money proposition "which Dublin has enjoyed for a number of years".

Overall, the national room occupancy level for 2016 was 74.0% - up from 71.1% on the previous year, with the average room rate charged across all hotels at €104.11.

However, hotels in the Midlands and east region showed the highest year-on-year growth in occupancy levels: up from 65% in 2015 to 68.5% in 2016.

The region has benefited from growing economic activity and employment, as well as the launch of the Ireland’s Ancient East campaign.

Additional hotel room capacity

The report says: "Occupancy levels in Dublin continue to rise, at 82.3% up from 80.7% in the previous year and highlight the need for additional hotel rooms in the city.

"Levels outside of Dublin have also seen an increase and are approaching 70% occupancy, providing the opportunity for better-located hotels to expand the accommodation side of their business."

The average rate charged for a room in Dublin is now €128.27.

"Room rates in the capital have now surpassed 2006 peak prices of €120.38 by €7.89 and are significantly ahead of other regions".

Respondents to the survey identified key drivers of growth in 2017 as:

• Continued increase in international visitors, particularly the high-spending US visitors
• Increases in corporate business, particularly in relation to the conference market, both domestic and international
• Retention of the 9% VAT rate
• The upgrading and refurbishment of revenue generating areas within their hotels

The report says one clear trend is the need for additional hotel room capacity in the capital, which Crowe Horwath estimates at over 5,000 rooms.

According to a recent Fáilte Ireland report, there are 1,958 new rooms being built as of summer 2017 and a further 2,219 which have full planning, but remain on the drawing board with another 1,205 rooms which are moving through the planning process.

Only 36% of the anticipated supply of 5,382 rooms is now coming on board.