West Cork Hotel Diversifies From Food to Accommodation | Irish Times

The family-owned Fernhill House Hotel & Gardens in Clonakilty, west Cork, has completed a €5.5 million investment aimed at diversifying its revenue streams away from food and beverage operations. The expansion, reported by The Irish Times on March 30, 2026, adds 16 modern bedrooms to the property, bringing the total room count to 43. The strategic shift underscores the pressure facing hospitality businesses regarding shrinking margins in traditional dining and drink services.

Michael O’Neill jnr, who runs the business alongside his brothers Neil and Gearóid, indicated that the investment was necessary to strengthen the company’s financial position. The O’Neill family has owned the country house hotel for 80 years, with the current leadership representing the fourth generation of family management. The decision to prioritize accommodation over food service reflects broader economic challenges within the sector, specifically regarding profitability in dining operations.

According to management, the business mix has shifted significantly over recent years. Approximately 75 per cent of the hotel’s business was previously derived from food, but that figure has been reduced to the 60s. This adjustment was driven by the necessity to mitigate risk associated with low-margin food sales. The leadership team noted that there is currently no margin in food, necessitating a pivot toward bedroom revenue to ensure the viability of the enterprise.

There’s no money in food. We’ve dragged it now into the 60s. Drink sales have fallen off a cliff, they are down over 20 per cent per head since Covid, there’s been a real culture shift and there’s no margin in food. So we had to diversify into bedrooms to strengthen the business

Michael O’Neill jnr

The decline in beverage revenue has been particularly sharp. Management reported that drink sales are down over 20 per cent per head since the Covid pandemic. This drop contributes to the overall reduction in profitability for food and beverage operations, reinforcing the decision to allocate capital toward accommodation infrastructure rather than further expansion of dining facilities. The culture shift among consumers regarding alcohol consumption and dining out has had a tangible impact on the hotel’s bottom line.

Expansion Details and Facilities

The €5.5 million investment has facilitated several physical upgrades to the property located a short stroll from Clonakilty. Beyond the 16 new bedrooms, the hotel has added a bridal suite and a styling lounge for brides to use before ceremonies. These additions are designed to capture more of the wedding market, which relies heavily on accommodation packages rather than solely on catering.

A new event space, called the Fernery, has been built among the 13 acres of garden to host wedding ceremonies. This outdoor capability allows the hotel to offer distinct venues for events, further diversifying the types of services available to customers. The distinctive smell of newly laid carpet was noted as the first hint of the recent investment upon entry to the property, signaling the completion of the upgrade work.

Sustainability measures were also included in the renovation project. Solar panels have been installed to heat water and reduce energy bills. This infrastructure improvement aims to lower operational costs over the long term, addressing the energy expense component of running a large hospitality venue. The integration of renewable energy sources aligns with broader industry trends toward reducing carbon footprints and managing utility expenditures.

Regulatory Context and VAT Changes

The hotelier expressed anticipation for upcoming changes to the value-added tax structure. Michael O’Neill jnr noted he is looking forward to the VAT rate for food services being reduced to 9 per cent in July 2026. This measure was announced in the budget released in October 2025. While the reduction is welcomed, management indicated that margins for food have gotten thinner and thinner over the years, suggesting that tax relief alone may not fully resolve the structural profitability issues in food service.

Yeah, it will be good to see that come in. Margins for food have just gotten thinner and thinner over the years

Michael O’Neill jnr

Commenting on the scale of the investment, Michael O’Neill jnr observed that there would not be too many hotels outside of the big touristy spots undertaking that level of capital expenditure. The commitment of €5.5 million by a family-owned business in west Cork highlights a confidence in the regional tourism market despite the challenges in food and beverage margins. The diversification strategy aims to secure the business for future generations by reducing reliance on volatile dining revenue.

The reporting on this development was published by The Irish Times on March 30, 2026. The article details how traditional hospitality models are adapting to post-pandemic consumer behaviors and economic pressures. By shifting the revenue mix toward bedrooms and events, Fernhill House Hotel & Gardens seeks to maintain profitability in an environment where food and drink sales no longer provide sufficient margin to sustain operations independently.