STOICISM & SURVIVAL

You know that things are really bad when economists move from producing forecasts to creating scenarios.

Since 2016, the Federation has commissioned a hotel report which outlines developments in the sector, tracks industry performance and provides a forecast for the coming months. The reports have consistently highlighted the massive annual investment the sector has made while outlining emerging challenges and charting the story of the hotel sector’s contribution to the local economy. The latest report has drawn on a number of sources but forecasting in any meaningful way has proved impossible.

The report reflects the simple but stark reality; the industry is in survival mode trading within a severely restricted framework.

The narrative to date: as 2020 dawned, after a number of years of considerable investment, the hotel sector was well placed to capitalise on new opportunities. With a record 9500 rooms, good air access to the island and the creation of a new brand, everything pointed to a strong trading year. In 2019, around 2.5m bedrooms had been sold. Predictions for 2020 indicated that it would be a year of rate consolidation with limited new rooms entering the market and spend by international visitors expected to grow. The staging of The Open had stimulated interest in golf tourism. New markets were opening up and despite Brexit, there was an air of cautious optimism.

Indeed, Brexit was viewed as being the biggest challenge on the horizon. To date, the impact of this has not been felt, nor is it clear yet what the impact will be. On this issue, the government has not covered itself in glory. There has been considerable vocal opposition around their approach to international law and it’s still not clear if there will be an exit deal!

At the start of this year, the hotel industry was in a strong position. First quarter trading was good with rate, occupancy & REVPAR holding up well. Bubbling in the background, there were stories of a strange virus in China, but Wuhan was a long way away. At the end of February, business from China was being cancelled and there was an emerging health crisis in Italy. Each day brought more news, none of it good.

By March, the month that heralds the start of the new tourist season, businesses were beginning to feel apprehensive. The Covid-19 pandemic was spreading. The focal point of the month, St Patrick’s Day, when buildings around the world turn green and Ireland traditionally captures the world’s attention, was essentially cancelled. Hotels limped through the rest of March before eventually being ordered to close at the end of the month. A small number of premises remained open to house essential workers.

On the 3rd July hotels were given permission to re-open. The sector slowly came back to life as premises sought to limit occupancy in order to abide by social-distancing restrictions. At the end of August, 85% of NI’s bedroom stock was available. Despite the lack of international visitors and no coach, conference or major events income, hotels performed above expectations in August. Trade held up in early September. However, curfew measures and restricted trading meant by consequence, hotels effectively closed.

The mandated closure in March with furlough support was the insurance that hotels needed to survive. Government initiatives recognised that the sector was a viable one and intervention allowed businesses to shut up shop and wait for better times. The situation today is very different as it appears that hotels will now be left to flounder. Recent support mechanisms and the limbo of being open whilst in reality not being able to trade places the sector in a precarious position. Staying open and bleeding cash, or putting up the shutters without the fiscal means of preserving the business, is the stark reality.

With winter on the horizon, recovery seems a long way off. Resilience has been the name of the game to date. Hoteliers have always been a stoic bunch and have fought to survive in the past. The skills that they have honed through previous crises will be truly tested in the coming months.