Cash flow key to survival of hospitality sector

Measures like the Fáilte Ireland Adaptation Fund help, but maintaining customer focus and cash flow is vital for survivability of the Irish tourism and hospitality sector in the long term.

It could be years before the hospitality sector returns to 2019 levels of trading but maintaining a focus on the customer is the way forward urges Gerardo Larios Rizo, head of Hospitality Sector, at Bank of Ireland.

Yesterday (18 August) Fáilte Ireland revealed details of the €26m Covid-19 Adaptation Fund, one of the measures revealed by the Irish Government as part of its July Stimulus.

“I believe customer focus is still central for the viability of any business, however cash flow management comes very close to it at present as you can’t provide good service if you can’t finance it”

The Adaptation Fund the third step in Fáilte Ireland’s approach to re-opening and has been designed to contribute to the costs incurred by tourism businesses as they implement Fáilte Ireland’s Guidelines for Re-opening.

Eligible businesses can apply for adaptation grants from now until 8 October 2020.

Larios Rizo welcomed the new fund. “The adaptation grant is certainly another welcome addition to the suite of supports offered by the government; together with the restart grant, the wage subsidy scheme and the temporary lowering of the standard rate of VAT these measures can certainly make a difference.”

2020: The year of staycations in Ireland

Man with glasses wearing a blue suit.

Gerardo Larios Rizo, head of Hospitality Sector, Business Banking at Bank of Ireland.

“The demand has been particularly strong for destinations although not so much for Dublin which would traditionally take the lion’s share of overseas visitors”

Reflecting on the staycation trend that was keenly embraced by Irish families after months of lockdown, Larios Rizo said it revealed some tough realities about the effect of lockdown on the hospitality sector and the challenges ahead.

“Irish residents have shown strong support for the sector since the hotels were allowed to reopen at the end of June, pickup escalated rapidly in July as people were eager to take a break outside their city/town.

“The demand has been particularly strong for regional destinations although not so much for Dublin which would traditionally take the lion’s share of overseas visitors, corporate demand and event business which are currently not available at any material level.

“Business on the books appears to be at a healthy level for September however pickup will slow down with children going back to school. The step-back in the lockdown regulations for Laois, Kildare and Offaly negatively impacted consumer confidence and this has impacted bookings; the announcement of the government over the last couple of days about further tightening of recommendations could erode this further.”

Looking to the rest of the year and into 2021, Larios Rizo said the picture is far from certain for tourism and hospitality businesses, especially as new restrictions emerge to prevent possible surges of Coronavirus/Covid-19.

“There is a healthy level of pent up demand from the domestic market as evidenced by hotel bookings to the end of September, but the threat of possible setbacks is still there; some level of uncertainty will remain until a vaccine is available.

“I believe customer focus is still central for the viability of any business, however cash flow management comes very close to it at present as you can’t provide good service if you can’t finance it. It could take three or four years for businesses to return to 2019 trading levels so it’s important to review the cost base to try and protect the bottom line.

“Most businesses in the sector are currently availing of breaks in the payment of commercial rates, warehousing of revenue obligations as well as the Temporary Wage Subsidy Scheme that has supported up to 85pc of wages. Some of these supports could be dropped or changed by the end of August; businesses need to be cognisant of the immediate impact this will have on their cash flow,” Larios Rizo said.

Written by John Kennedy (john.kennedy3@boi.com)

Published: 19 August, 2020