Encouraging performance in hospitality sector

The Irish hospitality sector is succeeding in the face of a tsunami of challenges, says Bank of Ireland head of Hospitality Gerardo Larios Rizo.

Notwithstanding the many challenges presented by the Covid-19 pandemic and the threat posed by the fourth wave, businesses across the hospitality sector have reported encouraging trade figures over the last five months since the sector reopened.

Regional locations continue to outperform Dublin, but demand has been steadily climbing with occupancy of circa 60pc reported for Dublin for the month of October (Ref: Accommodation sales KPIs table).

“Corporate bookings in particular took a tumble as the Government advised to work from home unless ‘absolutely necessary’”

Although no specific data is available, a large number of businesses in the hospitality and tourism industry continue to avail of the Government’s EWSS scheme which has so far supported strong profit levels and associated cash flows.

Overseas demand has been slowly returning to various locations, and the sustained increase in air capacity (Global capacity has climbed up to 70pc of 2019 levels) is expected to support growth into the future; many businesses already reporting material numbers of American visitors in particular (The CSO is yet to resume the publishing of data on international travel).

accommodation KPIs Ireland.

Source: CoStar STR & Trending October 2021 data

Christmas cancellations

The Taoiseach’s announcement on Tuesday Nov 16th was followed by large scale cancellations of hotel, bar and restaurant bookings for events taking place in November and December. Corporate bookings in particular took a tumble as the Government advised to work from home unless ‘absolutely necessary’.

Bars and restaurants were also told to close at midnight, reverting to restrictions that had been in place until October 22nd when 11:30 closing was mandated. At the time of this report NPHET is not recommending any further restrictions.

Market Activity

  • Cliste Hospitality have been appointed to operate a brand new 163-bedroom hotel located in the corner of the North Circular Road and Dorset Street, this is the first Dublin hotel for the group that manages nine others around the country.
  • A number of high-profile hotel assets are expected to go sale agreed in the coming month or two including Killashee House in Kildare, Clonmel Park Hotel in Tipperary and the Clifton Court Hotel in Dublin.
  • A new 97-bedroom Premier Inn has opened in South Great Georges street in Dublin
  • US hotel group Standard Hotels announced plans to open a property in Dublin Arch (Connolly Quarter)
  • Asador owner Shane Mitchell has opened a brand new pub-restaurant in Dawson Street called Lennan’s Yard. Budgeting for 2022 Following strong performance this summer businesses in the sector are optimistic about the year ahead with many expecting a return or even an improvement on pre-pandemic trading.

Key points to consider when budgeting for the year ahead

  • Sizeable (hopefully temporary) increase expected in utility expenses. A number of suppliers of products and services have been adjusting their prices accordingly including linen suppliers.
  • Wages: Minimum wage increase to €10.50 and three days mandatory sick pay per annum will be in place in 2022. Pension ‘auto-enrolment’ is not expected until 2023 when mandatory sick pay will increase to five days.
  • Return to ‘normal’ booking patterns likely to extend lead in times for business which may impact the competitive landscape and erode the strong room rates reported for 2021.
  • Interest will be applied by Revenue on warehoused debt at 3pc starting January 2023 so it should be considered when planning cash flows for the end of the coming year.
  • The sustainability agenda continues to gather momentum, a number of operators are already adapting their premises and adjusting their operating models in advance of tighter regulations on carbon emissions. Early operational steps can be implemented in the coming year to support a gradual transition
Developments & Insights December 2021
Gerardo Larios Rizo
Gerardo Larios Rizo is head of Hospitality sector at Bank of Ireland.