Hospitality sector stays resilient

The delay in the lifting of restrictions on indoor dinning was a severe blow to the hospitality sector but firms are still optimistic about the future, says Bank of Ireland’s head of Hospitality Sector Gerardo Larios Rizo.

The summer of reopening has so far turned out to be anything but for the Irish hospitality sector and the material and mental cost will be immense.

That’s the view of Bank of Ireland’s head of Hospitality Sector Gerardo Larios Rizo who said that despite this says that business sentiment remains strong with business owners pinning their hopes on the return of international travel and the ongoing vaccination rollout.

“The vaccine roll out, which will support indoor dinning, should also support the return to offices, and later live events … normality will return one slow step at a time”

In his latest analysis as part of the Sectors Development & Insight report for June by Bank of Ireland’s Sectors team, Rizo said that State measures including the extension of the Employment Wage Subsidy Scheme, the extension of lower tourism VAT rate of 9pc until September and the commercial rates waiver, have been crucial.

Stops and starts

Man with glasses wearing a blue suit.

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

“Strong summer trade has always been essential for businesses, the season will now be shortened which limits trade prospects now limited to August and September”

But the delay in the much-anticipated reopening of indoor hospitality was a severe blow.

“I think it’s vital to consider the toll on mental health of pub and restaurant owners in particular. Business owners are not only concerned about their livelihoods, but also about their staff and the loyal clientele they developed over the years,” Rizo said. “The government supports have so far help to mitigate loses, however people are really looking forward to a return to normality and this delay just makes that more uncertain. We have no guarantees about further delays, and that moving goalpost is mentally exhausting for everyone.

Rizo said the delay in the lifting of restrictions on indoor dinning was a severe blow to the hospitality sector at wide for a number of reasons. “It impacts on consumer confidence as people are only starting to get comfortable with close social interactions.

“Staff had been rostered and food/beverage supplies secured some of which will be perishable, the incurred expenses will become losses.

“Strong summer trade has always been essential for businesses, the season will now be shortened which limits trade prospects now limited to August and September.

“Many businesses simply cannot offer outdoor dining and the extension means no trade whatsoever for a couple more weeks.

“Although hotels can trade, the appeal of destinations is somewhat dampened by the fact that visitors have limited options for dining particularly when the sun’s not out.”

Staycations and outdoor events

Rizo said anticipated spending in the domestic economy driven by staycations is the hope that many in the sector are depending upon.

“The craving for social interactions with friends and family combined with the appeal of settings other than one’s living room or garden has delivered =very strong domestic demand to date. The Government’s strong message on foreign travel has further supported this as we have essentially a captive audience in terms of demand.

“Irish households spend more money on foreign travel/holidays than overseas visitors to Ireland do on an annual basis (€7.9bn in 2019 spend by Irish residents overseas vs €6.86bn spend by overseas visitors in Ireland), so our domestic market can make a big difference.

“However, this does not take corporate demand into account which leaves a material void for Dublin in particular. Travel for cultural and sporting events is the other big gap whose return remains uncertain. Big events and matches in the Aviva Stadium, Thomond Park or Páirc Uí Chaoimh have a big impact on hotels bars and restaurants.”

Rizo said that the sector has reacted by channelling its efforts to domestic advertising through email campaigns targeting their existing customer base as well as reaching new customers through social and printed media.

“Targeted marketing efforts have helped a number of hotels deliver strong room rates particularly as the direct approach takes out some of the sizeable commissions payable to third parties. Some venues like Liss Ard and Ballymagarvey which would have traditionally focused on the wedding market have been able to focus on ‘accommodation sales’. However, some businesses like hotels in Dublin city centre have simply delayed their opening conscious that demand remains compromised and reopening might just not be feasible at present.”

Rise of the regions

In 2020 when staycations soared, it revealed an imbalance between cities and regions with regional destinations like Kerry and Galway enjoying significant footfall. Rizo expects to see more of the same in 2021.

“The imbalance between demand for the capital and the regions is set to continue in the short term. Although art galleries, cinemas and shops have reopened there are still a number of activities including indoor dinning and live music events that would have historically drawn visitors to the city that not available/allowed yet.

“Furthermore, a large part of the working population that would have been traditionally based in Dublin city are still working from home, the drop in footfall that would have fuelled morning coffees, lunches and Friday drinks will take a few more months to come back in full.   For hotels the low demand will further be impacted by the substantial number of new hotel bedrooms on offer; over 2,000 new hotel bedrooms are expected to enter the market before the end of 2021.

“Business sentiment remains strong with business owners optimistic about a bounce back in demand after international travel resumes. The vaccine roll out, which will support indoor dinning, should also support the return to offices, and later live events … normality will return one slow step at a time,” Rizo said.

By John Kennedy (john.kennedy3@boi.com)

Published: 6 July 2021