The path to recovery for Ireland’s hospitality sector

The path to recovery for the Irish hospitality sector will ultimately begin when restrictions are lifted, says the head of Hospitality Sector at Bank of Ireland Gerardo Larios Rizo.

The one sector of the Irish commercial economy that has borne the biggest brunt of the economic fallout has been the hospitality and wider tourism sector.

Prior to lockdown in 2020 the hospitality sector had strong expectations. However, restrictions and limitations on social interaction took their toll on businesses operating in the sector.

“It is clear that if we all make a conscious decision to support the sector we can make a real difference”

The most recent Insights and Outlook report on the Irish hospitality sector compiled by the head of Hospitality Sector at Bank of Ireland Gerardo Larios Rizo makes for sobering reading.

Accommodation key performance indicators (KPIs) show that Dublin city centre was the worst hit with business down 77pc year-on-year between 2019 and 2020. Other destinations were also hit hard despite the staycation trend of 2020, including Galway (-52pc), Cork (-62pc), Limerick (-58pc) and Kilkenny (-48pc).

A substantial drop in hotel occupancy associated with the various stages of restricted trade was reported from March 2020 to December 2020 across the world and ROI was no exception; the sustained decline also impacted on room rates particularly in Dublin. Average RevPAR for the Republic of Ireland was around 60pc down on 2019 totals.

The hotel and restaurant sectors have been most likely to avail of the Temporary Wage Subsidy Scheme (TWSS) and Tax Warehousing facilities as reported by the Department of Finance SME Credit Demand Survey.

With the potential lifting of some restrictions in April and the hope that more of the Irish population will be vaccinated by late Spring, the likelihood is that the sector will not be in a position to truly reopen until the Summer.

Green shoots may also come from hopes of a spending spree as a result of pent up demand by lockdown weary consumers. The report said that Fáilte Ireland expects that part of the almost €8bn spent by Irish residents on overseas travel during 2019 could be spent on domestic trips while international travel remains disrupted. Air and sea arrival numbers into Ireland for 2020 were 77pc down on last year at the end of November 2020 according to CSO data.

Supporting the hospitality sector will be essential

Man with glasses wearing a blue suit.

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

ThinkBusiness spoke to Larios Rizo about his thoughts on these green shoots and how Ireland’s internationally renowned hospitality sector will return to growth.

No doubt 2020 was a difficult year for the hospitality sector, do you foresee a recovery for the sector in 2021?

The path to the recovery for the hospitality sector will ultimately begin when restrictions are permanently lifted. Right now we only know that the government does not envisage the reopening of the sector before mid- summer, at which stage the accelerated vaccination programme would have more than 80pc of adults receiving the first dose of the vaccine.

We know from Fáilte Ireland surveys that there is strong pent up demand, so if all goes according to plan then we can expect domestic demand to bounce back almost immediately which should support strong trade for the second half of the year.

However, it’s unlikely that t the recovery will be evenly spread; businesses located in regional and suburban locations are expected to recover at a faster pace particularly as restrictions on large gatherings are unlikely to be lifted this summer. The return of the corporate and overseas demand could also take a little longer so businesses that depend on these markets might be initially at a disadvantage.

What must be done to ensure the sector can reopen and one day thrive again?

Well, the Government has provided a number supports that have delivered some vital cash inflows for businesses during the lockdown. As we come to an end on the trade restrictions businesses might need additional cash flow supports to fund wages and stocks particularly as the government supports will eventually cease.

I think Fáilte Ireland’s ‘Keep Discovering’ campaign is ideal as it looks to encourage people to take more than one trip this year when the time is right. Well spread and sustained domestic demand will be essential if we are to fast track the recovery. 

As a nation we spend nearly €8bn on overseas travel every year and we benefit from around €7bn from our overseas visitors; it is clear that if we all make a conscious decision to support the sector we can make a real difference.

How should businesses in the hospitality sector be planning for their future and what areas are ripe for innovation?

Consumer behaviour has been reshaped by the pandemic and this will impact on expectations as businesses welcome back customers to their premises. Good service, good products, clean facilities and a friendly smile is all customers really want, if you make good on the delivery of those anything extra should exceed expectations. 

Demand will take some time to return to pre-Covid levels which could increase competition. A number of hotels, bars and restaurants have been carrying out comprehensive repairs and maintenance projects as well as some improvements which could increase their appeal as customers return and ultimately displace demand. 

New products and services including the improvement of outside dining experience, online check in and check out and keyless entry to rooms have been implemented by some hotels. I think anything that can improve your guest experience is good to consider.

Within the sector, do you see much activity on the horizon in terms of consolidation or mergers/acquisitions?

Mergers and acquisitions have been prevalent in every sector for a number of years now so it’s likely that some level of consolidation will continue to take place across all sectors including hospitality.

Ireland’s hospitality product is unique as we have a large number of family/individually owned businesses (much more so than the UK) which is very appealing to both domestic and international visitors. The government supports rolled out over the last year would hopefully go some way in helping us to maintain that.

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

Published: 11 March 2021