Hoteliers more optimistic about tourism outlook for 2014

By Business & Finance
24 February 2014

Irish hoteliers are more optimistic about the outlook for the tourism industry according to an industry survey undertaken by the Irish Hotels Federation (IHF) in advance of its 76th Annual Conference.

Overall confidence levels are up on last year, with four out of five (83%) of respondents indicating a positive outlook for trading conditions for their business over the next twelve months – compared to just half (51%) having a positive outlook this time last year. As a result, two out of every three hotels (68%) plan to take on additional staff over the next 12 months.

Nationally, three quarters of hoteliers (75%) are seeing an increase in business levels compared to this time last year (14% report no change; 11% report a decrease). Advance bookings are also performing strongly with 65% seeing an increase on 2013.

Early indications for 2014 show that city destinations such as Dublin (within the M50), Cork and Galway are benefiting from event and business-related tourism while traditional tourism hotspots, such as Killarney are doing well. Growth is also evident in the east, south east and parts of the west coast. However, business levels are continuing to lag in the midlands, Shannon region and north west.

Tim Fenn, chief executive of the IHF states: “The Government’s decision to retain the 9% VAT rate continues to help the industry when marketing Ireland abroad as a tourism destination. Combined with increased air access and a continued upturn in the global economy, this is enabling us to attract a greater share of overseas visitors. This is directly feeding into increased confidence on the ground with over 65% of hoteliers planning to increase their investment in marketing next year and 77% planning to increase investment in refurbishment and product development.”

Overhanging debt

Despite the significant upturn in overseas visitors achieved in 2013, the hotels sector is still a number of years away from achieving profitability due to excessive levels of overhanging debt. As of the end of 2012, was debt in the sector was estimated to stand at €6.7bn – over a third of this which is in the process of being restructured, refinanced or recycled. This continues to weigh heavily on the industry with some 54% of hoteliers saying they are concerned about the viability of their business over the next 12 months.

Fenn says: “As a result of unsustainable amount of outstanding debt across the sector, the cost of servicing the interest alone means many hotels will not break even in 2014. This is despite having survived five years of economic downturn and implemented extensive cuts in operating expenses, which are now down 24% across the sector on 2008 levels.”

Other concerns

The cost of doing business in Ireland remains a major challenge, with hoteliers citing excessive local authority rates as the single most pressing issue stifling cost competitiveness within the sector. While the availability of appropriately priced credit has improved, 24% of hoteliers still indicate that they have experienced difficulties accessing standard/normal credit facilities from their banks over the last 12 months.

Breakdown across markets
Compared to 2013, business levels are up in the domestic market with two out of three (63%) of respondents seeing a low-level increase in business from the island of Ireland in the first couple of months of 2014. This contrasts with 1 in 3 (28%) who are experiencing static business levels and 9% who are seeing a decrease in business from the domestic market.

Half of respondents (50%) are seeing an increase in bednights from Britain this year while 43% see no change and 7% see a decrease. Respondents are also positive about the US market with 36% seeing an increase in business (52% see no change; 12% see a decrease).

Results indicate mixed performances so far this year for both Germany and France, Ireland’s two biggest markets in continental Europe. Compared with this time last year, 22% of respondents noting an increase in bednights from Germany (67% see no change; 11% see a decrease) while 15% are seeing an increase from France (75% see no change; 10% see a decrease).