Crowe partner, Aiden Murphy shares some reflections from the Irish Hotels Federation Conference, which took place in Killarney in March 2019. Looking Beyond was the theme of the conference and this annual event provides a powerful barometer on the collective mood and outlook for the hotel sector in 2019.
While hoteliers remain positive about the 12 months ahead, their outlook has dampened compared to last year, based off a number of issues:
- That cost increases in the business may outpace revenue increases as hotel sector enters phase of slower growth.
- Concerns as to the viability of investing in adding rooms as a means of growing revenues.
- The impact of the 50% increase in VAT rate from 9% to 13.5% for accommodation and food sales.
- The tightening labour market causing rising costs and a shortage in key departments, such as food & beverage.
- The impact of Brexit on visitors from the UK market.
- The concern that, after seven years of continued growth, a slowdown may be on the horizon.
This cautious mood from hoteliers was counterbalanced by the optimism from government agencies.
- The expectation is that visitor numbers will remain buoyant and the ongoing contribution they bring to the national economy will further support continued investment in the infrastructure and attractions for the sector.
- Local government agencies have been positively engaging with Tourism Ireland and Fáilte Ireland to successfully promote the regional spread of tourism.
- It is also expected that the development of Dublin Airport as a fourth transatlantic hub will keep Ireland more connected than ever to key markets like North American, where visiting Ireland remains a bucket list ambition.
The conference also addressed the theme of sustainability in all its guises.
- Tourism Ireland talked about quality over quantity and their focus on targeting visitors with a higher spend, rather than simply focusing on numbers.
- Consumers are favouring hotels that can evidence in a clear way how they are achieving greater efficiency with regard to water use, energy use, waste recycling and support for electric vehicles. Consumers are also turning their attention to menu choices which include planet friendly ingredients.
- While it is recognised that the sector will experience higher costs for utilities as regulators push for sustainability improvements, greater cultural change and investment is needed by hotels to protect against these costs increases.
- The expectation is that statutory bodies will require faster progress on sustainability issues over the medium term. The recent campaign to withdraw plastic straws is an example of the increased impact of public sentiment and pressures from consumer sources.
- The prominence of social media is also having a positive impact on a hotel’s sustainability efforts as guest reviews provide a recognition of positive measures in place helping to boost the hotel’s image.
Food critic Giles Coren also talked about the power of Instagram and other social media where customers regularly post images of their dishes during a meal. He urged hotel restaurants to focus on the theatre and presentation of food to enhance the guest experience.
On the back of the popularity of his BBC documentary Amazing Hotels: Life Beyond the Lobby, which featured Ashford Castle, Giles stressed the importance of continued investment by Irish hotels and tourist attractions and cautioned about relying too much on the warmth of the people and the welcome rather than investing in the quality and range of activities and experiences for visitors.
Returning from the conference Aiden concludes, “It is apparent that hotels need to embrace these new challenges. It is paramount that hoteliers identify smarter cost saving initiatives to counteract the impact on profitability of the recent 4.5 percentage point hike in the VAT rate. They need to have engagement with their staff in meeting this challenge and finding ways to generate savings.”
“Likewise for any plans or announcements of capital investment, the sustainability benefit arising from the investment should be highlighted. In fact, sustainability needs to be a key pillar for decision-making for future capital investment plans.”