Hotels may have mixed fortunes as they reopen their doors

Austin Hickey, Director in BDO's Consulting department, provides his analysis of the hotel sector's recovery against the backdrop of Ireland's roadmap for reopening the industry. 

With a roadmap for reopening the hotel sector now in place, hoteliers in Ireland are readying themselves to welcome back guests and planning for a busy summer to generate some much-needed cashflow.

The impact of Covid and the subsequent closure of many hotels over the past 15 months has resulted in historically low hotel occupancy levels for 2020.

According to hotel data tracker STR, hotels in Dublin achieved an average room occupancy of 31pc in 2020. The national figure for Ireland was slightly lower at 30pc, resulting in a loss of €2.6bn in revenue for the sector during the year.

The immediate sector prognosis for the summer period, notwithstanding anticipated low levels of international visitors, is high demand from the domestic market leading to a relatively busy period for hotels – particularly in traditional holiday destinations.

Concerns, unfortunately, remain for hotels located in some of the more urban locations which traditionally have been more reliant on overseas, corporate and incentive markets. Data from the CSO shows the overseas visitor market contracting by over 90pc during 2020, with uncertainty remaining as to when it will start to recover.

The predicted high levels of demand for hotel accommodation in the coming months will be a welcome relief. However, the road to recovery will be long, and this upcoming spike in demand is merely the opening chapter of the sector’s recovery story.

Plans and strategies put in place by hoteliers in Ireland to manage the next two or three years are of equal importance to the plans being implemented to capitalise on the anticipated surge in demand.

In its Tourism Recovery Plan, the Irish Tourist Industry Confederation suggests it may take up to five years for the Irish tourism sector to fully recover from the effects of the lockdown, while BDO modelling indicates it may take a similar period for average room occupancy levels to return to the peak levels reported in 2019.

If we assume no further increases in hotel supply, and allowing for varying growth rate assumptions, it could take until the end of 2024 before average room occupancy nationally returns to 73pc. And it could take until 2025 for average room occupancy in Dublin to reach 85pc. Though we would expect the return of international travel to drive a much quicker V-shaped recovery in the market.

At the same time, it is important to remember that demand in Dublin grew at an average of 3.7pc per annum between 2000 and 2019, with the biggest annual increase of 14.6pc taking place between 2006 and 2007.

Content originally published on Irish Independent

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