Crowe Reveals Results Of New Irish Hotel Sector Sentiment Survey
Irish accountancy and business advisory firm Crowe has revealed the results of a new Irish hotel sector sentiment survey.
126 hotels, which have a combined room count of 12,419 and represent over 20% of Ireland's hotel stock, took part in Crowe's survey, which was completed between June 4 and June 15.
Impact Of COVID-19 Crisis on Occupancy And Revenues
According to the survey's findings, the average national occupancy rate is set to decline to 32% in 2020 from the 73% figure that was recorded for 2019. Dublin occupancy levels are forecast to decline by 53% while regional rates are expected to drop by 38%. As a result, Dublin hotels expect to be harder hit overall than regional hotels in 2020, with total revenues for Dublin hotels forecast to decline by 62% while regional hotels are predicting a fall of 55% from 2019.
Average Room Rate Prediction
The hoteliers that took part in the survey predict that the average room rate is set to fall to €94 this year from €111 in 2019. When broken down by regions, the survey participants expect Dublin room rates to fall by 28% (€37) in 2020 while room rates outside of Dublin are expected to decline by 13% (€14) from the figures for 2019.
Expected Duration Of Crisis Impact
Nationally, 42% of hoteliers that took part in the survey expect the impact of the COVID-19 crisis to last more than 18 months, affecting trade into 2022. Hoteliers in regional Ireland have a more pessimistic outlook, with 46% expecting the impact on performance to last longer than 18 months.
All hoteliers that took part in the survey said that they recognise that domestic demand will be critical to underpin hotel performance for the next two years.
Looking Ahead To Recovery
The survey found that, when looking ahead to recovery, hoteliers have learned lessons from the economic crash of 2008 and now understand that discounting has a limited impact on overall demand stimulus. As a result, Crowe predicts that hoteliers will protect room rates by avoiding over-discounting room rates in 2020, allowing the industry to create a better base for 2021.
In line with this point of view, Dublin hotels are projecting that recovery in 2021 will be modest with occupancy rates remaining 31% down on 2019 and room rates being down 24% on 2019 levels. In comparison, hoteliers outside of Dublin are more positive, predicting that average rooms rates will recover by 7% in 2021, but that they will remain 17% below 2019 levels and room rates will be down 6% on 2019 rates.
"Little Expectation For Hotels To Generate A Profit This Summer"
Crowe partner Aiden Murphy commented, "As hotels prepare to open next week, our survey tells us that 90% of hotels have needed to approach their bank for changes to their loan repayment terms or additional working capital. 53% are operating with just three months working capital reserves, highlighting the urgent need to resume trading. Due to the collapse of international demand and an increase in operating costs, there is little expectation for hotels to generate a profit this summer. As a result, there is a situation whereby 50% of hotels in Ireland could run out of money in the months ahead.
"To avoid this situation and maintain as many jobs as possible across the industry, hotels will require ongoing government supports in the form of extended temporary work scheme supports, reduced VAT rate, extension to rates waiver and other grants to sustain operations until demand levels allow for revenue and profit recovery. All hotels are implementing cost-cutting measures to include hiring freeze, reduction in staff numbers, pay cuts and deferring capital expenditure. These cost-cutting measures alone will not be enough. By October 2020, the hotel sector will be facing a cliff edge as they enter another low season with minimal levels of international demand forecasted, no large events and constrained domestic demand. Hoteliers are facing a race against time."
© 2020 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.