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Hotel sector facing potential decimation, says NIHF

Northern Ireland Hotels Federation President Stephen Meldrum launches the latest hotel sector ahead of today’s virtual Hospitality Exchange, The Summit.

Hospitality Exchange, the Northern Ireland Hotels Federation’s annual conference, was already underway in virtual format this morning when new restrictions were announced for the hospitality sector spanning a four-week period from October 16.

“The news that the hospitality sector in Northern Ireland will have to close from 6pm this Friday places the sector in a perilous position,” said Janice Gault, CEO, Northern Ireland Hotels Federation (NIHF).

“Having traded responsibly throughout the summer, hotels hoped that they would have had the opportunity to continue trading in a similar manner for the foreseeable future. The additional restrictions which have come into force in recent times have brought the viability of hotel trading into question.

“Forecasts from the NIHF have indicated that hotels will already sell one million less bedrooms than they sold in 2019 and the measures announced today will result in the decimation of one of Northern Ireland’s most buoyant sectors which has invested £650m over the last five years.

“It goes without saying that our primary concerns are the health and well-being of hotel guests and staff. The situation is a precarious one with livelihoods under threat and tourism infrastructure being irreparably damaged.

“It is essential that hotels have access to support so that we have an industry to return to, clear guidance of what is expected from them in terms of closure and a pathway back to recovery.”

The stark impact of Covid-19 on Northern Ireland’s hotel sector was revealed at The Summit, which was hosted by BBC’s Mark Simpson with delegates invited to live stream the programme, submit questions and take part in the discussion and debate.

The 2020 line-up included an update on the hotel market with a specially commissioned report from (NIHF forecasting that at least one million less hotel rooms will be sold this year. Overall trading for the hotel sector is expected to fall to under £250m in 2020 around one a third of the 2019 turnover figure.

The hotel sector is the largest of Northern Ireland’s serviced accommodation sectors in terms of rooms, with 143 hotels providing 9,580 rooms. In 2019, around 2.5 million rooms were sold and predictions were that 2020 was set to follow a similar trajectory. Pre Covid-19, the sector also supported 13,000 jobs: 10,000 direct, 800 indirect and 2,200 induced.

“Each year the NIHF commissions a report which explores a series of figures linked to the sector and its performance,” said Gault. “This year’s Hotel Report 2020 is a more like a horror story than fairy tale. The impact of Covid-19 has been significant.

“The hotel sector entered 2020 cautiously confident. Investment in the region of £650m in new and upgraded stock in the preceding five years had delivered an exceptional product with the hotel sector in Northern Ireland poised to capitalise on increased all island air access, modern hotel stock with a record number of rooms and strong international interest in visiting the region. As 2020 dawned, the biggest challenge on the horizon was Brexit.

“When the Covid-19 pandemic hit, hotels were ordered to close on 26th March 2020 and allowed to re-open on the 3rd July. The plight of staff was one of the primary concerns of businesses and the introduction of the Coronavirus Job Retention Scheme by the Chancellor was a huge relief. In the region of 90% of hotel staff were furloughed.

“However, the industry’s inability to trade in the way it did prior to closure means that it is likely that the sector will lose between 15-20% if its direct work force through redundancies, re-deployment and natural churn. The final number will be determined by winter trading, the timing of a return to full trade and fiscal support for employees over the next six months.

“When the industry did re-open on a phased basis in July, increased domestic business and large visitor numbers from the Republic of Ireland contributed to a better summer than many had predicted. September also held up reasonably well. The real game changer has been the VAT rate reduction to 5% allowing hotels to hold their rate and offer value.

“In October the situation began to deteriorate again as Covid-19 infection levels rapidly increased. The introduction of a Northern Ireland wide curfew and localised restrictions in the Derry City and Strabane District Council (DCSDC) area decimated trading.

“The scenario in the DCSDC area now appears to be the playbook for what is to come: hotels open only for residents; only essential travel is recommended for those living in the region and those outside the district being advised not to travel into it. The effects of these measures in DCSDC resulted in over 40% of the hotel bedrooms being closed after eight days. This figure may increase if the current regime remains in place for longer than the initial two-week period.

“The key for the hotel industry is to be allowed to trade sustainably within a clear and workable framework. Hotels have shown their resilience and resolve since March. They have traded responsibly, and they have a strong reputation.

“The support that has been received to date has been welcomed but as recovery becomes more truncated this support must continue so that the industry can survive.

“On a local level, rates relief for the year was very much welcomed and the hope would be given 2020-21 performance that there will be a discount for the coming financial year. Similarly, the reduction of VAT to 5% until March 2021 has been a lifeline and businesses will need this to continue beyond its current end date.

“The Coronavirus Job Retention Scheme (furlough) which allowed employers to protect staff was vital and is still being used, while the new Job Support Scheme, though not yet fully explained, will be required over the winter, particularly if we have lockdowns, curfews and restricted trading. The furlough bonus due in February will be welcomed but if the sector is in lockdown it is difficult to see how hotels can meet the terms to secure this payment.

“Finally, the announcement of £9.9m additional funding for the sector from the Executive has also been welcomed. This will help fund increased promotion, support and a stay at home voucher scheme. The hope is that these funds can be deployed despite the looming threat of lockdown.

“On a positive note, Ireland as an international destination has a good reputation but the propensity to travel at present is low. There will be pent up demand and hopefully this business can be realised at a future date when the pandemic has subsided and it is safe to do so.”

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