Belfast Telegraph

Monday 22 December 2014

Tourism is silver lining but clouds are hard to shift

The weather is always a hot topic of conversation on these shores with tales of woe, talk of an Indian summer and, if last winter is to be repeated, a return to the ice age.

It's a tricky thing and sometimes the sun can be shining in the city while grey clouds sit stubbornly over the rural landscape. Its unpredictability is the only thing you can be certain of. In reality its a very good analogy for the business turmoil the world is currently experiencing with constant challenges, unpredictable trends and the odd unpleasant downpour. It is particularly fitting for the hotel industry which is currently going through one of the most turbulent periods the industry has ever experienced.

To set the scene you have to go back to the late 1990s, when Northern Ireland had 137 hotels, the majority independently owned and managed, mainly in the three- star category. There were one or two international brands and budget hotels were in their infancy. By 2010 the landscape had altered considerably with the number of hotel rooms growing to 7,700 - an increase of 57%. In a curious twist the number of hotels remained exactly the same, sitting at 137, but their size, location and type had altered inextricably.

Hoteliers have invested in excess of £500m in the last decade with upgrades, new builds and general refurbishments being the norm. These investments were made in a climate of good economic growth, strong demand and high consumer confidence Occupancy rose, reaching a peak in 2008 with occupancy hitting 80% during the most buoyant months. Recent figures published by ASM Belfast and the Northern Ireland Hotels Federation show a sluggish performance with occupancy levels at 67.5% over the last quarter and room rates averaging £67.56.

Belfast, where the bulk of Northern Ireland's hotel rooms are situated, has experienced the biggest downward shift, with occupancy tumbling by 13% and room rates falling by 26%. This downturn makes it very difficult for the industry to generate levels of profit that would facilitate investment or expansion. However it must be said that a number of resort and rural properties are performing very strongly with a good rate being achieved.

A number of them are achieving occupancy levels of 90% as a result of a good business mix and strong demand from the local population. Michael Williamson of ASM said: "There are a number of regions that have held up well over the past year.

"In general, those hotels located in rural areas have outperformed those situated in major urban settings. The holiday-at-home market has been strong for these operators, such that there has been less requirement to adopt heavy price discounting as a means of generating demand. The result is that hotels in rural and coastal locations have experienced a period of relatively strong trading with many recording revenue and profit growth."

The real problem for the sector is forecasting ahead - whether it be to next week or next year. Last-minute booking has become the norm, making cost control and staffing more difficult. Consumer behaviour has altered; just as it is seen as cool and indeed prudent to shop in discount stores, staying in budget hotels and bartering over your hotel rate has become wholly acceptable. The business customer has become as cost conscious as the leisure visitor, and confidence in all segments remains very low.

The hotel sector and indeed all those in the hospitality industry are in the business of providing enjoyment, holidays and positive experiences. This is a real challenge against a framework of financial pressures and falling demand. However, the capital investment required to set up and operate a hotel lends itself towards a 30-year investment as opposed to a three-year quick-profit model. Those who are engaged in the industry are there for the long haul and see the sector as a real contributor to the Northern Ireland's economic and social infrastructure.

Tourism in its widest sense really could be the silver lining in the current economic cloud but it may be a couple of seasons before we see the sun shine again.

Janice Gault is chief executive of the Northern Ireland Hotels Federation

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