How Northern Ireland government can help hotel success story
The recent extensive series of investments in hotels here is a welcome indicator of the progress of the tourism industry along with local leisure sector activity and the needs of the business community. NI is now approaching the scale of investment in hotel facilities needed for the next decade.
The hotel sector is now buoyant and generally successful. Investors anticipate satisfactory levels of return on investments. Room occupancy rates and average revenue per room can now be more comfortably compared with other parts of the UK and Ireland.
The NI Hotels Federation estimates that £500m may be invested between 2016 and 2020. Nearly 2,000 more beds will be added, bringing NI's capacity to over 10,000 beds. This investment, driven by forecasts of strong market demand, is welcome.
It is also a reaction to the many years of low hotel investment during the years of political and civil instability. NI is getting back towards the level of hotel provision that would be expected in comparable English regions.
Locally, a larger and growing tourism sector is a desirable core objective of official policy. But a balance must be struck between welcoming tourists who enjoy the environment and amenities, often without direct charges, and ensuring they make a contribution to the local economy.
Now Government is tasked with responding to suggestions of support it should give to underpin some aspects of the tourism sector. Last week's report by the NIHF on hotel expansion includes some suggestions for additional government support. The suggestions pose serious questions on their merit in securing value for public money, or the balance between the costs and benefits gained.
The report does not set out these suggestions in detail, except the request for specific easing of taxation requirements in a partial VAT reduction and the removal of air passenger duty. Support could address infrastructure improvements, ensure that hotels can recruit enough people adequately skilled to good standards, ease the impact of taxation on hotels and the wider tourist sector, and tackle supportive changes through reform of relevant legislation.
The federation has been arguing its case for more support with the NI government and other public agencies. The details in the submissions have not been published.
They will be assessed on availability of extra government funding, the tensions if NI was to be permitted a lower rate of VAT on tourist-related spending (including accommodation charges) and the balance between industry-funded support (eg for training schemes) and funding from taxation.
The response of the NI government is likely to be constrained because public funds are seriously stretched and also because tourism is now a success story and is in no danger of serious loss of momentum. For example, there will be limits to the scale of public sponsorship funding to secure special international events whether sporting or conferencing.
The federation has a stronger case for indirect infrastructure promotional developments such as an NI version of the Wild Atlantic Way.
This may be a stronger additional contributor to the economy than the lighter taxation suggestions.
The biggest single issue for tourism development may be whether (or how) Government might supplement enhanced training schemes, particularly in a post-Brexit labour market shortage.
The hotel sector faces possible labour market distortions post-Brexit if immigrant workers are deterred.
NI hotels are now enjoying better trading conditions than in other recent years. Ensuring that this continues is a challenge to operators and public agencies.