Bracing for Brexit
The hospitality industry was among the first to suffer the fallout from the UK’s vote to leave the EU and the effects are increasing as October 31st draws closer
According to Fáilte Ireland, hotels and tourism businesses near the border have already suffered a 30 per cent downturn in business as a result of the fall in the value of sterling and the general uncertainty surrounding the UK’s departure from the EU. Photograph: iStock
While opinions differ on the price impact of a no-deal Brexit on Ireland’s tourism industry, there is general agreement that it will be bad news. According to Fáilte Ireland, hotels and tourism businesses near the border have already suffered a 30 per cent downturn in business as a result of the fall in the value of sterling and the general uncertainty surrounding the UK’s departure from the EU.
In June, management consultancy Crowe revealed the results of its latest hotel industry survey – which found that a no-deal Brexit could result in €52 million worth of lost revenue for Irish hotels in 2020. According to Crowe, business from UK tourists and business travellers could fall by 15 per cent during the year. That would translate into about €5 million worth of lost accommodation income and a further €7 million from a fall in food and drink sales.
The report also found the market share of hotel guests from Northern Ireland and the UK has dropped by 25 per cent since 2013. The surge in demand from US visitors has balanced this out to a certain extent, but hotels in the border counties have found it more challenging to pick up replacement volumes from international markets and have become more dependent on the domestic market.
Brexit is a prime source of concern among hotel industry leaders. They want to see an end to the over-reliance of the industry on the UK market
It is not only businesses in the border counties which are affected. Another survey of hoteliers, carried out in September by hospitality recruitment consultancy The Firm, found Brexit ranked second as the most serious challenge facing the sector, with rising costs just marginally ahead.
“Brexit is a prime source of concern among hotel industry leaders.”says Micheline Corr, director of The Firm. “They want to see an end to the over-reliance of the industry on the UK market.”
Brexit presents a mix of challenges for the hospitality sector, according to Helen McDaid, manager of Enterprise & Hospitality Supports at Fáilte Ireland. “The industry started feeling the impact as soon as soon as the vote was taken in 2016,” she says. “Tourism is discretionary spend and it’s affected by any uncertainty. The overall numbers held up, but the rate of growth has been slowing. The sharp fall in sterling has affected the numbers travelling and the amount they spend.”
Tourism numbers from the UK dropped by 5 per cent in 2017 in the wake of the Brexit vote and its knock-on impact on currency markets. “The numbers never really recovered and the spend is down quite sharply,” McDaid adds. “Some business in the border counties have seen a drop of about 30 per cent in their leisure business. A lot of them would depend on the Northern Ireland family leisure market.”
The drop in the value of sterling is also affecting Ireland’s international competitiveness. “It’s making the UK a lot more attractive as a destination for many of our key source markets,” says McDaid.
‘A wake-up call’
Irish Hotels Federation president Michael Lennon describes Brexit as “a wake-up call” for Government and policy makers and calls for an immediate response in the form of a VAT reduction and other actions.
We need a commitment from Government to restore the 9 per cent rate of VAT with no ifs, buts, or maybes.
“Tourism is the largest indigenous export employer in the Irish economy supporting over 270,000 jobs,” he says. “Tourism competes internationally for business every day. Competitiveness is a key factor in sustaining our growth. It is time now for Government to revisit the 9 per cent VAT, to look at all Government-controlled barriers to competitiveness and to fast-track reform of insurance claims management.”
Adrian Cummins, chief executive of the Restaurants Association of Ireland, agrees. “Every time there is more discussion about Brexit it depresses consumer spending,” he says. “There is a fear about what will happen after October 31st. We need a commitment from Government to restore the 9 per cent rate of VAT with no ifs, buts, or maybes. If that doesn’t happen, I know what our members are saying – no VAT, no vote.”
Fáilte Ireland has developed a customised suite of supports to assist businesses deal with Brexit. To date, the organisations has engaged with 3,000 business and trained more than 8,000 individuals in preparation for Brexit. The tools and supports offered include an online Brexit Readiness Check, which takes just 10 minutes to complete and provides business with a bespoke report to help them define their Brexit response plan, the priority areas to be addressed, and outlines how Fáilte Ireland supports can help them.
According to McDaid, the Fáilte Ireland approach has been to provide support and advice geared towards the need of each individual business.
“We deal with a very diverse portfolio of businesses, from one-person operations all the way up to major hotel chains,” she says. “We tailor our supports to meet the individual needs of each company. We have a budget of €5 million for Brexit supports this year and we are using €1.7 million to target overseas buyers to get them to include Ireland in ways they haven’t done before.”
The Fáilte Ireland Market Diversification Programme assists companies to avoid an over-reliance on one market. The programme focuses on developing viable and sustainable market entry strategies; honing tactical sales skills; targeting business in new markets and perfecting sales pitches to secure new business. “It helps them develop and deliver plans to diversify markets, to ensure a more sustainable approach to business,” says McDaid.
There is also a GB & NI Market Retention and Growth programme. “While it is very important to consider diversifying into different markets, it’s also important to strive to retain and even grow business from Great Britain through targeting best prospects, aligning with marketing campaigns and availing of targeted business supports,” McDaid points out.
In addition, Fáilte Ireland has established a new panel of experts to deliver one-to-one guidance and mentoring on key Brexit issues for tourism businesses – initially in border counties, in order to facilitate business sustainability and growth.
“We are also running an intensive multi-module Brexit preparation programme in conjunction with the IHF branch in Cork,” McDaid adds. “This bespoke programme is giving businesses across Ireland’s Ancient East and the Wild Atlantic Way in Cork the sales tactics and strategies they need to drive commercial growth by retaining and growing business from the UK in addition to other key leisure markets. We are running a similar programme for about 70 tourism and leisure businesses in the Waterford-Wexford region as well.”
Adrian Cummins believes more should be done in terms of direct financial assistance, however. “If you look at the agri sector, a €100 million fund has already been established for the beef industry alone,” he notes. “They haven’t even looked at dairy and sheep and the other elements yet but that will come. We haven’t seen one cent proposed for the hospitality sector.”