67% of hoteliers expect an improvement within 3 years

Two-thirds of hotels are confident that they will see an improvement in the performance of the Irish hotel sector over the next three years, according to new research produced for AIB.

In the second of the ‘Outlook Report’ series, the bank examined the hotel sector and found that 67% of hoteliers are confident that the tourism sector will improve within the next three years.

Amárach Research, who examined the sector on behalf of AIB, found that while 26% of hotels had seen their turnover fall, 54% had reported a growth in turnover last year.

The head of the Irish Hotels Federation, Tim Fenn, said that after the slump in tourism figures the recovery in turnover offered grounds for optimism.

“After a period of a big slump, when you see it stop and recover, there is relief and grounds for optimism. The bigger cities have already seen a recovery.” But he cautioned “there remains to be quite a lot of work to be done”.

The recovery is still quite fragile, with hoteliers viewing a number of factors as major threats to sustained growth in the sector. Vat rates, utility costs and local rates, as well as a fall in visitor numbers, are all factors that hoteliers felt could undo their recovery.

“The outlook for the hotels sector is more upbeat compared to last year, with hoteliers increasingly optimistic about the trading conditions for their businesses. However, significant challenges remain in terms of high operating costs — most notably local authority rates, which have been kept at pre-2007 levels even though turnover is significantly down,” said Mr Fenn.

“Another area of serious concern is the attempt to reintroduce sectoral wage-setting mechanisms in the form of Joint Labour Committees, which are out of touch with the business realities facing hoteliers and act as a barrier to job creation in the sector,” said Mr Fenn.

Hoteliers are set to let their money follow their optimism by refurbishing their hotels. The research found that the majority of owners are going to refurbish or extend their hotels over the next three years.

Some 44% of the hotels are planning on funding their expansion through loans, while 84% will fund it through reinvesting their profits.

Head of business banking at AIB, Ken Burke, said: “AIB is wholeheartedly committed to the growth and development of the Irish tourism industry and has enjoyed a long relationship with the hotel sector for many years. AIB has a dedicated hotels team which has been to the fore in developing a wide range of solutions for the sector.