Crowe Hotel Sentiment Survey captures outlook of Irish Hoteliers

• Occupancy rates set to fall from 2019 high of 73% to 32% for 2020
• Average room rate of €111 in 2019 is set to fall to €94 for 2020
• Dublin room rates predicted to fall 28% (€37) while Regional hotels room rates are expected to be down 13% (€14) in 2020 on 2019 levels
• 42% of hoteliers expect the impact of COVID-19 to last more than 18 months impacting the 2022 season
• 50% of hotels in Ireland could run out of money in the months ahead

Crowe, Ireland’s leading accountancy practice and advisors to the Irish hotel sector, has revealed the results of a sentiment survey of the Irish Hotel sector amid the Covid-19 pandemic. These results come at an unprecedented time when 87% of hotels have been closed for three months but prepare to reopen on 29th June. The survey was completed between 4th-15th June by 126 hotels with a combined 12,419 hotel rooms and representing over 20% of the hotel stock in Ireland.

Impact of Covid 19 on Occupancy levels and Average Room Rates:
The survey of hoteliers found that average national occupancy levels are set to dramatically fall from 2019 highs of 73% to just 32% for 2020. Dublin occupancy levels are forecast to be down 53% of 2019 levels with regional rates down 38%. As a result, Dublin hotels expect to be harder hit overall than Regional hotels in 2020 with total revenues for Dublin hotels forecast to be down 62% on 2019 levels. In comparison, Regional hotels are predicting a fall of 55% on 2019 record levels.

Hoteliers are preparing to operate in a marketplace where lower occupancy levels will be the norm for some time due to the collapse of the international tourist sector including corporate travel. As a result, it is inevitable that competitive pressure between hotels to attract the available demand will put downward pressure on average room rates. Hoteliers are predicting that the average room rate of €111 in 2019 is set to fall to €94 for 2020. When broken down by regions, Dublin room rates will fall by 28% (€37) in 2020 while room rates outside of Dublin are expected to be down 13% (€14) on 2019 levels.

Nationally 42% of hoteliers expect the impact of COVID-19 to last more than 18 months, affecting trade into 2022. Hoteliers in regional Ireland have a more pessimistic outlook with 46% expecting the impact on performance to last longer than 18 months versus. Only 24% of Dublin hoteliers agree with the lasting impact of the pandemic on the market. All hoteliers recognise that domestic demand will be critical to underpin hotel performance for the next two years.

Hotels adopting new approach to recovery:
When looking ahead to recovery, the survey revealed that Hoteliers have learned lessons from the economic crash of 2008 and now understand that discounting has a limited impact on overall demand stimulus. As a result, Crowe is predicting that Hoteliers plan to protect room rates by avoiding over-discounting room rates in 2020, allowing the industry to create a better base for 2021.

In line with this point of view, Dublin hotels are projecting that recovery in 2021 will be modest with occupancy rates remaining 31% down on 2019 and room rates down 24% on 2019 levels. In comparison, Hoteliers outside of Dublin are more positive predicting that average rooms rates will recover by 7% in 2021, although will remain 17% below 2019 levels and room rates will be 6% down on 2019 rates.

Speaking about the impact of Covid 19 on the sector and the outlook for future of the sector, Aiden Murphy, Partner at Crowe, commented:

“As hotel prepare to open next week, our survey tells us that 90% of hotels have needed to approach their bank for changes to their loan repayment terms or additional working capital. 53% are operating with just three months working capital reserves highlighting the urgent need to resume trading. Due to the collapse of international demand and an increase in operating costs, there is little expectation for hotels to generate a profit this summer. As a result, there is a situation whereby 50% of hotels in Ireland could run out of money in the months ahead.”

“To avoid this situation and maintain as many jobs as possible across the industry, Hotels will require ongoing Government supports in the form of extended temporary work scheme supports, reduced VAT rate, extension to rates waiver and other grants to sustain operations until demand levels allow for revenue and profit recovery. All hotels are implementing cost-cutting measures to include hiring freeze, reduction in staff numbers, pay cuts and deferring capital expenditure. These cost cutting measures alone will not be enough. By October 2020, the hotel sector will be facing a cliff edge as they enter another low season with minimal levels of international demand forecasted, no large events and constrained domestic demand. Hoteliers are facing a race against time.”

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