What could hurt Ireland's hotel prospects?

Image of Belfast Waterfront: ©iStock / RobertMayne. (Belfast Waterfront)

Hotels in Northern Ireland followed the southern part of the island’s upwards trend for a strong 2016, according to the latest data from ASM Accountants.

The group reported occupancy of 77.9 percent for the year, driven by a fall in the value of the pound—but as the region benefits from the looming Brexit, an increase in supply and the potential for a hard border may hit performance.

The study reported that average room rate increased by 4.1 percent on the year to £77.95, driving a 4.6-percent increase in RevPAR to £60.74.

“Without doubt, the almost instant decline in the value of sterling on the back of the EU referendum result in June 2016 boosted our competitiveness as a destination and, in Belfast especially, this made a tangible difference to the demand for accommodation in the second half of the year,” Michael Williamson, director of Consulting at ASM Accountants said.

“Not only is Northern Ireland better value for money to those traveling from Europe, but we are just as appealing to the Great Britain market since traveling to Europe is now more expensive for UK residents. It is now that we should be maximizing the opportunities offered by the relative weakness of pound sterling by increasing our marketing efforts in Great Britain and in other out of state markets. We can be sure that our key competitors will continue to invest heavily in marketing their destinations such is the importance of the tourism industry to their respective economies.”

Looking at the supply side movement in Belfast, Williamson said that the “level of development in Belfast is unprecedented and will add around one-third to the supply of room stock by the end of 2019. It’s hard to see how the demand for rooms can grow at this level in the short-run, so I fully expect there to be some decline in average bedroom occupancy rates from 2018 onwards. But let’s remember that we are coming off a very high occupancy rate, so the impact may not be severe as that experienced during the last wave of development in 2009 and 2010.”

The Republic

The Republic of Ireland—what most Americans just call Ireland—has also seen growth, with Dublin in particular seeing a strong recovery since the downturn. STR is predicting that room rates in the capital will increase by between 5.5 percent and 7.5 percent in the second half of this year.

These rooms, however, are likely to be challenged by an increase in supply, with tourism body Fáilte Ireland expecting just under 5,500 hotel rooms to be built in Dublin between now and 2020.

“The research is saying that supply will improve by 2019,” Fáilte Ireland’s head of research, Caeman Wall, said. “However, we face ongoing pressures until they arrive and it is critical that the hotel industry keep a watchful eye on competitiveness. If we damage our overall value-for-money perception with international visitors and buyers, we will create a problem that will take a long time to fix.”

“The Irish market has seen almost 10 years of no new hotels,” Joseph Quinn, analyst, Davy Research, told HOTEL MANAGEMENT. “In terms of how the Dublin supply comes in, most of it is coming on board in the last part of 2018 and it should be quite manageable with a lot of it extension work.”

An increase in supply is not the only issue facing the region. As the UK attempts to negotiate its exit from the EU, the issue of a “hard” border between Northern Ireland and the Republic of Ireland could see the imposition of customs and passport controls. If a “Hard Brexit” results in hard borders then there seems little doubt they will have an impact on tourism and the wider business environment.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.