Crowe | Annual Irish Hotel Market Briefing Part 1
What’s the road to recovery? The journey to rebuild hotel profits and valuations
IHF Associate Member

At the annual Irish Hotel Marketing Briefing Crowe partner Aiden Murphy warned that many hotels in Ireland will record revenue in 2022 that will be over 30% down on 2019 levels – the last full comparable year of trading prior to the pandemic.

The briefing, held in partnership with Cushman & Wakefield, focused on the theme "What’s the road to recovery? The journey to rebuild hotel profits and valuations" which looked at current trading performance, investor sentiment and development landscape and the outlook for the sector as it struggles to recover from the impact of the pandemic.

Key insights from Crowe's Presentation:

The Dublin market will remain most impacted. Even with a strong events and leisure breaks market and strong recovery in international visitors, it will likely only achieve 70% occupancy level in 2022, a full 12 percentage points down from 2019 levels of 82% occupancy for the Dublin market. Room rates also likely to be at least 25% down on 2019 levels leaving Dublin hotels very challenged for 2022. Regional Ireland hotels, less reliant on overseas visitors, will not be as badly impacted, especially for hotels that are strong leisure destinations for the domestic market.

The domestic staycations market bolstered demand and fuelled strong room rates over Summer 2021, but the expectation is that Irish trips abroad will rebound strongly in 2022 and so we expect to see Summer 2022 record lower average room rates. Only some traditionally strong summer destinations did well this year and many faced lower occupancy levels, well behind 2019 levels.

Hotels have a high fixed and semi fixed cost base and so the Employment Wage Subsidy Scheme (EWSS), which is expected to finish at the end of the year, was vital as it underwrote a large proportion of payroll costs, keeping many hotels afloat as they operated at significantly lower revenues. The fallout from the pandemic for the hotel sector will endure over the next two years as they wait for international travel and the events market to recover fully. The test for EWSS qualification is that turnover is down at least 30% on the 2019 reference period. As this test will be met by many hotels in 2022, Crowe recommends that the relief be continued into 2022 to ensure the survival of impacted hotels for at least the medium term until there is a rebound in demand.

Even when hotel profits return, there will be cash flow challenges as many hotels will need to fund repayment of warehoused taxes when these fall due from 2023 onwards. The expectation is that it will be 2025 before 2019 profit levels can be attained as revenues will need to be at least 10% over 2019 levels due to the cost increases coming through which will erode profitability during the recovery period. The next 18 months will be very challenging and while the outlook is somewhat gloomy in the short term, the strength of the tourism product and the strength of the Irish economy provide an excellent backdrop and basis to suggest full recovery to pre COVID-19 levels over the medium term.

Download Crowe's Presentation Here

For Cushman & Wakefield’s Presentation Click Here

Irish Hotels Federation | Working Together