Average national hotel occupancy levels are set to dramatically fall from 2019 highs of 73% to just 32% for 2020, according to the latest Crowe sentiments survey.
The survey comes at an unprecedented time when 87% of hotels have been closed for three months but are preparing 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.
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.
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.
Aiden Murphy, Partner at Crowe, commented: “As hotels 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.”