Sunday 23 July 2017

How Brexit is fracturing the Irish market for British tourists

Hotel and restaurant owners believe slide in sterling's value has already hit visitor numbers and the bottom line, writes Gabrielle Monaghan

Ties soon to be cut between the UK and the EU. Photo: Elena Schweitzer
Ties soon to be cut between the UK and the EU. Photo: Elena Schweitzer

Gabrielle Monaghan

In the 1970s, when going out to a restaurant in an Irish town meant prawn cocktail for starters followed by a well-done steak and vegetables boiled into submission, a group of 12 enterprising restaurateurs and hoteliers in Kinsale set up the Good Food Circle to pitch the west Cork town as the gourmet capital of Ireland.

Armed with the knowledge that Kinsale was one of few places with a plethora of decent restaurants, the group set out to counteract a slump in tourism in the maritime town, which was suffering from domestic economic woes as the Troubles raged in the North. They sought out new cohorts of tourists from Dublin and then set their sights on English visitors. In 1976, the first annual Kinsale Gourmet Festival was set up; by holding the event in October, the group could extend the town's summer tourist season.

The famous Temple Bar in the heart of Dublin's cultural quarter.
The famous Temple Bar in the heart of Dublin's cultural quarter.

The English foodies began to arrive in their droves, fascinated by the availability of fresh seafood, the narrowing winding streets, the old harbour, and the backdrop for the British defeat of Spanish and Irish forces during the Battle of Kinsale in 1601.

But these days, Kinsale has a different battle on its hands: how to hold on to the British.

Since the UK vote in June to leave the European Union and subsequent fall of the pound against the euro, Ireland is 15pc more expensive for British holidaymakers. In addition, as UK prime minister Theresa May enters two years of negotiations with the EU about exiting the bloc, uncertainty looms large over the Irish hospitality industry about whether travellers from the North will once again face border checks and if visitors from Britain will be restricted from free movement in the EU.

In Kinsale, the summer of 2016 was a bumper one for tourism, not least because many Britons had made their travel plans ahead of the Brexit referendum. But once the peak tourism season ended, Brexit was already making its presence felt in the affluent streets, according to Liam Edwards.

Edwards is chairman of the Kinsale Good Food Circle and the new president of the Restaurants Association of Ireland, which has 2,500 members.

He and his family run Jim Edwards Bar and Restaurant, a gastro pub and seafood restaurant on Market Quay that was opened by his father Jim in 1971. Jim Edwards, who was instrumental in the 1970s in helping to attract more tourists to Kinsale, still works at the restaurant but Liam has taken over the reins of the business.

"The tourist season finished in October but from November to now, Kinsale has been quieter than usual and we are feeling Brexit already," Edwards said.

"About 45pc of our customers come from England and we get a lot of people coming over for weekends because Kinsale is only a 20-minute drive from Cork Airport, there are numerous flights from England, and because we are the first destination on the Wild Atlantic Way. But, speaking as a Kinsale restaurateur and from speaking to other restaurants and hotels here, I know that there are already fewer English people coming during the off-season.

"In the last few years, when the pound was close to parity with the euro, the English kept saying what excellent value the town was for restaurants and hotel room prices.

"The bookings are okay and I remain positive, but there is a lot of uncertainty about the future."

While discourse surrounding the potential fallout from Brexit has focused on the potential impact on trade - or, indeed, the opportunities to Ireland presented by financial services relocating here - operators of hotels, restaurants and tourism businesses are concerned they will feel the most immediate impact from the UK's messy divorce from the EU.

This is especially the case outside Irish cities, where many towns and villages still struggling to recover from the recession.

Last year ended as the best ever for inward tourism, with the number of visitors to the island of Ireland climbing 11pc to 10.5m, contributing more than €5.4bn in revenue to the economy. After a record-breaking 28m passengers travelled through Dublin Airport in 2016, the airport had its busiest-ever February, up 4pc from the same month a year earlier.

However, Tim Fenn, chief executive of the Irish Hotels Federation (IHF), believes that advance bookings from British visitors, who account for 40pc of all foreign tourists to Ireland, helped buoy tourism figures last year. The effects of Brexit will likely be more pronounced this year, Fenn warned the IHF's annual conference at the end of February, with rural tourism the hardest hit from a decrease in Britons' purchasing power.

A survey carried out for the conference revealed that 95pc of Irish hoteliers and guesthouse owners are concerned about the impact of Brexit on their business, and that some 29pc had already experienced a decline in business from the UK.

A separate RedC poll of 2,000 British consumers, conducted for Tourism Ireland in January, found half of those who are considering a holiday abroad this year plan to spend less money and a quarter would reduce their length of stay. Meanwhile, the Irish Tourist Industry Confederation claimed earlier this month that the UK's impending departure from the EU posed the biggest crisis to face the tourism sector since the financial crash.

In rural Ireland, even high-end hospitality businesses with a well-heeled customer base are not immune from the economic uncertainty caused by Brexit. Some of the guests who stay at the five-star Ashford Castle in Cong, near the Galway-Mayo border, land by private jet 46km away at Knock Airport.

The resort has undergone a $100m (€94m) restoration that included the addition of a 30-seater cinema and a spa. But Niall Rochford, Ashford Castle's general manager, has not seen the hotel's revamp under Red Carnation Hotels, a UK-based firm that bought it in 2013, generate an increase in British guests this year.

"I would have expected a stronger performance from the UK, purely because so much was invested in the last three years and because we are now part of Red Carnation, a UK collection," Rochford said. "But we are not seeing the kind of improvements from the UK market that we would have expected. The US market is performing exceptionally well and the domestic market is performing well, but to date this year the UK market is on a par to this time last year.

"Even though the UK only accounts for 10pc of our business, we are very much aware of the potential impact Brexit could have on us. Nobody really knows what the impact will be like.

"We work very hard on PR in the UK, but because we're a single unit hotel rather than a chain, it's like throwing a stone into a pond sometimes. So we rely on Tourism Ireland to promote Ireland as a whole. It needs to increase marketing in the UK and we are also contributing more funds towards UK marketing."

Rochford has recently returned from a work trip in the US, where Ashford Castle is benefiting from American perceptions that Ireland is a European destination safe from terrorist attacks.

"Over there, they keep speaking about the three 'I's that have not been affected by terrorism - Ireland, Iceland and Italy - and where US consumers are looking at now rather than traditional destinations like Paris, Belgium and central Europe."

But the January election of Donald Trump may affect Ashford Castle's domestic market if the new American president's administration overhauls the corporate tax system, such as by creating a border adjustment tax that could hit Irish exports to the US.

There are concerns this could have a domino effect on Ireland's multinational employers and therefore on Irish consumers' spending power. With the double whammy of Trump and Brexit, Rochford said the Government needs to retain the 9pc Vat rate for the hospitality industry, introduced during the economic crisis in 2011, for the foreseeable future.

"We will employ 400 people here this year, but we are in a very small community that's rural and remote and doesn't have a huge amount of industry, so it's very important that we are protected," he said.

Liam Edwards, meanwhile, believes hospitality businesses in Dublin and Cork are better placed to withstand the consequences of Brexit because domestic demand, coupled with a shortage of venues, may compensate for a fall-off in UK customers.

Indeed, when Dalata - which has more than 20pc of the hotel market in Dublin and Cork with brands such as Clayton - reported in December that trading for the final four months of 2016 was marginally better than expectations, ceo Pat McCann said booking patterns were showing "no evidence of any kind of negative from Brexit". PwC predicted at the end of February that Dublin hotels would have the highest occupancy rate of any European capital throughout 2017 and 2018, after topping the occupancy league last year.

A 30-minute drive outside the capital, at the five-star Druids Glen Hotel & Golf Resort in Co Wicklow, ceo Edward Stephenson said trading in 2016 was the best its hotel division had enjoyed in its history, mostly because of a sales and marketing push in the UK and the US and the continued recovery of the Irish economy.

While Stephenson says business from the North increased in the first two months of 2017 and that Druids Glen is not experiencing any effects from Brexit, its golf division has been challenged by cheaper prices being offered by Scottish golf courses to wholesale tour operators.

"These operators generally book residential golf tours to venues in Ireland, where groups of 20, 30, or 40 golfers stay in the hotels and play several rounds of golf over three days," Stephenson said. "There's certainly been a reaction in the UK to travelling to Ireland. There's been a reaction in Scotland, where they are discounting aggressively. We've been able to mitigate this by focusing our efforts on the US business.

"We review our golf business every week and we are bang on target for this year. Brexit is the most-discussed event on the horizon, but there are a lot of nuances and nobody can read the tea leaves."

Hospitality businesses in the Border counties are the most exposed in the industry, according to the IHF, which has called for a €24m war chest to fund international tourism marketing over the next three years so tourism can be 'Brexit-ready'. In the north-west of Ireland, 46pc of tourists come directly from across the Border.

If the Border becomes a land frontier between the European Union and the UK, complete with identity checks and customs control, tourism businesses in counties like Sligo will suffer, says Anthony Gray, who owns the Eala Bhan bistro in Sligo town and Tra Ban in the seaside village of Strandhill and is chairman of the Sligo Food Trail.

"There will be a hard Brexit - there's no such thing as being half-pregnant," said Gray. "I can see the UK economy going back to a recession and if the UK sneezes, Ireland gets the flu.

"The hospitality industry is 100pc going to be affected. With the value of sterling, the British are not going to get the same value they used to here."

Gray, a former president of the RAI, has already cut opening hours at Tra Ban and says three restaurants in Sligo have recently shut down, with most of those in the town closed on Mondays and Tuesdays. A fifth of his own customers used to come from Northern Ireland, but numbers have fallen in recent months.

"There's a drop-off, especially on bank holiday weekends, when we would typically get visitors from Enniskillen or Derry," he said. "We don't hear Northern accents as much as we used to."

Gray, who last month marched to Leinster House as part of a campaign for a motorway connecting Sligo to Dublin to revive economic growth in the region, believes Brexit will further intensify a two-tier economic recovery.

"It's going to have a disastrous effect on rural Ireland and on farmers, which will have a snowball effect on restaurants," he said.

"The Government hasn't said one word about tourism being affected - their main concern is getting companies to Dublin. We need government to come out with a coherent plan for the tourism sector in Ireland and they need to tell us how to be prepared."

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