Sunday 25 September 2016

Are Irish hotels in danger of pricing themselves out of the market with Celtic Tiger rates?

Room with a view

Published 17/01/2016 | 02:30

Watchful: John (right) and Francis Brennan say hotels have turned a corner but prices are a big concern
Watchful: John (right) and Francis Brennan say hotels have turned a corner but prices are a big concern

Hotels are benefiting from a surge in visitor numbers. But are they in danger of pricing themselves out of the market?

  • Go To

The turnaround in fortunes for some Irish hoteliers has been dramatic.

Five years ago, rooms in five-star hotels were available at knockdown three-star rates; thousands of beds in Celtic Tiger era establishments were lying empty, and many were engulfed by NAMA.

But now, tourism is booming again, and in 2016 it is one of our strongest growth industries. Multi-nationals may attract bigger headlines, but tourism has been responsible for the creation of 20pc of new jobs since 2011.

Ireland earned an estimated €7.3 billion from tourism last year, with the number of holiday visitors soaring by 20pc.

This week the hotel industry launched a recruitment drive in order to fill 40,000 jobs by the end of the decade - and there is a shortage of rooms in Dublin.

According to Fáilte Ireland, 84pc of hotels enjoyed a rise in business last year.

Hoteliers have good reason to welcome the recovery. Many of them survived the economic crash by the skin of their teeth.

But the latest tourism boom comes with a severe health warning, and it is not necessarily good news for consumers.

Health warning

The chairman of Fáilte Ireland Michael Cawley warned this week that the upward trend in prices in the tourism sector here is "at an unacceptable level".

He said: "I think it would be a grievous mistake to start gouging people. I'm not suggesting they are but in certain periods of the year it may be a temptation and we need to be careful."

The drift upwards in prices is noticeable to anyone who travels across the country. Even bog standard bar food is edging up above €15 again for a main course.

In hotels, the soaring prices are more than just anecdotal. The latest Hotel Price Index from the hotel booking site Trivago showed that the average hotel in Dublin shot up in price by 22pc in 2015 - from €118 to €144.

Nationally, the rise in prices is more modest, and the Midlands seems to be losing out, but the overall hike in rates is still significant at 9pc.

"You would have to be worried that prices will rise so much, that we go back to the time when Ireland was considered a great place to visit, but a very expensive one," says Dermott Jewell of the Consumers Association of Ireland.

The marriage equality factor

There are a number of different causes of buoyancy in the tourism industry.

Dublin hotelier Paul Gallagher, who is president of the Irish Tourism Industry Confederation, believes that the marriage equality referendum has helped to bring in visitors.

The sight of huge crowds outside Dublin Castle on the sunny day when the result was announced spurred people to book holidays in Ireland.

Gallagher, who is general manage of Buswells Hotel in Dublin says: "It was seen as a happy news story around the world.

"People saw under our skin and we were seen to have a positive and optimistic outlook."

There is every sign that this tourism boom will continue over the coming months, with St Patrick's Day followed quickly by the Easter Rising centenary celebrations.

The country seems to be flavour of the month in the international media, with several newspapers - including the New York Times, the Los Angeles Times and The Guardian - featuring it on its lists of top places to visit in 2016.

As the Los Angeles Times put it, "You could say it's Ireland's 100th birthday. Dublin's Easter Rising in 1916 launched Ireland on a path to independence from British rule."

Industry observers also believe the Force is with hoteliers because of the popularity of the latest Star Wars movie, filmed partly on Skellig Michael off the Kerry coast.

Exchange rates

Other factors are giving Irish hotels a fair wind, including the weakness of the Euro.

The value of the currency fell consistently during 2015 against the US dollar and sterling, making Ireland a cheaper destination for visitors from the UK and US. Fáilte Ireland's 'Value for Money' survey found that 58pc of visitors believe Ireland is actually good value. However, tourists from eurozone countries such as France and German are now less likely to see the country as reasonably priced.

A weak currency cannot be ­relied upon because Ireland still has to ­compete with other Eurozone ­countries. Also if the value of the Euro starts to rise, it could make Ireland suddenly much more expensive and less competitive for American and British visitors.

Other factors that are contributing to the tourism boom include the increased availability of flights, and the fact that the country is considered relatively safe.

Fáilte Ireland's Tourism Barometer says: "With threats and acts of terrorism affecting other parts of the world, many operators believe Ireland offers potential travellers a safe haven."

This could be a double-edged sword however. If tourists consider that there is a global terrorist threat, they may not travel abroad at all.

John Brennan, managing director of the Park Hotel in Kenmare, Co Kerry, has watched the ebb and flow of the hospitality sector in recent years. Until last year, he presented the RTÉ show At Your Service with his brother Francis (Francis now presents it on his own).

The Brennans have given advice to hoteliers and guest house owners across the country.

Brennan says there has been a solid increase in tourism numbers.

"We are in a different space to where we were two years ago. There was a good year in 2015.

We came out of seven dismal years when there was no increase in business, employment and staff wages. Hotels turned the corner.

"However, it's only one season, and we should not get carried away."

John Brennan believes Fáilte Ireland is right to raise concerns about rising rates, and there is a danger of killing the goose that laid the golden egg. He says the general quality of our hotels was stagnant during the recession, but now hoteliers are re-investing in their businesses.

"Hotels are changing curtains, and buying new bedspreads. They are replacing threadbare carpets and doing jobs that haven't been done for years. It's very much a case of playing catch-up."

Brennan believes there are three factors that are driving up hotel business in his area.

Firstly, the lowering of the VAT rate to 9pc has helped to keep costs low, and has kept some hotels open in the West of Ireland. Secondly, there are new airlines flying into the country.

Thirdly, the introduction of the Wild Atlantic Way has been one of the most successful tourism initiatives ever in this country, at a very small capital cost.

"By putting up signs along the road, they brought business to places where the IDA couldn't bring business in a million years."

While he welcomes the upsurge in the industry, Brennan believes there is plenty of room for improvement.

At your service

While family-run hotels are the bedrock of the industry, in the Celtic Tiger era we were left with a legacy of bland chain hotels, built in unattractive locations, according to Brennan. "It was a very boring product. You walked in the door, the bathroom was on the left, the wardrobe was on the right, there was a double bed, small settee, one armchair, a straight-up chair and a table along the wall built-in.

"It was typical of any three-star hotel anywhere in the world.

"Ireland should always be that little bit different, and we need something special to attract people here."

Brennan says that while there are hotels offering good food in Irish mid-market hotels, they are still in the minority.

"In that part of the market, food tends to be quite uninteresting. In some of the brand hotels, the menus can be very generic, and there is very little individuality.

"Typically, they'll have the goat's cheese, the deep-fried brie, and then a steak, a chicken and a fish dish."

Brennan has three pieces of advice for hoteliers hoping to benefit from the recovery. "Firstly, they should re-invest in their business. Secondly, they should make sure that their product is different in order to make it interesting for the guest. Thirdly, they should remember that Irish tourism is built on hospitality."

He says chain hotels are often impersonal. "There is a synthetic carpet because it is run by an accountant.

"The small owner-managed hotels of Ireland are the ones that make Ireland different. You can put an Irish person into a room anywhere in the world and they will talk away and create a buzz. That's what people love when they come to the country and we mustn't lose sight of that."

Demand for hotel beds in Dublin may be soaring, but the surge in tourism is not believed to be as great outside the capital.

"There are two different tiers of growth," says Paul Diver of the Sandhouse Hotel in Rossnowlagh, Co Donegal.

"Outside Dublin, while the recovery is evident, it is not growing at any huge rate.

"There may be a shortage of beds in Dublin but along the West coast we are certainly not turning people away."

Hotel room numbers

22%

Rise in prices of Dublin hotel rooms in 2015, according to Trivago price index

9%

Rise in prices nationally in 2015

€144

Average cost of Dublin hotel room in 2015

€106

Average cost of Irish hotel room

33,000

Tourism jobs created since 2011

7.3bn

Total revenue from tourists in 2015

€1.1bn

Revenue from US tourists

7.3m

Foreign visitors to Ireland in 2015

Indo Review

Read More

Promoted articles

Editors Choice

Also in Life