REPORT FROM IRELAND—The United Kingdom’s Brexit negotiations with the European Union are stumbling along, with one principal barrier being the question of the status of the Irish border, and that is having a profound effect on hoteliers on both sides of the border.
According to hoteliers, the largest problem stemming from arguments over “hard” or “soft” borders, customs unions, trade deals and potentially troublesome political precedents is the uncertainty it is generating.
Adam Coburn, GM of the 58-room Four Seasons Hotel, Spa & Leisure Club, in Carlingford, Ireland, six miles southeast of the border, said his hotel is putting renovations on hold until the present landscape settles down.
Coburn said 2018 might be a difficult year for rural Irish hotels, with challenges including an increase in the price of food and beverage and other imported goods, guests’ reduced disposable income and, again, market uncertainty.
His property has an emphasis on weddings, but with the U.K. pound sterling dropping 20% in value since British voters voted to leave the EU, Coburn said his sales and marketing team is working twice as hard to offset that.
“We’re looking at other lines of business,” Coburn said. “On the wider scale, we’re lucky as wedding sales for 2019 and 2020 from Northern Ireland are increasing, but this year we’ve suffered, down 32 weddings.”
Tom Barrett, director of hotels and leisure at business advisory Savills Ireland, said pound devaluation created Irish demand to travel north to Northern Ireland.
“People going north to Belfast, yes, that is financially more attractive, but the number of U.K. tourists into Ireland has declined this year,” Barrett said. “Pricing reflects more than anything is the tipping point.
“Now, effectively, there is no border. Staff and labor, food and goods distribution all is now seamless, but a hard border for sure will create difficulties getting things in and out over borders.”
Both Barrett and Coburn said things would become calmer, although politics can change rapidly. On 8 December, the U.K. government announced it reached an agreement with the EU concerning the Irish border’s “soft” status, but critics say the “agreement” has not been categorically spelled out and it produces a precedent—why cannot Scotland and, even, London enjoy the same status—and political uncertainty.
According to the BBC, the “agreement” is a “gentleman’s agreement between (U.K. Brexit secre-tary) David Davis and Michel Barnier, the EU’s chief negotiator on Brexit.
The BBC reported that on 10 December, Davis said, “Guarantees on the Northern Ireland border were not legally binding unless the two sides reached a final deal.”
That will not be anytime soon, Barrett said.
“Delays in crossing the border is something that must be avoided,” he said. “No one likes delays, and that would hit goods probably more than people.”
Uncertainty
Barrett said even though some of the largest Irish hotel companies, such as Dalata, initially put expansion plans in the U.K. on hold following the Brexit vote, they have not restarted them.
“The world goes on; business goes on,” Barrett said. “The whole situation delays investment. The biggest question is whether this all makes it more difficult to travel.”
But Barrett said there’s still reason for optimism, such as the continued pace of transactions.
“A lot of these things get sorted out in a rational environment, and we will all get through it,” he said. “I am still seeing investment in Ireland from the U.K., and the Irish are buying in the U.K.”
Barrett added that Savills helped sell a Republic of Ireland hotel close to the border in June, which originally was put on the market prior to the Brexit vote with a guide price of €25 million ($29.6 million) and sold after the vote for between €27 million ($32 million) and €28 million ($33.2 million).
“That sale was down to currency,” Barrett said.
According to data from STR, the parent company of Hotel News Now, in year-to-date numbers through October 2017, both Northern Ireland and regional Ireland saw year-over-year performance growth.
Regional Ireland saw occupancy grow 3% to 74.2%, average daily rate rose 5.6% to €109.43 ($129.59) and revenue per available room increased 8.8% to €81.16 ($96.11). Northern Ireland reported occupancy rose 3.5% to 79.2%, average daily rate increased 12.2% to £78.31 ($104.82) and RevPAR jumped 16.1% to £62.03 ($83.03)
But for the time being, hoteliers would be prudent to be cautious, sources said.
“F&B is struggling at the moment,” Coburn said. “Suppliers have been since day one, and products have been discontinued. The extra cost hits us, and, of course, we have to decide whether to put them on the guest. It is a worrying trend at the moment.”
Coburn’s team has seen improvement in markets such as France, Germany, Austria, Italy and the U.S.
“All of Ireland is now far more on the map, but demand from rural Ireland—that is a different concept. It is difficult to change mindsets,” he said about trying to encourage local communities to come to hotels for F&B and leisure trips.
Coburn’s hotel has two sister properties, the 59-room Four Seasons Hotel & Leisure Club in Monaghan, and the Imperial, also in Dundalk, which was purchased recently and is undergoing renovation. All three are close to the border.
A new shining star
Barrett said one new gem in Ireland is the Northern Irish capital, Belfast.
“Belfast now is like Dublin was in the 1990s,” Barrett said. “It is a dynamic economy, and there is a lot of hotel development, and then when you throw the currency at it, Belfast has a very bright future.
“Visitors are 6% to 7% down from the U.K. to Ireland, but overall numbers into Ireland are up. Cheaper flights (in Europe) have helped. (This year) has been good in Ireland generally. There is only so much (hoteliers) can control, and those along the border will have most concerns initially.”