The average room rate for hotels in Ireland is set to fall to under €100 for the remainder of this year.
The average room rate for Irish hotels is set to drop by just under €20 compared to 2019 levels and will fall to under €100 in 2020, according to a new survey.
The survey, carried out by accountancy firm Crowe in partnership with the Irish Hotels Federation, also revealed that occupancy levels will drop from a high of 73% in 2019 to just 32% this year and warned that up to 50% of Irish hotels risk running out of money in the months ahead.
87% of hotels in Ireland have been closed for three months due to the Covid-19 pandemic, but will be permitted to reopen again from next Monday (29 June).
Due to the impact of the pandemic on the international tourist sector, however, including corporate travel, lower occupancy levels are set to become common for the foreseeable future.
As a result, pressure to attract demand and competition between hotels is likely to lead to a reduction in the price of hotel rooms, with hoteliers forecasting that it will fall by €17 from the 2019 average (€111) to €94 this year.
The impact on hotels in Dublin will be greater, with average room rates likely to fall by 28% on the 2019 figure compared to 14% outside the capital.
With international tourism taking a hit and despite the potential increase in Irish people booking ‘staycations’ in favour of going abroad in the months ahead, occupancy levels are also going to affected dramatically in 2020 compared to last year.
According to the responses in the survey, national occupancy levels for Irish hotels will fall from a record high of 73% in 2019 to just 32% this year. In Dublin alone, occupancy levels are set to drop by 53%, with revenues for hotels set to drop by 62% as a result.
Revenues in regional hotels, meanwhile, look set to be down 55% on last year’s figures.
As far as the future is concerned, just over two in five hoteliers (42%) expect the impact of Covid-19 on the industry to last for over 18 months and continue to have an impact into 2022, with regional hoteliers (46%) taking a more pessimistic view in that regard.
Accountancy firm Crowe is predicting that, having learned lessons from the economic crash in 2008 where discounting had a limited impact on overall demand, hoteliers will avoid over-discounting room rates for the remainder of 2020 to allow the industry to create a better base for 2021 onwards.
Commenting on the impact of Covid-19 on the hotel sector and the outlook for the future, 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."
