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Challenges facing the hotel industry

The hotel industry in Northern Ireland is currently undergoing a period of rapid growth. You don’t have to look too far in Belfast to see a new or expanding hotel development. The new 178 room Hilton by Hampton and 300 room Grand Central Hotel, expected to open May and June 2018 respectively, will contribute to the more than 1,000 additional rooms expected by the end of 2020. To put this in context this will increase current hotel capacity in Belfast by 25%.

What we now see is the market responding to increased levels of tourism to Northern Ireland, with both local and foreign investors attempting to capitalise on opportunities presented by the market, which is being fuelled by the impact of the weak pound. According to the Northern Ireland Hotel Federation (NIHF), occupancy rates in 2017 rose by 2.9% with additional growth forecast for the current year.

An uphill challenge now facing hotels is staff recruitment and retention. These new rooms will create an estimated 400 additional jobs in Belfast alone. A big worry for employers is the lack of adequately skilled personnel available to fill these new roles, not helped by the poor perception people have of working in the hotel industry.

Brexit and the weakening of the pound is also a concern for staffing the industry and appears to be having the opposite effect on employment. EU immigrants, who have traditionally contributed a significant proportion of the workforce, are now finding it less attractive to work in Northern Ireland due to the poor exchange rate and already low wages.  This is leading to EU nationals moving to the Republic of Ireland and other EU countries for higher wages with the benefits of their wages being earned in the same currency as that of their home country. The latest Office for National Statistics figures showing net migration from the EU to the UK at its lowest since 2012 reinforce these concerns.

Shorter term, employers are having to pay more to bridge the gap in living wage rates between the UK and ROI to attract more EU workers. However, this won’t be sustainable as the effect of an increasingly competitive industry and the additional costs facing employers from the increasing contributions required to auto enrolment pensions comes to bear. Longer term, hotels will need to break new ground with educational providers and the Government to address these issues and capitalise on the opportunities provided by the investment in the industry as a whole.

Hotels outside of Belfast will also need to be innovative, so as to meet the challenge to remain competitive. With more availability of modernised rooms available in the city, there is a chance visitors will no longer look further afield and will flood into Belfast.

What is clear is that there will be an adjustment period required when all the new hotel developments are complete and the outworking of Brexit has reached its conclusion. It is hoped the 6% forecast increase in NI tourism will be achieved and ensure the occupancy rate remain at a sustainable level and there is no resulting oversupply in the hotel sector.