12th June 2024, NITA notes on Dept of Economy meeting: Oral evidence from Hospitality Ulster and the Ulster University Economic Policy Centre

Hospitality Ulster – Oral evidence from Hospitality Ulster

Mr Colin Neill, Hospitality Ulster, Mr Joel Neill, Hospitality Ulster, Mr Eamon McCusker, AMPM Restaurant

Key Points:

  • Hospitality is one of the UK’s top ranked industry contributors, both economy wise and as an employer but its full potential is not being realised.
  • Accommodation is ok, the pub sector is struggling and the fundamental model for restaurants is broken.
  • Despite the statistics, consumer research states that the demand for hospitality is still there but because disposable income is less, less money is being spent in these businesses.

Statistics (recent survey)

  • Hospitality adds £58 value to the local economy for every £100 spent.
  • Our tourism product is 5.2% of GDP while in any other developed country it is 10% or over.
  • Headline figures of Q1 in Northern Ireland:
    • 28% of businesses have broken even in the last 12 months.
    • 17% of hospitality businesses made a loss or are at a risk of failure in the next 12 months.
    • 24% of hospitality businesses have no cash reserves.
    • 54% are pessimistic about the next 12 months.
    • In the first quarter of 2024, 49% of hospitality businesses were in profit but the majority had less profit than the first quarter of 2023 so although in profit, they were continuing to decline.
    • 20% of the industry is decreasing investment in their premises.
    • High turnover but low profit due to food prices increasing by 14%, drink prices increasing by 10% and staffing costs increased by 12% due to the National Living Wage increase – so 52% of the industry is experiencing staff shortages while 12% of roles are unfilled. The cost for hospitality businesses is now non-viable because of these rising costs.

Top Priorities for NI Hospitality Businesses:

When asked to list their top priorities, 93% stated VAT and 69% stated Rates.

  • NI has the highest business rates in the UK – London is 56p in the £, Belfast is 60p in the £ and Larne is 67p in the £.
  • NI also has the highest energy, insurance and labour costs and food inflation is 25%.

Eamonn McCusker, AMPM:

  • 22 years on the same site but the last 12-18 months have been the most challenging time.
  • Hospitality industry needs help, otherwise even more businesses will close.
  • VAT has a massive impact on the whole industry – however our devolved government cannot sort that.
  • A rate reduction is a key area that would help businesses.

Hospitality Ulster:

  • Backing a call for VAT reduction, even initially as a pilot. This could initially prevent businesses from closing but they would eventually pass the savings on to the customer.
  • Rates relief – NI is the only part of the UK which doesn’t support rural businesses, UK has 100% relief for rural businesses.
  • Hospitality needs to be made a priority with the Dept of Economy instead of all funding allocated through tourism.
  • Hospitality Ulster is not included on the same boards/panels as tourism – Chair agreed to raise this with the Minister.
  • Tourism  is a massive growth area but we need pubs, hotels and restaurants to cater for our tourists.
  • Over 50 Employment Guide discussed.
  • Barnett Consequential money should be used now to subsidise rates and provide rural rate relief.
  • Longer term:
    • a proposal for a new rates model has been submitted which would include a review of small business rates and rural rates.
    • Use a variable multiplier to calculate rates for all small businesses who need it as it is a fairer system. Rates would then vary depending on industry type and done per sector.
  • Sustainable tourism – important to get people to come and stay longer and spend more.
  • Changes of behaviour need to be considered – nightlife is busy in Belfast but because businesses are not charging the prices that they need to in order to thrive, they are losing money. 20% of a meal goes to the Exchequer – hidden costs that customers do not see.
  • A High Street Task Force should be recreated – to be action driven rather than just meetings.

Transport:

Transport and communication links were discussed including the need for a night bus to cater for night time trade.

Chair Summary of Actions:

The Economy Committee confirmed their support for the hospitality industry.

  • VAT – write to the Minister of Finance re progression of the devolution of VAT and a pilot programme of VAT exemption – as part of the economic investment zone.
  • Rates – write to the Minister of Finance for an update on engagement with UK treasury in relation to rate relief, explore a new model for business rates including rate relief for the rural community and development of a variable multiplier.
  • Labour Relations Skills Council – speak to the Minister for the Economy re Hospitality being represented on this panel. 
  • High Street Task Force – consult with the NI Executive Office to develop an up to date Task Force with a set of actions for them to take forward.
  • Translink – progress night mover service and improved communication links.

Tourism – Oral evidence from the Ulster University Economic Policy Centre

Gareth Hetherington, Ulster University Economic Policy Centre, Dr Eoin Magennis, Ulster University Economic Policy Centre

UU and Dublin City University research – different aspects of the all Ireland tourism economy covering Northern Ireland and the Republic of Ireland. The report examines the issues experienced by industry stakeholders in a post-pandemic era including the labour market, infrastructure and connectivity, private sector investment, regional development and sustainability. The full report can be found HERE.

Gareth and Eoin provided a summary of the contribution of tourism to the economy including rural areas, part time employment, first job for many etc. There has been an increased demand for travel and the tourism industry generates exports, creates high skills and will continue to grow. A labour market dashboard will be launched soon.

Key Findings:

  • Significant growth during the last 25 years. Since the pandemic with businesses reopening, regrowth was faster than expected and by September last year air travel had returned to what it had been. 
  • NI has 20% share of international tourism – however international visitors have been more likely to visit family and friends and will spend less money than in RoI.
  • A range of performance gaps continue to lead to greater economic impact in the Republic of Ireland than in NI including visitors to Northern Ireland more likely to be visiting friends or relatives rather than on holiday or a business trip, visitors from GB make up two thirds of visitors to NI compared to one third in the Republic and people stay in Northern Ireland for fewer nights.
  • The GVA in 2019 was 5 times larger in RoI than in NI.
  • The cross border market has done well – in 2013 less than 100k CB trips while in the first quarter of 2023, there were up to 300k CB trips.
  • Challenges facing businesses are significant and will require further investment.
  • Policy responses raise questions around future cooperation in marketing, ETA, tax and regional development policy and some processes are likely to require UK Government intervention.
  • Challenges of keeping up with changing trends and what visitors want (skills, staffing etc) could be tackled by private investment, Government funding (eg City Deals) and clustering of tourism providers.
  • The development of Wild Atlantic Way, Mournes, food trails etc are all important.
  • Sustainability for the future is essential with a key regional balance needed.

Where can we find growth?

  • Marketing the island of Ireland and encouraging RoI visitors to come to NI.
  • Investment in infrastructure including connecting ports and airports to public transport.
  • High value visitor attractions.
  • Investment in tourism infrastructure within the private sector.
  • Most visitors arrive in Dublin and stay there or travel to SW and West of Ireland – border issues are more of a perception than reality BUT ETA has the potential to change that – visitors will need to be encouraged to apply before they arrive.
  • Performance gaps need to be bridged to raise tourism revenue in Northern Ireland.
  • Conferences are big money spinners and they should be encouraged again post pandemic – ICC has been very successful.

Are we losing tourists as we do not have suitable sporting facilities?

  • Need to move tourists to NI and retain them – golf is a successful example.
  • Dublin has Aviva, Croke Park etc to bring large sporting events and concerts. NI does not have that infrastructure.
  • The Casement Park would provide suitable infrastructure – NI will lose significant money if it is not built as we need to hold the same big events to compete with Dublin.

Internal Tourism

  • 70% travel into Dublin Airport, Belfast Airport needs to grow along with better connections from the airport across NI (Dublin opens up to the whole island).
  • Need to look at expanding into different external markets, richer tourists eg from Dubai.
  • It needs to be easier for people to land in Belfast and then travel around Northern Ireland from the airport.
  • Regional balance is important – smaller less significant places are not visited as they do not have the attractions, accommodation etc – these areas need to be built up for people to visit them.

How will ETA impact tourism?

It shouldn’t have a big impact but could deter visitors – NITA have suggested a 5-7 day grace period which would be a reasonable policy measure to avoid any complications in relation to visas.

How will including the Giants Causeway (and Londonderry etc) in the Wild Atlantic Way brand be beneficial – those attractions have already been successful as  stand alone attractions?

Each council has unique selling points but there is no reason why each can’t also have their own sub brand along with the Wild Atlantic Way brand.

Other points:

  • Tourism has moved on since the 2006 research in relation to strategic intent.
  • Very little all Ireland strategic consideration given within the private sector (less than 10%), this is something that could be encouraged.
  • Clustering businesses amongst the private sector is also important in addition to government help.
  • It is important to encourage visitors around the whole island of Ireland and signpost them to the less popular areas also. 

Chair Summary of Actions:

  • Request a briefing on potential increase in air activity.
  • Review and discuss the action points within the proposed Tourism Strategy Action Plan.