Covid-19 uncertainty continues to hamper the hospitality industry

The BDO Northern Ireland and Hospitality Ulster Sentiment Survey also illustrated how ongoing Covid-19 uncertainty continues to hamper the industry with investment plans hanging in the balance.

The survey, which was conducted between June 29 and July 22 021, interviewed a range of hospitality businesses in Northern Ireland, including bars, restaurants, hotels, nightclubs, and other establishments and measured their confidence levels and concerns for their own business and the industry as a whole.

The results highlighted that 74% of Northern Ireland’s hospitality sector continue to struggle with staffing issues, as the impact of Covid-19 has further intensified recruitment concerns across the industry. Even prior to the pandemic, hospitality in Northern Ireland faced significant labour challenges.

The impact of Covid-19 has now led to an increased skills shortage, which has seen many move away from the industry permanently, leaving a shortfall that businesses are unable to deal with.

If the industry is to proceed with its intended investment plans (71% of those surveyed indicated plans to invest in the next six months) there needs to be a concerted effort to address this recruitment shortfall.

Of those surveyed in the BDO NI & Hospitality Ulster Sentiment Survey, only 42% indicated they were confident about their future – whilst this is higher than previous, the caution lies with the uncertainty of what is to come and what support businesses can avail of to make their post pandemic operations workable.

The hospitality industry in June saw a jump in growth following the opening of pubs, restaurants, and hotels and whilst this was welcome, the challenge will be to make these businesses sustainable in the face of growing demand and persisting challenges.

There is no doubt that the uncertainty around future restrictions or lockdowns has prevented many businesses from investing in their offering and this continues to be a substantial issue with 77% stating that this uncertainty is a serious risk to their future.

Expressing concern over the drastic impact of the pandemic on the local economy, Brian Murphy, Managing Partner, BDO NI and Chair of the Hospitality Industry Group highlighted the commitment and dedication of the Northern Ireland sector and the ‘great sacrifices’ made and the working together of local businesses, employees, suppliers, banks and Government.

He continued: “The Covid-19 pandemic has had a dramatic impact on us all, both socially and economically.

“It is only through great sacrifices that we have been able to progress to the point now where there is the potential of getting back to a new normal.  

“Faced with the challenges of the last 16 months, it is heartening to see that businesses, employees, suppliers, banks and Government have all come together to work in partnership to plot a course through the pandemic.

“With so much investment of time, money, and effort to get to this point, it would be a further tragedy if we were to allow businesses to fall at this final hurdle.

“The hospitality industry in particular has such an important role to play in both the economic recovery and also for us all to find our way back to a new way of living and working.

“The hospitality sector in Northern Ireland is a strong and resilient sector and with continued support from stakeholders over the coming months, I have every confidence that it will bounce back even stronger and better than before.”

Several other significant challenges over the next six months will dictate if this confidence level increases or decreases within the industry.

One of the biggest risks for businesses in hospitality over the next six months is rising business costs, with 80% of those surveyed saying this is a significant concern.

Whilst furlough and associated government grants supported the industry during the various lockdowns, it fell short of the financial burden that many in the industry felt and continue to feel.

The anticipated rise in costs for businesses, including wages (56% quoted this as a concern), rent and other utilities such as gas and electricity will put further pressure on what is an already tight profit margin within the industry.

How other sectors recover from the pandemic will also have a knock-on effect for hospitality, 27% said that low levels of international visitors is a significant risk to their business over the next six months.

Whilst the safety and wellbeing of all those travelling to Northern Ireland must be the priority, the continual changes to travel rules is having a detrimental impact on tourism and those who rely on it to survive.

Commenting on the survey findings and the future sustainability of the entire industry, Colin Neill, Chief Executive, Hospitality Ulster added: “It is clear to see that the hospitality sector is faced with some major challenges.

“The Covid-19 pandemic and the subsequent impact on the sector has been devastating.

“The long shut down and the lack of progress in lifting the remaining restrictions has damaged confidence and livelihoods and seen some business owners take difficult business decisions.

“The future sustainability of the entire industry is at risk.

“Many have burnt through cash reserves and any government support they could get.

“The sector is still being denied the ability to be fully open, unhindered, and trading at a viable level.

“This coupled with rules around staff isolation policy is also creating a significant burden on being able to open at a time when we should be building back and placing emphasis on the recovery and revitalisation.

“The analysis of the survey information by Brian Murphy and his team at BDO clearly shows that an accelerated pathway out of the pandemic is now imperative, as the hospitality sector is far too important to our local economy to not be given the attention it requires by the NI Executive.

“These results speak for themselves, and we now urgently need a dedicated hospitality recovery strategy, developed and delivered in a partnership of the industry and the NI Executive.”

Managing debt and other funding issues was a risk identified by 31% of those surveyed, while 20% indicated that meeting current and future creditor commitments was a key risk for their immediate future.

The level of financial assistance over the last year has been unprecedented but with Covid-19 loans coming to an end, many within the industry are concerned about how these obligations can be repaid on top of any other creditor commitments that they have.

To facilitate a successful and long-term return to trading within the industry, all funding options need to be considered by businesses, whether this is via Government or the banks/lenders.

Confidence in these options to date has been viewed as being either good or fair by 75% of the respondents in relation to the support they received from their bank / lender during the pandemic and 84% rated the Government’s response as either good or fair.

This shows how effective the assistance provided by the banks and Government has been, the funding lifelines extended by them have preserved tens of thousands of jobs in the hospitality sector and it is now critical that this support continues to help the industry overcome the remaining challenges.

Other interventions identified in the survey included the continued reduction of VAT for hospitality and the call for further support from local councils across Northern Ireland.

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