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Perspectives

Hospitality 2015

"Recent headlines in relation to insolvency actions and closures in the hospitality and leisure industry demonstrate the difficulties facing this sector in Ireland. The diversified profile of hotel ownership in Ireland, coupled with strong links between hotel and property businesses will undoubtedly lead to further insolvency proceedings as NAMA carries out its role. These issues and tough market conditions are likely to force consolidation in the industry, with a smaller number of stronger players surviving”, comments Kevin Sheehan, Partner in charge of Tourism, Hospitality and Leisure.

Kevin also goes on to say “In fact, as a result of exceptional external factors including the economic downturn, increased unemployment, poor market sentiment and even the recent ‘volcanic ash’ crisis, there have been considerable and fundamental changes in the industry in the past year. It is now more critical than ever that companies in this industry assess their business strategy and look to become “game changers”. While there are undeniable threats facing the industry, as consumer confidence slowly begins to return, there are opportunities for those companies who are prepared to take advantage. Against this difficult backdrop only the strongest will survive.

In a recent report by the global Deloitte Research team, ‘Hospitality 2015’ identifies seven major issues facing the industry and details the key drivers which can determine success for companies through 2015 and beyond. These include:

Water

Technology
To be successful in 2015, hospitality companies must invest in technology. The battle to drive bookings through proprietary websites will continue, but all major operators will also develop applications and websites for mobile devices to meet consumer demands. Irish operators that begin building these technologies now will have “first-mover” advantage.

Brand
The growth of social media in the last five years has been staggering, and will continue to grow. This new form of communication and feedback is good news for consumers, and offers both threats and opportunities for operators. The transparency of social media will highlight any inconsistencies in the delivery of the brand, and will provide a quick and enriching communication channel between brand and consumer. Penetration and utilisation of social media is still relatively limited in the Irish hospitality sector; the most successful brands will be those that embrace and learn to harness social media rather than underestimate or fight against its influence.

Sustainability
Sustainability will become a defining issue for the industry in 2015 and beyond. Rising populations and increasingly scarce financial and other resources will provide a challenging business environment in which sustainability will need to be embedded within all facets of the hospitality industry. Irish businesses that ingrain sustainability in everything they do will not only improve brand reputation, but will also reduce costs.

Crisis Management
As the report shows, the key to the hospitality industry’s survival of unpredictable shocks and minimising their impact is to establish appropriate responses, protocols and risk management programs. Operators also need to capitalise on new opportunities that may present themselves in challenging times. As the number of hotel insolvency proceedings increases driving consolidation in the Irish marketplace, operators who actively plan for and anticipate the future industry landscape are more likely to be successful.

Talent
An average hotelier spends 33 percent of revenue on labour costs, but employee turnover in the industry is as high as 31 percent. High employee turnover continues to plague the industry and operators need robust strategic plans to retain their critical employees and manage staff turnover.

Demographics
In 2015 and beyond there will be two key demographic drivers of change in the industry, which will create new patterns of travel and demand in the West, and important new source markets in the East: the ageing US baby boomer population, and the emerging middle classes of China and India. Irish hospitality operators who understand the drives and needs of these growing demographics will reap the rewards and become the future leaders in the industry.

Emerging markets
China and India will continue to be the key hospitality markets, and according to the report, by 2015 these countries will have absolute year-on-year tourism growth greater than the United Kingdom, France or Japan. As these countries position themselves as key destinations for Western travelers, Irish hospitality providers will need to be prepared to compete against them in the global marketplace.

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Kevin Sheehan

Partner - Audit

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