A long inward breath
No hotel rooms were completed in Belfast in 2021, for the third year in a row. While on the surface this seems to suggest either a lack of demand or oversupply, it is actually the result of the substantial volume of hotel rooms completed between 2016 and 2018.
COVID-19 halted international tourism for much of 2020 and substantially limited the ease of travel in 2021. The reduction in new hotel stock coming to market since 2019 can be seen as a consequence of market adjustment and global circumstances, rather than an indication that Belfast’s star is dimming as an attraction.
This view is supported by the commencement of a new development in 2021, the first start in the sector since over 1,200 hotel rooms were completed in 2018:
- Queen Street Aparthotel: a 175-room aparthotel being developed by Oakland Holdings and due for completion in 2023.
Equally important, there were no major permanent closures of hotels or visitor accommodation in 2021. The sustained quantity of existing stock is an indication that investors and operators retain confidence in the city.
One small development of note also completed in 2021. ‘The Regency’, a refurbishment of Regency House on Upper Crescent, was completed in Q4, creating six luxury-style self-catering apartments. £2.5 million was invested in these formerly derelict Georgian town houses.
A sobering look back
Despite causes for optimism looking forward, the devastation caused to the hospitality industry in Belfast since March 2020 was extensive. An estimated 2,100 jobs were lost in the hotel sector in 2020, with corporate earnings decreasing overall by 90 per cent compared to 2019. The Northern Ireland Tourism Alliance estimated that, as of March 2021, total visitor spending had fallen by £800 million since the start of the pandemic in early 2020.
Compared to the turbulence in 2020, summer 2021 should be seen as a success in the circumstances. Following a 16-month lull, an estimated 76,000 cruise ship passengers visited between March and August 2021. Hotel room occupancy rates also recovered, to 66 per cent for nights on which accommodation was open to guests between January and September 2021. This contrasts with rate of just 32 per cent for the equivalent period January – September 2020.
The recovery has brought its own challenges. Various factors have had an impact on the industry since COVID-19 regulations were relaxed in spring 2021:
- With many staff made redundant or placed on furlough at the height of the pandemic, there has been a surge in job vacancies, which the available supply of labour has been unable to fill. There was an estimated eleven-fold increase in vacancies for hospitality staff in summer 2021.
- Supply chain pressures and price rises have put pressure on the bottom line for many operators. 58 per cent of businesses in Northern Ireland reported cost increases of six per cent of more in Q3 2021 alone. Across the UK, over 70 per cent of businesses reported increases in their costs for food and drink.
- Exacerbating the scale of job vacancies is the departure of EU nationals following the UK’s departure from the European Union, accelerated by COVID-19.
- Despite the indefinite extension by the UK Government of the ‘grace period’ for customs checks on goods entering Northern Ireland from the UK, there remains uncertainty over the long-term arrangements that make up the Northern Ireland Protocol.
It remains to be seen what the pace of recovery in the hospitality and tourism sectors will be. There are reasons to be optimistic that the prospects for 2022 are brighter than in 2021. However, international travel and hospitality in general remains exposed to the risk of any resurgence of the pandemic despite the vaccine rollout.
Based on trends during 2020 and 2021, domestic and nearby markets would appear to be most likely to recover first, followed by more distant markets. Should visitor numbers recover, and hotels enjoy a full year of remaining open, there will likely be a period of re-acclimatisation while the market determines to what extent existing stock in the city is capable of satisfying demand.
With respect to new schemes emerging or progressing in 2021, the only project in the pipeline is a six-storey 276-bedroom hotel to be constructed on Hamilton Dock in the Titanic Quarter, which gained planning permission in January 2020.
Compounding uncertainty is the ongoing scarcity of business tourism relative to pre-pandemic benchmarks. This is a global trend observed across developed economies. Combined with emphasis on reducing carbon emissions and the likely permanence of increased working from home, even the most optimistic outlook does not anticipate a return to the levels of business travel expenditure seen in 2019.
While many investors may be taking a ‘wait and see’ approach to new developments, existing operators and government cannot afford to delay their response, given the importance of the industry to the Belfast wider Northern Ireland economy.
Proactive initiatives to date include the creation of the Ambassador Circle by Tourism NI to foster relationships which may attract business tourism, and the publication of a Tourism Recovery Action Plan by the Department for the Economy in May. Essential measures required in 2022 include restoring confidence among the workforce that tourism-related careers will be secure, upskilling employees, and maximising the potential for domestic and cross-border tourism – turning limitations on international travel into an opportunity given that many destinations may continue to be restricted.
Notably, Belfast City Council has purchased 2 Royal Avenue, a beautiful historic building recently vacated by a supermarket chain and has rapidly re-purposed it as an event space for music, arts, exhibitions and markets. There has been a positive response to this move, which may be indicative of the opportunities that need to be considered for creating a reimagined city centre.
- 2 Royal Avenue: redevelopment of 16,100 sq ft of former retail space to create new city centre events space, operated by Belfast City Council. The original building was designed by renowned local architect W.J. Barre and constructed during the Victorian era.
Belfast was designated an UNESCO City of Music during 2021. This is linked to further progress made via the Belfast Region City Deal on the development of a large-scale attraction which will highlight the city’s cultural prominence. The £100 million Belfast Stories visitor experience was formally announced in December 2021 – a concept designed as a focal point for the screen industry, including a state-of-the-art cultural cinema, and to provide public realm and event space. This attraction is due to open in 2028.
Although there are pandemic-related challenges for tourism in the short term, Belfast as a city continues to invest in tourism as a driver of inclusive economic growth and key to regeneration of the city centre.
2021 was another disrupted and challenging year for city centre retail in Belfast. Many businesses were unable to open until May 2021 due to restrictions on ‘non-essential’ retail from the beginning of the year. This forced many consumers to make their purchases online and retailers to develop their online selling.
Once re-opening became possible in spring 2021, there were signs that shoppers were returning to in-store retail, with footfall in all subsequent months up on the corresponding period in 2020, though down 24 per cent compared to 2019. Autumn footfall was boosted significantly by the ‘Spend Local’ scheme, which saw 1.3 million £100 vouchers issued and an estimated £100 million spent in local retailers.
There were no new retail starts in 2021; however one scheme continued work though the year.
- The Bank Buildings: the rebuilding of the iconic structure which was destroyed by fire in 2018 has entered the construction phase and will be re-occupied by Primark on completion.
One retail scheme was completed in 2021:
- 23-29 Castle Place (Calvert House): a redevelopment of the former DV8 premises which were vacated following the Bank Buildings fire, creating 34,000 sq ft of retail space to be occupied by JD Sports.
Several new schemes have emerged during 2021 and are in the pre-construction phase. It is anticipated that construction on these schemes will begin in 2022.
- ‘Belfast Keep’: a proposed mixed-use retail and leisure space on the site of the former BHS store on Castle Lane (vacant since spring 2016) by Belfast-based investors Alterity
- 16-24 Cornmarket: a proposed four-storey mixed-use office and retail scheme, with the bottom two floors for retail spaces and the upper two storeys for office use.
Both these schemes are located well within the existing retail core of the city, in the area approximately bounded by Victoria Square and Castlecourt. This is indicative of a broad theme in city centre retail, which is to focus on retention and reclamation of consumers, rather than expansion of space. While greatly buoyed by the ‘Spend Local’ scheme, there are mixed messages about the extent of the return of consumers to in-store premises.
The Deloitte Consumer Tracker for Q3 2021 suggests that with the reopening of the economy consumers have been spending more, saving less and borrowing more. However, data also points to consumer concerns about their personal finances as the cost of living increases and the government’s pandemic support schemes are wound down.
In a sign that savings accumulated during the lockdown are being used up because of rising living costs, more than one in three consumers (36%) say they have seen their overall personal expenditure go up in Q3 2021. While the increase in consumer spending is a cause for optimism, it is notable that footfall in the city centre is still lagging typical levels.
There is also optimism in 2022, with the anticipated re-opening of the Bank Buildings. Combined with the strength of the city’s independent retail offering and the gradual return of consumers, Belfast's retail experience will continue to be a key ingredient in the city core.
A major leisure scheme breaks ground
One major leisure scheme commenced in 2021. Following a year of site preparation works, the development of the Belfast Transport Hub began transition to the construction phase. The development will greatly expand the existing bus and railway station on Great Victoria Street. In addition to transforming the city’s transport offering, the Hub will provide a large amount of new public space – including Saltwater Square, a space for art, entertainment and leisure.
An estimated £208 million is being invested in the Transport Hub to create a fully integrated train and bus terminal to replace the ageing Great Victoria Street facility. The investment is anticipated to have a significant regenerative effect on the surrounding area, with the associated Weaver’s Cross and Saltwater Square creating new mixed-use and recreational spaces on previously unused land.
- Belfast Transport Hub: creation of about 1 million sq ft bus/train station with associated leisure and retail space.
Work concluded on the £17 million refurbishment of The Odyssey Pavilion in Q4 2021.
- Odyssey Pavilion: renovation commenced in 2019 to reconfigure almost 250,000 sq ft of space with new restaurant and leisure spaces.
Work also concluded on the £12.2 restoration of the Grand Opera House, which re-opened in June 2021. The investment in this historic city centre venue was financed by stakeholders that include the Lottery Heritage Fund, the Department for Communities, and charitable foundations.
The evolving role of leisure in the city centre
In recent years, there has been a growing focus on sustainability and green spaces in the city. These themes were central to the draft ‘Bolder Vision for Belfast’ which articulates the need for a “green, people focused, connected city centre”. The Bolder Vision document contains the ambition to reduce reliance of private car transport; prioritise walking, cycling, and public transport; and create green spaces and an inclusive public realm.
In January 2021, Belfast City Council committing to developing a ‘30 by 30’ biodiversity campaign for the city – reflecting an initiative originated at the UN Biodiversity Summit in September 2020 to return 30% of land and sea to nature by 2030. Details about the delivery of this ambitious and forward-looking vision for the city are yet to be published; however it will present an opportunity for Belfast to forge an exciting path ahead, with leisure and wellbeing at the centre of future city planning decisions.