Hotel News Now underlines two European legislative issues for hoteliers coming to a head this month, but also a few demand opportunities for the continent, one generating from a new European Union initiative.
REPORT FROM EUROPE—The very first month of the year 2019 is gearing up to be a windy one for hoteliers, especially in the United Kingdom and its closest neighbors, dominated by ongoing arguments, concerns and—yes—even some hopes stemming from Brexit.
Also look out for tax-rate changes in the Republic of Ireland, and the hoped-for fillips for Matera, Italy, and Plovdiv, Bulgaria, the elected Capitals of Culture for the year.
New for 2019 is another European Union initiative, the European Capital of Smart Tourism, which recognizes cities that have combined tourism with accessibility, digitalization and sustainability. The first two winners are Helsinki and France’s Lyon.
Experts believe Brexit will have its most profound international effect on the Republic of Ireland, which shares the United Kingdom’s only land border, and Spain, notably so if the pound sterling drops in value and consumers elect to staycation within the U.K.
Irish tax changes
From this month, the minimum wage in the Republic of Ireland increases from €9.55 ($10.90) per hour to €9.80 ($11.18) per hour, said Weldon Mather, owner of hospitality and tourism consultancy WM Consultancy Ltd & Associates, who added in terms of the minimum wage paid in Euros, the new Irish rate is the second highest in the European Union behind that of Luxembourg.
Mather said another pressure on Irish hoteliers will be that the “special temporary” budget measure of a 9% value-added tax on food and certain services in operation since 2011 will revert to the “normal” reduced rate for services at 13.5%.
“This 4.5% reversion will impact more regional hospitality operators since the Dublin and city hotels can generally pass on the rate increase. Contracted group tour business is also being passed on the increase, just as they got the reduction in 2011. Wedding contracts generally allow for this increase to be passed on, but many hoteliers are honouring the old rate as a gesture of goodwill and not to sour the brides,” he said.
Mather added that the higher rate of 23% on luxury goods and alcohol remains, and the United Kingdom’s VAT rate is 20% across the board for F&B.
“We still have a competitive advantage. … But both are significant increases in the face of a potential hard Brexit,” he said.
Brexit might be disadvantageous for the Republic of Ireland, sources said, especially along the border between Northern Ireland, part of the United Kingdom, and independent Ireland, part of the European Union and a user of the Euro.
The border is the biggest contentious issue in Brexit, and there are real fears border checks and tariffs on goods will be imposed and, far more severely, troubles will restart along sectarian lines.
The big unknown is the pound sterling/Euro exchange rate, Mather added, which might result in return on investment and travel to EU countries being more expensive, and thus a decrease in U.K. outbound travel.
“I actually think this will be the biggest and unquantifiable threat to tourism and trade, making our exports that more expensive,” he said.
Elephant in the continent
There is no getting away from Brexit, an event that has been described as the biggest political issue of the last 50 years, or since when the U.K. joined the EU in 1973.
Tiago Venâncio, director of development, U.K, at Choice Hotels International,* said if the current parliamentary bill to leave the European Union is rejected by Parliament, the pressure will be on politicians to avoid a so-called No Deal Brexit, which might have severe economic consequences that will add to the widespread uncertainty felt by businesses and consumers.
“We will need a strong boost of confidence and specific economical and sectoral measures to regain pace and momentum on stalled investments, to be able to deal with the most transformative political event of the last 50 years and avoid transforming it into an economic crisis of unprecedented scale,” Venâncio said.*
“(The U.K. is) already experiencing a significant skills shortage in our industry, and creative ways of retaining and motivating our staff will be key in a highly pressured employment market, baffled with pouches of anti-immigration feeling and wage pressure.”
Still, Venâncio remains optimistic.
“On the other hand, I believe we’ll be able to take advantage of the growing movement of staycations and boost our leisure destinations throughout the U.K. whilst making the most of all this publicity around the U.K. that is driving an increase in demand for inbound travel in a subdued sterling environment,” he said. He added this would allow hoteliers to keep pushing total revenue per available room and gross operating profit per available room.
European capitals 2019
Two lesser-known markets in Europe share the coveted Capital of Culture status in 2019: dramatic Matera in the southern Italian region of Basilicata and the second largest city in Bulgaria, Plovdiv, which like Rome sits on seven hills and was occupied by Romans.
The newly designated European Capital of Smart Tourism also has hoteliers and marketers excited.
Petko Mitov, GM at the 153-room Ramada Plovdiv Trimontium, said his hotel is not contemplating anything special for the year, but the city is gearing up for it.
“There are a lot of events planned, and we’re looking forward to it putting (Plovdiv) on the map,” he said. “But (the hotel) is on average 75% booked already for 2019, and we see that as healthy.”
Laura Aalto, CEO of Helsinki Marketing, said she believes the main legacy of being awarded the designation of European Capital of Smart Tourism is that it will be a development tool for local industries on issues of sustainability.
Kati Soini; senior business advisor, hotel investment, at Helsinki Business Hub, said she also has seen increased interest in Helsinki from hoteliers, investors and tour operators in regards to this issue.
Sustainability issues are key in discussions with hoteliers, Soini said, adding that Finnish companies in general are very advanced in sustainability and environmental issues.
“The bigger the company, the more they pay attention to these matters,” Soini said.
Soini said her organization currently works with domestic and international investors and hoteliers to establish hotels and look for sites, especially as tourism is growing fast due to Helsinki’s and Finland’s clean nature, fresh air and increasingly clement climate.
Helsinki is aiming to be carbon neutral by 2035, 10 years before Finland aims to be so and 15 years before the European Union, she said.
Soini added one Finnish hotel company, Sokos Hotels, aims to be using 100% renewable energy for 2030.
“We are looking at a few constructions in wood, and investors see that this leads to savings further down the line. For the last few years, the Helsinki investment total is at a record high, and half the trade is from foreign investors,” she said.
“Hotels in Finland represent the most profitable real-estate class, and whereas owners were mainly willing to have rentals, the city is now more willing for management contracts to come in,” Soini added.
*Hotel News Now originally asked a group of hoteliers and consultants to give comment on their hopes and fears in respect to two scenarios, the first being if Parliament passed the latest bill on exiting the EU, the second if Parliament threw out the bill. That vote was due in Parliament on 10 December, but that was delayed and will now likely be held in the week beginning 14 January. Hotel News Now has used part of Venâncio’s response to the above questions as they appeared to be general to the entire subject of Brexit, rather than just on the outcome of the vote.
*Correction, 4 January 2019: This story has been updated to correct Tiago Venâncio's position with Choice Hotels International.