As Northern Ireland’s fourth largest private sector employer and with a turnover of £2bn, hospitality and tourism is without doubt a key player in the Northern Ireland economy. The innovation and determination of our operators, coupled with the friendliness and warmth of our people are at the heart of this success. The hotel sector alone has invested over £1bn over the last two decades, with the potential for a further £300m to be invested by 2025, on top of significant ongoing investment in our pubs and restaurants.
This demonstrates the continued growth and desire to improve the hospitality and tourism offering across the region. The hospitality sector has benefited greatly from the changes over the last 25 years, with the number of overseas visitors more than doubling from 1.3m to 3m.
Scheduled air routes to Northern Ireland have also more than doubled, handling some 8.8m passengers (up from 4.4m in 1998), while the number of annual cruise visitors has leapt from just over 1,000 to 350,000 expected in 2023 within 170 ships. But with tourism still only 5.2% of GDP, there is the potential and opportunity to double that figure to over 10% of GDP.
The opportunities for growth are very real and those that have adapted their business models are continuing to trade well, with customer experience and greater flexible working arrangements at the forefront of business owners’ minds.
However, we cannot ignore the challenges, as businesses seek to deal with the consequences of one crisis after another - from the uncertainty and upheaval of Brexit to a global pandemic; from the lack of a functioning local Executive to the war in Ukraine; and from inflationary pressures to concerns about a potential recession
Businesses which have been unable or unwilling to adapt have found themselves facing the very real threat of rising costs, higher interest rates and post-pandemic debt levels, coupled with the challenges of maintaining staff - all of which have led to cashflow pressures.
Many hospitality businesses depend on consumer confidence and discretionary spending, both of which are showing signs of weakening in the current climate. Consumer concerns about rising prices for essential goods like energy, fuel, food, and transportation expenses, are eroding discretionary spending for many. However, we have seen over the years, the hospitality sector is resilient, and it is certainly not a fluke that so many have evolved to meet the changing needs of the market.
A Reimagined Programme for Prosperity in Northern Ireland
Business owners, employees, Government and Trade Bodies have all worked together to drive the development of Northern Ireland’s hospitality and tourism offering over the last 25 years, however these efforts must now evolve with the prevailing economic conditions to make the most of the opportunities that are still out there.
In conjunction with Trade NI, we recently presented the BDO NI Prosperity Dividend Report in Westminster, outlining steps that Government and other stakeholders could take to help drive the wider local economy even further.
A major issue facing the hospitality and tourism sector, as well as other sectors, is the difficulty in recruiting and retaining staff. One possible solution to this problem would be the creation of new Immigration Pathways to facilitate the introduction of new people and skills to the Northern Ireland marketplace. Another could be the establishment of Public Sector conversion academies to facilitate the transfer of personnel from the public sector into the private sector.
Even with the economic successes that have been achieved over the last 25 years, the economy in Northern Ireland continues to be impacted by an historic underinvestment in infrastructure and capital projects across the region. To reverse this underinvestment and to give the region the tools it needs to deliver its own economic sustainability, a new approach to funding is required for the region. By introducing a Needs-Based approach, it would be possible to identify the critical areas of need and to allocate funding to create a foundation on which to build a sustainable economic viability for Northern Ireland’s future.
Critical areas of need that we have identified across the hospitality sector include:
- Enhanced air connectivity and the abolishment of Air Passenger Duty to make the region more accessible for both commerce and tourism. The Department for the Economy previously announced its intention to action a Route Development Scheme to attract airlines to come to NI, thereby boosting tourism and trade links.
- An overhaul of the existing Rating System in the region; and
- Enhanced and targeted investment in existing Government Agencies to enable them to compete with other destinations in selling Northern Ireland as ‘the’ place to visit and to do business.
These steps will help with a levelling of the playing field, as for many years businesses in Northern Ireland have had to compete at a disadvantage to their counterparts in the Republic of Ireland. This imbalance has mainly existed around VAT rates for the hospitality and tourism sector and at a higher level, the differing corporation tax rates which exists between both jurisdictions.
For many years, BDO NI has worked closely with the local hospitality and tourism sector to help local businesses find a way through the uncertain and difficult times that come along. We have always found that those businesses that demonstrate flexibility and a willingness to change to meet the needs of the marketplace have been able to survive and thrive. We remain both optimistic for the potential for this sector and also committed to helping businesses within the sector to capitalise on the opportunities ahead and also deal with the challenges that they may face over the months and years ahead.