DURING the dark and depressing days of the recession, it was difficult to see a return to more prosperous times for one of the local economy’s biggest industries as the hospitality sector seemed to limp from one high profile liquidation to the next.
But the last 24 months have seen the licensed trade bounce back with aplomb as the sector seems to go from strength to strength with encouraging trading performance feeding an impressive roll out of new build and refurbished pubs and hotels across the north.
While the doom and gloom merchants point to the findings of HRG’s recent survey where it claims Belfast’s hotels average room rate fell by 5 per cent to just under £92, the ‘glass half full’ analyists point to an increase in the number of visitors to Northern Ireland and PwC’s findings that Belfast was one of the top three major UK cities in terms of improving its hotel trading performance.
Mixed messages to some, but in my view the story is generally a positive one and the sector will continue to flourish assuming we don’t repeat the mistakes of the past and flood the market with an oversupply of bed space.
The 1,000 rooms that we see coming out of the ground currently in Belfast is probably sufficient in the short term until we see some new business drivers. An opportunity does exist for a few smaller ‘boutique’ style establishments to provide a different offering to the market. Such hotels will of course be reliant on a strong food and beverage business to compensate for the lower levels of room sales compared to the larger ‘bedroom factories’.
The influx of new hotels bring with them a range of new competitors for the pubs and restaurants and this is of particular concern to some city centre pub operators who have invested heavily in establishing a presence in Belfast’s commercial core.
Our licensing laws limit the number of licensed premises to a degree but there is no doubt that competition is fierce in this sector although it has in no way led to a softening in demand for city centre pubs or to a cooling in the prices being achieved, as 2016 showed.
Last year saw a welcome return to sales between private entities instead of the liquidator type ‘fire sales’ previously witnessed in the years between 2010 – 2015.
Demand remains high for licensed opportunities in Belfast and whilst more provincial locations are undoubtedly a harder sell, transactions such as the Thatch (Broughshane), White Horse (Saintfield), Cova (Antrim) and the Wetherspoons portfolio show that there is always a buyer for a well-established business in a good location.
From a market perspective, expect to see a number of new refurbishments and reinventions this year and the number of private sales to continue to increase.
Prices should remain fairly stable however as the number of potential buyers continues to be restricted by limited lines of credit. In that sense, cash will continue to be king.
Whilst Brexit and Stormont uncertainty present significant challenges ahead, the hospitality sector has shown both adaptability and resilience in recent years that should continue to drive the market in the short to medium term. So I’ll drink to that!
:: Gavin Weir is a director specialising in pubs and hotels with Belfast-based commercial property advisers GVA NI
