Hotel revenues down €200m from cancelled weddings
Impact of COVID-19 on the wedding market
Crowe’s hotel, tourism and leisure specialist partner, Aiden Murphy, talks to the Sunday Independent about the impact of extending the current COVID-19 restrictions on the Irish hotel wedding market.
There are on average 20,000 weddings each year in Ireland, with Irish hotels hosting 12,000 of these. The wedding market forms a large part of the sector’s annual revenue, particularly for hotels outside of Dublin. It generates over 900,000 room night sales alone.
During the three-month lockdown period, weddings were down by over 4,000 compared to the same period last year. July to September is the traditional peak wedding season for the industry, with as many as 40% of all weddings taking place.
The current restriction of a maximum of 50 people for indoor social gatherings was due to be relaxed to 100 people from 20 July. However, there has been a further delay in the easing of COVID-19 restrictions to 10 August at the earliest. It will result in a near wipeout of the wedding market for the months of July and August for the Irish hotel sector.
Beyond 10 August, the outlook for the remaining peak months of August and September remains bleak, with at least 60% of these planned weddings, or about 3,000 events, being deferred until 2021 due to continued social distancing restrictions.
Many hotels specialise in the wedding market and rely on weddings for up to 50% of their turnover, so these restrictions and deferrals will have a devastating impact on their cash flow. It will be extremely important that they can access funding to sustain operations until after Easter next year, when the anticipated boost from deferred weddings is expected.
It is anticipated that from 10 August 2020, restrictions on indoor social gatherings like weddings will be eased to 100 people. However, this total will need to take into account any hotel staff, meaning the true number of guests is likely to be considerably smaller. We would expect to see larger weddings postponed until at least 2021 or scaled back to only inviting immediate family and close friends.
With guest numbers limited and potential average spend per guest reduced due to the impact of COVID-19 on disposable incomes, hoteliers face a challenging 18 months ahead to ensure these smaller weddings remain profitable.
With the projections of fewer international tourists to Ireland next year and reduction in corporate trade, we may see non-traditional wedding hotels compete to try to secure a new revenue stream to replace lost demand.
Many traditional wedding hotels will look to improve their offering with incentives such as champagne receptions, chair and table dressings etc. being included in the package. This may mean that the luxury segment could become more appealing and affordable, especially as buying power switches back to the consumer, stealing market share from their three- and four-star competitors.
The luxury market also has the potential to create bespoke honeymoon packages around their extensive facilities and on-site activities as traditional overseas honeymoon destinations become less desirable due to long-haul travel.
If couples and their guests remain reluctant to travel, there may be a positive aspect in that couples planning an overseas wedding, which tend to be smaller, may instead book their event at home and switch the venue at short notice.
While 2021 may be a substantial year for weddings, even the anticipated strong bounce in number of weddings may not achieve 2019 levels as spend per guest and attendee numbers at weddings reduce.
On average, a wedding will generate 40 hotel room sales per wedding hosted. However, we anticipate that this will decline, as it did during the last recession, with many guests deciding to travel home after the wedding to reduce costs.
A reduction in the VAT rate on food and accommodation sales from 13.5% to 5% (currently in place for the UK and Northern Ireland) would allow cheaper room costs and incentivise wedding guests to stay at the hotel – an important source of ancillary revenue for the hotel.
In addition, a reduction in VAT in line with the UK would enable hoteliers to maximise revenue by offering a higher-end food and beverage package while still ensuring couples can stay within their budget.
There are on average 20,000 weddings each year in Ireland, with Irish hotels hosting 12,000 of these. The wedding market forms a large part of the sector’s annual revenue, particularly for hotels outside of Dublin. It generates over 900,000 room night sales alone.
During the three-month lockdown period, weddings were down by over 4,000 compared to the same period last year. July to September is the traditional peak wedding season for the industry, with as many as 40% of all weddings taking place.
The current restriction of a maximum of 50 people for indoor social gatherings was due to be relaxed to 100 people from 20 July. However, there has been a further delay in the easing of COVID-19 restrictions to 10 August at the earliest. It will result in a near wipeout of the wedding market for the months of July and August for the Irish hotel sector.
Beyond 10 August, the outlook for the remaining peak months of August and September remains bleak, with at least 60% of these planned weddings, or about 3,000 events, being deferred until 2021 due to continued social distancing restrictions.
Impact on hotel revenues
The impact on revenue to the sector is significant. The reduced scale of wedding events and postponements will cost over €100m over the period July to September. Added to the €100m of lost revenue from the closed period of April to June, this leaves hotels down €200m in revenues from weddings over a six-month period.Many hotels specialise in the wedding market and rely on weddings for up to 50% of their turnover, so these restrictions and deferrals will have a devastating impact on their cash flow. It will be extremely important that they can access funding to sustain operations until after Easter next year, when the anticipated boost from deferred weddings is expected.
It is anticipated that from 10 August 2020, restrictions on indoor social gatherings like weddings will be eased to 100 people. However, this total will need to take into account any hotel staff, meaning the true number of guests is likely to be considerably smaller. We would expect to see larger weddings postponed until at least 2021 or scaled back to only inviting immediate family and close friends.
With guest numbers limited and potential average spend per guest reduced due to the impact of COVID-19 on disposable incomes, hoteliers face a challenging 18 months ahead to ensure these smaller weddings remain profitable.
Prospects for the sector
With a smaller pipeline of new bookings for the next 18 months and many traditional wedding hotel venues restricting their traditional marketing activity such as wedding fairs due to a limited budget, this could lead to a more competitive market.With the projections of fewer international tourists to Ireland next year and reduction in corporate trade, we may see non-traditional wedding hotels compete to try to secure a new revenue stream to replace lost demand.
Many traditional wedding hotels will look to improve their offering with incentives such as champagne receptions, chair and table dressings etc. being included in the package. This may mean that the luxury segment could become more appealing and affordable, especially as buying power switches back to the consumer, stealing market share from their three- and four-star competitors.
The luxury market also has the potential to create bespoke honeymoon packages around their extensive facilities and on-site activities as traditional overseas honeymoon destinations become less desirable due to long-haul travel.
If couples and their guests remain reluctant to travel, there may be a positive aspect in that couples planning an overseas wedding, which tend to be smaller, may instead book their event at home and switch the venue at short notice.
While 2021 may be a substantial year for weddings, even the anticipated strong bounce in number of weddings may not achieve 2019 levels as spend per guest and attendee numbers at weddings reduce.
VAT reduction
The inevitable impact of COVID-19 is the reduction in size of weddings and this leaves hotels with similar overheads but fewer guests, in turn limiting the profitability of a wedding.On average, a wedding will generate 40 hotel room sales per wedding hosted. However, we anticipate that this will decline, as it did during the last recession, with many guests deciding to travel home after the wedding to reduce costs.
A reduction in the VAT rate on food and accommodation sales from 13.5% to 5% (currently in place for the UK and Northern Ireland) would allow cheaper room costs and incentivise wedding guests to stay at the hotel – an important source of ancillary revenue for the hotel.
In addition, a reduction in VAT in line with the UK would enable hoteliers to maximise revenue by offering a higher-end food and beverage package while still ensuring couples can stay within their budget.
Conclusion
Hotels will need to innovate to keep turnover and activity levels at their properties up during this pandemic. Venues may potentially offer a wedding celebration over two days, with the first day for immediate family and the second a barbeque-style event for friends. As the saying goes, “a wedding well-run will sell the next wedding”, so impressing attendees is an important lead generation for hotels.
Likewise, we can expect to see partnerships between function hotels and resort hotels to offer deals on honeymoon stays as part of a single package that may result in higher levels of business for both properties. The average saving of €1,000 from the potential VAT reduction could be put towards that honeymoon stay or second-day celebration.
Our dedicated Hotel, Tourism and Leisure (HTL) team has vast experience providing a wide range of planning, operational and taxation advice and support to hospitality businesses. If you need support in devising the appropriate strategy for your business, please contact Aiden Murphy or a member of our HTL team.
