H&RT met with Adrian Cummins (RAI) and Paul Gallagher (IHF) following HOTREC’s Cork assembly to discuss the sector’s uncertain outlook.
On the go since 1980, The Brussels-based Association of Hotels, Restaurants and Cafés in Europe – HOTREC – had its bi-annual General Assembly at the Kingsley Hotel in Cork on the 21st of April.
Aside from members in all EU member states (with the exception of Bulgaria), HOTREC members are found in other non-EU countries such as Ukraine, Armenia, and Azerbaijan; in all, 48 representative organisations from 33 countries make up the growing membership.
Ireland Hosts Europe’s Hospitality Leaders Ahead of EU Presidency
With these meetings coming around every six months, the lobbyist group representing over 2 million companies across our great continent has chosen Ireland as its destination on this occasion because, as RAI Chief Executive Adrian Cummins explains, in advance of a change in EU presidency, it’s traditional to have the conference in the country where the rotating presidency will next reside.
Adrian has been treasurer of HOTREC for a decade and, while there have been plenty of challenges for the industry over that time, this year’s set of circumstances that were set in train by USA’s illegal attack on Iran were as unprecedented as their potential consequences are unpredictable.
Energy Costs Dominate the Agenda
In HOTREC’s press release in advance of the assembly, rising energy costs in an uncertain geopolitical future formed the central thesis of the gathering and is surely one that occupies the minds of just about everyone in business. There is also the issue of how tourists are going to be able to travel over the coming months, with some airlines already cutting flights as another cost-of-living surge looms.
“I was listening to the session we had this morning,” says Adrian during a break at the event. “There was Cynthia Ní Mhurchú (MEP), Caroline Boucquel (Fáilte Ireland CEO) and Conor Healy of the Cork Chamber of Commerce… and we don’t know where we are at the moment in terms of the geopolitical atmosphere because it has knock-on effects for aviation fuel, energy from gas and, of course, oil.
“My prediction is that we’re in for choppy waters for the next six months. Reading between the lines with airlines reducing flight numbers, it will mean less people coming into Ireland by air. So we’re in for a tough summer on the demand side of things. In terms of supply and the cost of supply in the industry, energy is a big factor, along with inflation. Then, that has a knock-on effect for our labour costs because people will start looking for pay rises to counteract the rising cost of living.”
Irish Hospitality Leaders Weigh Up the ESB Profit Question
With electricity costs notoriously high in Ireland compared with most other European countries, one can only wonder what the ESB is doing with profits of €636 million. Shouldn’t some of that profit surely be used to lessen the cost burden on Irish businesses and households?
From its foundations, the spirit of the EU has been a socialist one; about spreading the cost burden throughout the member states and helping one another to grow together. Is there any of that spirit manifest in HOTREC’s policies?
“They (ESB) will argue that they need to reinvest in their infrastructure… To me, that €636 million profit should be reinvested to try to soften the blow for consumers until we get out of the crisis,” says Adrian.
Paul Gallagher, CEO of the Irish Hotels Federation (IHF), is not so sure that’s possible:
“We have an electric power network that’s creaking under the strain,” says Paul. “It’s a network that’s close to full capacity, so some of that €636 million is going to be reinvested in the national network. We have to do that. Otherwise, we’ll have blackouts and if we have that, then huge employers would think twice about coming to Ireland to invest in the economy… it’s critical to Ireland’s reputation.
“It’s hard to understand how we are so expensive in this country (for electricity). We import pretty much all of our gas and we burn a lot of gas and gas it the fuel that sets the world price for electricity because it generates most of it. And while we’ve been transitioning to green, we need standby power for when there’s no wind. We also probably haven’t been fast enough in capturing wind power in Ireland.
“Energy is one of the highest costs in a hotel because we’re high energy users. It would be the next highest cost after the payroll. (Transport Minister) Darragh O’Brien intimated earlier this week that energy costs could rise by 30% but overall impact could be about 9% on the domestic economy. Now 9% increase on energy costs into a hotel would have a huge impact on a hotel’s business. Cost absorption is something that hotels have to do but because the consumer is also experiencing an increase in the cost of living, it’s difficult to pass on cost increases such as this.”
Why HOTREC Matters in Brussels
For Paul and Adrian, HOTREC’s role in exchanging ideas and information is vital in a world where there are many similarities.
“Hotels and restaurants across Europe have a lot of common interests,” says Paul, “legislation and how it impacts us, taxation rules, sustainability and ways in which we can work together. And of course, every hotel has a restaurant.
“It’s been very useful. We couldn’t possibly keep our eye on Brussels and what they’re doing over there and still be affective here in Ireland and keep an eye on our own government – what they’re doing and what our industry needs. A lot of what the government transposes in legislation here ultimately comes from Europe.
“HOTREC are the eyes and ears of the industry. Their offices are very close to Parliament and they work the room like we do here – we try to find MEPs who we believe are open to understanding the sector and we try to educate them and as legislation affecting our sector is passing through parliament, we ask certain groups inside to either examine certain aspects of it that we don’t believe are right (like the Digital Fairness Act or the Digital Marketing Act) or sometimes, we ask HOTREC to make sure that legislation is benign – that it doesn’t come at a cost that we cannot manage here, for example. So it’s a very important organisation.”
So are we now at a point where exerting pressure on national governments has become a redundant exercise?
“Certain parts of fiscal policy are set at European level,” says Paul. “But then in Ireland, it is ultimately up to the Government as to how they then distribute tax revenues back through the economy, so we are active in terms of our own government with the needs of our own sector and we lobby that individually here.
“We also share some of our methods with other federations – how we lobby and what the key messages are that we use here to convince government to reduce the VAT rate from 13.5% down to 9%, for example. We share that with other organisations in HOTREC because they have similar issues.
“I think one of the main messages so far from the conference is how this energy crisis will have a long-term impact on Europe and the world. A lot of the long-term processes for turning heavy oils into products like kerosene and gas have been damaged, so even if we ended up with a resolution today to this particular crisis, it could be many months before we’d have capacity on the production side. So we’re going to have a long problem with energy crises and whilst we’re coming into the summer months now when we won’t be using quite as much energy for space heating and so on, once we get to September, we could have some really big issues.”
Calls Grow for Europe-Wide Support Packages
How the industry will deal with those impending issues is the big question. For Adrian Cummins, there’s no doubt that in order to face them, uncompromising action will be required.
“Coming out of the conference today, I would hope that HOTREC will go to the European Commission and say, ‘We need to have our support packages in place if energy costs start to cripple businesses and has a continued effect’,” says Adrian. “Similarly to the way we dealt with the Pandemic, we need to throw money as a solution to fixing the problem for the next 12 months or until it settles down. And it has to be done in a Europe-wide manner.”
