PREM Group open letter to An Taoiseach
Last week, our CEO Jim Murphy wrote an open letter to An Taoiseach Micheál Martin outlining the very serious impact COVID-19 is having on our industry. He also highlighted a number of recommendations which we believe are required as a matter of urgency to help support the recovery of hospitality and tourism. A copy of the letter is available below.
Over 400,000 hospitality jobs at risk. PREM Group calls on extended government support for the hospitality industry.
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Dear Taoiseach,
PREM Group is one of Ireland’s largest hotel operators and hospitality providers. We operate 38 hotels (including leased, owned, and managed properties) across Ireland, England, Scotland, Belgium, and The Netherlands. The group has 2,990 bedrooms and 1,508 employees under direct report, 60 of which are based at our Head Office in Dublin.
We have been in business for 23 years and have steadily grown into one of the most respected hotel groups in Europe offering a range of consumer and business to business hospitality services. Taoiseach, as you know through your many dealings with various hospitality, tourism and hotel lobby groups including the Irish Hotels Federation (IHF) and The Irish Tourism Industry Confederation (ITIC) the hospitality and tourism industry in Ireland is facing a dark future. The industry supports 270,000 jobs, but this number is only the tip of the iceberg as it doesn’t take into account the number of people who are not directly employed in the industry but provide it with services or products. Ireland’s agricultural sector is hugely dependent on domestic consumption for which the hospitality industry is a huge conduit. Our B2B hospitality procurement partner, Trinity Purchasing, works with thousands of suppliers every day, from food producers to linen providers and everything in between, so we know the reality of the situation only too well. All of these valued suppliers rely on us as we on them. ITIC has already said that as well as the 270,000 direct tourism and hospitality jobs there are another 1.5 indirect or induced jobs that are reliant on hospitality and tourism-related positions.
Due to the various lockdowns and many restrictions over 100,000 jobs have been lost, 100,000 are at imminent risk and a further 300,000 jobs are at risk in the medium term. That’s a staggering and unprecedented 400,000 hospitality and tourism related jobs in danger Taoiseach. The alarm bells are ringing, we must take immediate and decisive action to protect hospitality related jobs or quite frankly Taoiseach, the industry will suffer a dreadful blow which will take decades to recover from. This will directly impact the tax take and increase the social welfare cost.
Across our own group, as previously outlined 1,508 people were employed at the beginning of March 2020 of which 927 people, or 61% were employed in Irish hotels and at our Head Office. At the end of October 2020 just 274 were employed in our Irish division - this is a drop of 653 people or 70% from pre-pandemic levels. The scale of this issue is epic and should not be underestimated. To get back to pre-Covid levels of employment government support measures need to be continued.
Taoiseach, we completely understand the difficulties that you and your government face as the COVID-19 Pandemic continues and we would also like to commend you for the various positive measures the government has implemented. For example, the Employment Wage Subsidy Scheme, the reduction of the VAT rate for hotels, the local authority rates break and the reopening grants, all of which have been vital for our industry and have allowed us to keep people in jobs and effectively, to stay open albeit at a much-reduced capacity.
Despite these great initiatives, however, the grim reality is that these measures will not be enough to support our industry and the so many others who rely on us to buy their products and services. Without the continuation of government supports the hospitality industry will suffer so badly it will never recover to pre-Covid levels. All of the people who work within the industry and the producers who supply us with the very best of Irish produced food will also go out of business that’s not to mention all the other services our industry buys in. Our industry is the backbone of this country. I am writing to you to ask you to please consider the following measures which I respectfully ask you to prioritise.
Communication Strategy for Business Reopening:
We understand the reason for the moves from Levels 2 to 3 and then from 3 to 5, as ultimately the government is trying to suppress the transmission of the virus. However, the communication of these moves was very poor, and the recent leaking of advice given by NPHET to the government caused dreadful stress for both customers and staff. It was extremely damaging for our business: weddings which were due to take place with food already prepped and bought perished; international conferences were cancelled and our corporate business simply dried up overnight. It is imperative that sufficient notice is given to businesses about the changes in dates and levels so that we can plan accordingly. Communication is key in this regard. An industry forum needs to be put in place for engagement on the Resilience and Recovery 2020-2021: Plan for Living with COVID-19. This forum would take particular heed to the business reopening dates and appropriate restriction levels and would provide businesses with adequate notice so they can plan accordingly.
We need a plan for the next 3 months which will give business and leisure travellers the confidence to make a hotel booking. This needs to be well communicated as we emerge out of Level 5 restrictions in early December.
What Use is Level 3 to the Hospitality Industry?
The numbers of positive COVID-19 cases have been coming down, this is due of course to the hard work of the Irish people who have done everything that is asked of them. The hotel industry has not been associated with any coronavirus outbreaks, we have worked extremely hard to ensure the highest levels of hygiene and cleanliness have been put in place. In our case I am glad to be able to report that we have had no COVID-19 cases among our hotel employees since reopening on the 29th June. Hopefully the numbers of positive cases will continue to fall and we can move from Level 5 to Level 2 in December. Level 3 will be of no use whatsoever to the hotel industry as people will not be permitted to leave their own county. Please consider how many people would want to go to stay in a hotel within their own county? Very few is the answer as you know Taoiseach. If we must go to Level 3 then the restriction of travelling outside one’s county must be lifted.
Weddings, Events, Meetings and Conference Business is on its Knees:
Wedding, event and meeting restrictions need to be completely reviewed. Lots of hotels have very large ballrooms which can allow for social distancing in line with government advise and regulations. The number attending a wedding or event should be based on the room capacity and should not be based on a set number. The numbers allowed to attend weddings are unrealistic and unfair for couples, the restrictions around dancing are incredulous, impossible to police and unrealistic. The wedding business has been virtually wiped out, not just for us but also for so many suppliers who sell goods and provide services to this industry such as florists, musicians and entertainers to mention but a few. This goes back to my previous point Taoiseach that our industry supports many, many jobs and families both directly and indirectly.
The Green Stay – Support Irish Hotels:
Over 80% of all of the hotels in Ireland have signed up to the Fáilte Ireland COVID-19 Safety Charter and we have followed all of the guidelines on social distancing to the letter. Hotels have proven to be safe places to visit and to stay and there is no reason for the public to think otherwise. Fáilte Ireland needs additional marketing support to help communicate the message to the public that they can stay in Ireland’s many wonderful hotels and guest houses and to encourage them to look for the Fáilte Ireland Safety Charter approved mark. The previous ‘Stay and Spend’ incentive needs to be simplified, the public did not fully understand it or embrace it. Other marketing initiatives could be created such as the ‘Green Stay’ where people would be encouraged to stay in Irish hotels and to support the Irish hotel industry. The UK government’s initiative ‘Eat Out to Help Out’ allows the customer to avail of a 50% discount which is automatically available to customers at participating establishments. Establishments then claim the reimbursement from the government for the discount they’ve given to the customer. This is far less cumbersome for the customer who can avail of immediate benefits rather than waiting for a rebate in future tax credits and has made this incentive a success. This same mechanisim could be applied to hotel leisure stays and for food and beverage purchases in hotels and restaurants.
Business Supports:
We estimate that businesses will not start to see some sort of recovery until the second half of 2021. It is essential that the business supports that have been introduced continue well into 2021 and are not withdrawn abruptly. This will give reassurance to the many international investors currently supporting our economy.
The Local Authority Rates holiday needs to be extended from December 2020 until at least the end of August 2021.
The Employment Wage Subsidy Scheme (EWSS) is currently scheduled to remain in place until the end of March 2021. We firmly believe this needs to be extended until the end of summer 2021 and gradually phased out thereafter to give the industry time to recover and to allow at least one full summer season of trading. The Dutch government have already announced that their wage support scheme will continue until 30 June 2021. Their scheme takes the form of a tapering relief where the wage supports taper off as business levels improve.
The reduction of the VAT rate must be utilised as a vehicle for recovery for the hospitality industry and not seen as a cheaper selling rate for the consumer. Indeed, the reduction of the VAT rate for the hospitality industry to 9% by Minister for Finance, Paschal Donohoe was put in place for this very reason, a point the minister made very clearly himself when he said, “I am putting this reduced rate in place until December 2021 in order to provide significant additional support to businesses throughout 2021 when hopefully our economy and society can start to return to some form of normality.” The new VAT rate must not result in downward selling of rates due to consumer pressure. The industry cannot support a race to the bottom when it comes to pricing and we are already fielding calls from international tour operators asking us to reprice packages to take into account the reduction in the VAT rate. Crucially, the VAT rate must be reduced indefinitely to allow for the ongoing recovery of our sector and to support the capital values of the huge investment in the industry.
International Access:
We welcome the introduction of the EU traffic light and testing regime for air travel as it provides us with a positive step forward with facilitating international visitors to Ireland. This needs to work in tandem with an efficient testing facility in all our airports that will replace the current requirement to quarantine for 14 days.
Easy Access to Affordable Low-cost Funding:
The UK government has introduced easy access, low cost funding in a bid to support business. Their Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) provide funding which is 80% guaranteed by the state. Qualifying companies need to demonstrate their capacity to repay based on Pre-Covid performance levels. Realistic business plans are required however the application process is very straight forward and jargon-free. The borrower can choose from a selection of banks (including their own) to obtain the funding and in most cases borrowers deal with their existing relationship manager. Loans are interest free for 12 months and realistic repayment schedules are available. The COVID-19 Credit Guarantee Scheme is clearly not working and needs to be replaced with something along the lines of the CBILS in the UK and where the funding amounts are not capped. A major drawback of the COVID-19 Credit Guarantee Scheme is that it does not apply to a re-financing situation. A large number of Irish hotels are currently being funded by alternative lenders who are not signed up to the loan deferment scheme who must get access to a State backed scheme.
Bank Loan Deferment:
The IHF has asked for further bank deferment of interest and capital for 6 months for businesses in our sector. We would absolutely concur with this suggestion.
Human Cost:
Much has been made of the economic catastrophe that COVID-19 represents but we, as a ‘people industry’ are acutely aware (through various employee support mechanisms deployed) that our active – and more especially – our laid-off staff are suffering great mental distress due to the current circumstances. We feel that, given the labour intensity of our industry, that priority be given to assisting it getting back to normality as soon as possible.
Failure to implement these suggestions would, in our view, hit the hospitality industry so badly it may very well never recover to pre-Covid levels and will put 400,000 jobs at risk.
I look forward to hearing from you at your earliest convenience and would welcome the opportunity to meet in person if your busy schedule allows. Please do not hesitate to contact me if you need further information or indeed if you would like me to provide you with further insights or information on our industry.
Yours sincerely,
Jim Murphy
Chief Executive Officer, PREM Group
CC: Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar TD
Minister for Finance, Paschal Donohoe TD
Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, Catherine Martin TD
Minister for Public Expenditure and Reform, Michael McGrath TD
CEO Tourism Ireland, Niall Gibbons
CEO Fáilte Ireland, Paul Kelly
CEO Irish Hotels Federation, Tim Fenn
CEO Irish Tourism Industry Confederation, Eoghan O’Mara Walsh