The most Brexit-affected bars
Brexit could be detrimental to many in the hospitality trade. But which pubs are most likely to feel its brunt thanks to their location and to a weakened Sterling? AIB’s Head of Hospitality & Tourism at its Commercial Banking division David McCarthy may have some insight into this through his work on compiling spend in pubs around the country. We look at his findings here.
14 March 2019 | 0
With nearly 7,200 pubs operating throughout the country, the Irish licensed trade is a crucial component of Ireland’s hospitality sector which employs 230,000, spends just under €3 billion annually in wages and delivered €6.7 billion in tourism revenues in 2018.
But while the hospitality industry is likely to be among those losing significant amounts of business as we face into Brexit, some pubs are going to be more severely affected than others.
So which areas will be the most acutely affected by a further drop in UK tourists and any further Sterling decline? And what’s the level of UK tourist spend like in the rest of the country?
AIB’s Head of Hospitality & Tourism David McCarthy stripped out the data from those pubs using AIB’s Merchant Services data (card payment service) to get an indication of consumer spend figures in pubs around the country for 2018 and has compared it with the previous year’s figures to see in which areas UK tourists (as well as those from the US, Europe and internationally) are spending in the pubs.
The sample looks at all drinking places that are AIB Merchant Service customers – about half of all outlets – by tracking in-outlet card spend.
Last year saw a 3.2% increase in AIB’s year-on-year card spend overall in the pub in the year to December when compared to 2017. But 2017 witnessed a 26.7% year-on-year growth in spend. It should be noted, however, that some of the growth that year is down to the increase in card usage following an increase in the “contactless” card limit from €15 to €30 at the end of 2016.
While AIB MS saw a drop in Irish customers in our pubs across the country last year (going from 85.9% of custom in 2017 to 83.9% in 2018), tourism spend from the UK increased to take 6.0% of overall pub spend, up from 4.9% in 2017. Similarly AIB’s figures reveal that North American spend rose from 5.0% to 5.6% of pub spend while that of European tourists grew from 3.3% to 3.6%.
Kerry enjoyed the highest proportion of pub tourism business in the country with sales to ‘non-Irish’ customers being responsible for 35.9% of the annual spend in pubs there while Roscommon had the least proportion at just 2.6% of total spend.
Kerry’s UK tourists accounted for 10.1% of the spend in the pub in 2018, up from 8.2% the previous year according to AIB MS, while the US tourist was responsible for 16.3% of total pub spend, up from 16.1% in 2017. However European tourism to Kerry’s pubs saw a drop from 8.0% of spend to 7.7% while the ‘rest of the world’ spend there grew to 1.9% from 1.7%.
County Dublin enjoyed a tourist spend accounting for 18.5% of the total pub spend there. This breaks down into UK tourists being accountable for 7.2% of the card spend in pubs (up from 5.6% in 2017) while North Americans contributed 5.7% to overall pub card spend (up from 5.0% in 2017) and European tourists were responsible for 4.5% of spend, up from 4.2%.
Non-Irish tourists to County Cork were responsible for just 11.5% of total spend in the pub which comprises UK tourists (4.5%, up from 2017’s 3.5%), North American tourists (3.0%, up from 2.6%) and European tourists (3.2%, up from 2.7%). ‘Rest of the world’ tourism here contributed 0.8% of AIB’s total card spend (up from 0.6%).
Galway enjoyed a tourism spend accounting for a higher 22.8% of the total, according to AIB’s MS figures. Here, UK tourists were responsible for 5.1% of total card spending in the pub (up from 4.2% in 2017), North American tourists contributed 11.5% of total pub spend (up from 10.7%) and Europeans grew their proportion of spend from 4.8% to 4.9%.
Tourists in County Kilkenny were responsible for 14.8% of the total pub spend via AIB MS with UK tourists being responsible for 4.5% of total card spend in Kilkenny pubs, up from 4.0% in 2017. North Americans accounted for 5.7% of spend, up from 5.4% and Europeans contributed 3.6% to overall pub spend, up from 3.5%.
Non-Irish tourists were responsible for 5.5% of the pub takings via AIB MS in County Longford. This comprised UK tourists having 3.4% of the spend (up from 2.9%) where North Americans level-pegged on a 1.3% share of overall pub spend while European tourists share of the pub spend actually fell from 0.6% to 0.5% and ‘rest of the world’ fell in share from 0.7% to 0.3%.
Bearing Brexit the heaviest
But it’s those pubs with a heavier reliance on UK tourism that will be the most affected by Brexit, especially as the UK has a similar pub culture and Sterling could well fall further than the 12% it’s already fallen in relation to the €uro since just before the decision was taken to exit the EU.
And so the counties which rely the most on UK spend – Donegal 16.9% of AIB MS spend (up 0.1% on 2017 spend), Mayo 11.1% (up 10.9% on 2017), Kerry 10.1% (up by nearly a quarter at 23.1% on 2017), Louth 7.4% (down 13.3%) and Dublin 7.2% (up by nearly a half: 45.1%) – probably have the most to lose should UK tourism fall away due to the high cost of the €uro to those considering a trip over.
Tipperary can breathe more easily, perhaps, with only 1.5% of card pub spend coming from UK tourists (‘though up by 10.4% on the 2017 figure).
Then there’s the cross-border purchaser from RoI.
Alcohol remains the biggest attraction for RoI shoppers crossing the border into NI according to a recent Kantar Worldpanel report.
“No other food or drink category comes close,” commented Kantar’s Consumer Insight Director Douglas Faughnan, putting the value of cross-border alcohol purchasing at just over €16 million (or just under 25% of overall cross-border shopper spend).
VFI Chief Executive Padraig Cribben says the AIB figures highlight the importance of British tourists to the Irish pub trade.
“The UK tourists have more of an understanding of pub culture in terms of food and entertainment than their European or North American counterparts,” he told Drinks Industry Ireland, “The survey figures would re-inforce the anecdotal evidence of the importance of this facet of tourism in the border areas and along the western seaboard. Any negative fallout from Brexit will have significant adverse effects in these areas in particular.
“Overall, the figures provide a fascinating snapshot of spending in our pubs while further underlining our move towards a cashless society.”
Meanwhile LVA Chief Executive Donall O’Keeffe commented, “A fascinating set of figures from AIB Merchant Services which confirm both the ongoing growth in card turnover in the Dublin trade and the overriding importance of locals to our business. That said, tourists are a hugely significant element of our customer base, particularly in the city centre, around tourist landmarks and key hotels and they have made a substantial contribution to the growth in the Dublin trade in recent years.
“We expect card turnover to continue to grow strongly over the medium term as customers increasingly opt for card payments rather than cash”
It was undoubtedly an excellent two years for the sector, agrees David McCarthy, “The biggest contributor of growth in 2017 was the domestic economy which accounts for 84% of total business in pubs in Ireland. The domestic economy spend in Irish pubs grew by 26.7% in 2017, but has since flattened to 1% growth level in 2018.
“The two most important tourism markets to the sector in monetary terms are the UK and North American (US and Canada) markets.
“The UK has grown in both 2017 and 2018 by 23% and 26% respectively. The county that saw the highest growth levels from UK source markets in 2018 was Dublin with 45% growth from UK market spend achieved. Dublin has 48% of all UK pub business in Ireland.
He cites Dublin, Kerry, Galway and Cork as the counties with the highest UK spend with Dublin, Galway, Kerry and Limerick having the highest US spend.
“Apart from Dublin, Kerry and Limerick are clearly doing well in attracting both UK and US visitors to the counties,” he says.