Hospitality Needs Support Until at Least Easter 2022

A review of the island’s domestic economy has recommended that the gov continues to support the hospitality sector for the foreseeable future. Other recommendations include a code of best practice which may include contact tracing tools.

Carried out by PwC, the review, into the hospitality sector has said that cash support is likely to be required until Easter 2022 at the earliest.

Yesterday, representatives of the hospitality trade said they back the recommendations of the PwC report and called on the gov to implement a salary support scheme to aid the industry.

Recognition

The review’s executive summary said that businesses should be ‘duly recognised for its contribution to the visitor economy and to our quality of life’. 

However, PwC found that with different support being offered to the hospitality sector, compared to that of accommodation providers, hospitality businesses owners ‘feel disadvantaged’. It adds: ‘The current distribution of support has greatly aggrieved some business owners and has potentially exacerbated the recruitment difficulties within the sector. Hospitality provision on the Isle of Man today can only be self-sustained in the short-term by the successful attraction of visitors to the island for headline events.’ 

Several of those who engaged with the report unsurprisingly noted that the TT and MGP/Classic TT periods are the most lucrative times of year. They have requested a support system based on a per cover basis or a venue’s capacity be implemented. Some of those businesses perceive that they have been disadvantaged by the support offered to accommodation providers and that workers within that sector may be unlikely to seek employment in hospitality.

The report adds: ‘Interviewees explained to us that with hindsight, they would not have adapted their business to continue trading because doing so was not financially effective. Government should therefore recognise the contribution hospitality businesses have made to the island during the last 12 months and the toll it has taken on the individuals connected to these businesses.’

Tailored

As part of its review, PwC has recommended that the gov needs to tailor the support offered to businesses to their individual circumstances. While it says the support so far has been ‘gratefully received and swiftly implemented’, it adds that the gov has ‘not accommodated the variety that exists within the hospitality sector’. It has called on the support to be tailored to reflect a business’ age and stage in its lifecycle, the size of the businesses, its premises, the number of employees and where the business is based.

However, PwC says that further work is needed to understand the extent that people have continued to work from home and the drop in business meetings being held virtually instead of on the island. Additionally PwC says that ‘the continued disruption caused by the Douglas Promenade Refurbishment has a localised (but dramatic) impact which could exacerbate already precarious financial situations.’ 

To better understand these areas, PwC has recommended an online portal which businesses can supply info to gov to best tailor the support to their needs, in effect ditching a one size fits all policy. 

Support

The report also recommends that the gov needs to provide ‘clear, positive messaging to boost consumer confidence and to stimulate consumer demand for hospitality businesses’. It says that as people return to hospitality venues, the gov must lead with the clear messaging of supporting the hospitality sector and promoting the concept of ‘safe socialising’. 

PwC adds: ‘Making it easier to organise community events and promoting weekday trade in particular will mitigate some of the revenue losses resulting from lower visitor numbers, increased levels of remote working and other lifestyle changes. We also recommend a code of best practice (including contact tracing tools) be available to businesses to assist in living with Covid-19 and responding should the situation evolve. This will help build consumer confidence.’ 

While trade is said to be steady at weekends, the report says that a scheme should be developed to encourage weekday and lunchtime trading.

And with the borders due to open at the end of this month, there are concerns that more Manx people will leave the island than tourists will come in, which will have a further impact on the industry. 

Business leaders have also criticised a lack of coordination within the gov, with them being passed around departments and a ‘protracted scrutiny of events’ hampering their efforts to organise public events. 

Sustain

A big part of the report focuses on the viability of the industry, with PwC recommending that the gov continues to ‘respond to the financial hardship that threatens the hospitality sector’. PwC adds: ‘Businesses will carry the burden of the pandemic for months or even years to come. They have responded to the challenges variously but a common consequence is the impact on their ability to maintain existing services and/or to proceed with future growth and investment.

‘Sustained financial support will be a lifeline for many but it must also be periodically reviewed. Government must be flexible in its approach to working with businesses in recognition of the pandemic’s extraordinary impact.’

The report says that continued support will be required until normally trading resumes, with Easter 2022 being seen as a likely timescale. Furthermore it says the salary support scheme should remain in place if a business can demonstrate reduced turnover and that payments for money owed to the gov should ‘reflect the exceptional nature of the disruption to trade in the last year’.  

In the medium term, PwC has recommended that the gov look at exploring how to continue reduced VAT rates on hospitality supplies, reduce the duty on beer, transfer to the metric system (Gef has no idea why this would help) and suggests the gov could provide a credit line facility tailored to business needs for working capital purposes as they recover.

The report also says that given the anticipated drop in trade this summer, ‘it could be catastrophic to some businesses to discontinue salary support and to increase VAT rates’. 

Importantly it also gives an indication as to the levels of financial support that businesses have had to rely on including friends and family.

Adapt

PwC has recommended that the gov should continue to facilitate business adaptation and said they ‘cannot be expected to adapt to the post-pandemic world without a vision for the island’s future, guidance on how to operate and financial support to make necessary or innovative change’.

It adds that the pandemic ‘appears to have hastened lifestyle changes which requires businesses to evolve’. PwC says the gov ‘should recognise this in the availability and terms of adoption schemes’. Potential improvements to the scheme could include removing the need for businesses to fund adaptation in its entirety before receiving support and that ‘strategic projects and infrastructure investment should consider hospitality and its contribution to the island’s future’.

A potential lifting of the limits to one application per business is also recommended, with the report saying that a vibrant hospitality sector is vital to help grow the island’s working population.

Gov Response

A gov spokeswoman told Gef: ‘The Isle of Man Government has provided over £130m of direct financial support to businesses and individuals across the domestic economy, and we continue to monitor economic conditions and provide support where appropriate. In that respect we continue to work closely with a range of bodies including the hospitality and catering sectors.’

You can read the full report, including the comparisons with the support given to other jurisdictions below.

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