BDO John O'Callaghan

Business Planning for the Hospitality SectorFebruary 2012

Our Clients- Hospitality & Food Sectors

Page 2

Setting the scene

• Tourism business survey conducted on behalf of

Fáilte Ireland, towards end of 2011

• Over 1,200 businesses surveyed- achieved 22%

response rate

- Measured Performance during 2011

- Expectations for 2012

- Issues and Challenges facing the tourism sector

Page 3

Overall Performance During 2011

Page 4

My business generated an operating profit in 2011

Overall Performance during 2011

My business broke even

My business incurred an operating loss in 2011

3 in 4 tourism businesses achieved at least break

even performance during 2011

3 in 4 tourism businesses achieved at least break

even performance during 2011

One quarter of tourism businesses incurred an operating loss in 2011

One quarter of tourism businesses incurred an operating loss in 2011

%

Sector Observations

Page 5

Total

After accommodation providers, F&B businesses are the most positive in relation to overall performance

in 2011.

Accommodation provider

ActivityFood &

beverageVisitor

attraction

My business generated an

operating profit in 2011

My business broke even in

2011

I expect My business incurred

an operating loss in 2011

Overall performance in

2011% % % %

2012- Tourism Sector Outlook

Page 6

Energy costs

Total revenue/turnover

Rent/property cost

Net profit margin

Commercial rates

Payroll

No. of employees

Level of change anticipated over the next

12 monthsSignifican

t decrease)

Significant increase

• 48% of businesses expect turnover to increase in 2012

• 41% expect NP to also increase during 2012

• 62% of businesses expect energy costs to increase in 2012

• 27% expect payroll costs to increase during 2012

Increases in payroll and employee numbers not necessarily a negative if they are being driven by

increases in the volume of business

What are the Key Factors Impacting on Tourism Businesses?

Page 7

Impact on business

Rising costs

Lack of consumer confidence

Cash flow pressure

Domestic demand

Increased competition

Difficulty in accessing credit

Overseas demand

Currency fluctuations

Other

None

Rising costs, lack of consumer confidence (ESRI largest drop in 10 years) and cash flow are the key issues exercising

tourism businesses.

BiggestImpact

Any Impact%

What are the Key Factors Impacting on Tourism & Hospitality Businesses- Difficulties servicing debt

Page 8

  Performing % Watchlist/ Past Due % Default/ Impaired %

Agriculture & Food 81.38 13.83 4.79

Public, Community & Local 71.99 19.99 8.01

Total 70.48 18.02 11.5

Wholesale & Retail 69.31 17.1 13.6

Professional & Real Estate 68.92 20.1 10.98

Transport & Comms 66.26 20.1 13.63

Manufacturing 65.9 20.38 13.72

Financial 65.79 16.22 17.99

Construction 65.23 12.75 22.02

Energy & Mining 53.31 20.78 25.91

Electric 49.63 48.08 2.29

Hotels & Restaurants 48.9 34.82 16.28

Central Bank Survey- Hotels and Restaurants, one of the key groups of the SME sector that are struggling to keep up to

date with loan repayments

Know your business

Know your

market

Have the right

people

Use external supports

Have the right

information

Document & execute your

plan

Watch your

timeline

CREDIBLE BUSINESS PLAN

Page 9

Know your market…

Page 10

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

Important Questions

• Where is my market now?

• Growing /retracting / stagnant

• How will it evolve over the next 3-

5 years?

• Customers/ products

• What are the growth

opportunities?

• New Markets/ New products or services/ Partnering?

Information Sources

Fáilte Ireland, Tourism Ireland & CSO statistics and data

Trade and Representative Bodies- IHF, LVA, VFI, RAI

Sector publications

Internet research

Trends

Restaurants- local sourcing of ingredients, healthy nutritional food, smaller portioned meals, social media (influencing where people eat), iPads for menus and wine lists

Hotels- Vending machines to replace room service, free WiFi, electronic check-in, wet-rooms as opposed to bathrooms

…then look objectively at your business…

Page 11

• Complete a SWOT

• Exploit strengths and

opportunities?

Issues to be considered

• What are your customers saying about the business and its services?

• Customer comment cards

• More importantly what sort of opinions are prospective customers forming about your business

• Third Party web-sites (Tripadvisor)

• Independent Reviews

• How does your business compare to that of a competitors?

• Mystery Shopper

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

…have the right people…

Important Questions

• Do I have the right people to drive

the business?

• Are there any skills gaps?- How

can these be addressed- Fáilte

Ireland/ SOLAS

• How do I retain and motivate the

right people?

• Any future succession issues?

Practical Tips

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

DRAGONS DEN

Appraisal

Incentive packages – performance bonuses

Assessment

Make changes

Page 7

…have the right information…

Page 8

Important Questions

• Have I….

• Relevant and timely

information?

• Regular mgt accounts,

budgets, cashflows?

• Adequate and reliable

information systems?

Practical Tips

Identify and prepare KPIs

Rolling 3 month cash flows

Get into discipline of doing a budget

Consider and take action on variances

• Forecast peaks & troughs in cash

• Take corrective action NOW!

• Communicate with stakeholders/ lenders

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

…use external supports…

Page 14

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

Practical Tip

Use network events and industry associations

…use external supports-

Page 15

…use external supports…

Page 16

FUNDING SOURCES

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

Government Finance

SEED CAPITAL FUNDS

Equity Finance

VENTURE CAPITAL

BUSINESS ANGELS

EMPLOYEE INVESTME

NT INCENTIVE SCHEME

BANK DEBT

Debt & Working Capital

WORKING CAPITAL

MANAGEMENT

….document & execute your plan…

Page 17

=Business

Success

DOCUMENT

+IMPLEMENT

+REVIEW

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

….document & execute your plan…

Page 18

Know yourMarket

Know your business

Watch your

timeline

Document & execute your plan

Useexternal supports Have the

right informatio

n

Have the right

people

Enjoy It!

OUR TEAM

Kevin Doyle, Tax Partner

[email protected]

470 0301

John O’Callaghan, Audit Partner

[email protected]

470 0121

Presentation to NAMAPage 19

Derry Gray, Managing Partner

[email protected]

470 0350

Austin Hickey, Senior Mgr.

[email protected]

470 0352