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The British market is fundamental to the health of Irish tourism. 3.6 million of all international visitors to Ireland came from Britain last year representing 41% of visitor volume. €1.11 billion was spent by British visitors in Ireland last year, 22% of the tourism economy. Meanwhile 32% of all holidaymakers to the country came from Britain last year.
Furthermore 1.36 million trips were made by people from Northern Ireland to the Republic of Ireland, valued at €367 million in 2016. Therefore total income from sterling spending visitors while in Ireland was €1.48 billion in 2016. Source: Fáilte Ireland: Tourism Facts 2016
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Uncertainty prevails Formal negotiations between the UK and the EU finally got underway on June 19th against a background of a number of significant political developments and economic considerations since ITIC’s last Brexit bulletin in March. Most political observers point to a change in the mood music surrounding Brexit in recent months with a less ‘hard Brexit’ coming into focus. However, the UK government goals remain unchanged - leave the single market and control migration, exit the customs union and take back jurisdiction from the European Court of Justice. The changed political environment has emerged following elections in the UK and France. The political upheaval following the general election result for the Conservative Party, leaving the UK government dependent on the supply and confidence agreement with DUP, has resulted in more uncertainty about the British approach to the negotiations with the EU. The election of President Emmanuel Macron in France and his landslide victory in legislative elections reinforces a solid front by France and Germany to any concessions to the UK on the issue of the single market, safeguarding the freedom of movement of goods, capital, services and labour. Ireland’s unique concerns recognised by EU Ireland’s unique concerns regarding the Brexit negotiations were reflected in the EU negotiating guidelines which were adopted by the European Council on April 29th – to support and protect the achievements, benefits and commitments of the Peace Process, to avoid a hard border, and to protect the Common Travel Area. This builds on the significance of the clear references to specific Irish issues in Prime Minister May’s letter confirming the UK’s intention to leave the EU under Article 50, and in the European Parliament. More recently, Taoiseach Leo Varadkar met with Prime Minister May in London on finding solutions to common challenges in relation to Brexit. The challenges included the retention of the Common Travel Area and associated reciprocal civic rights, ensuring minimal disruption to Ireland’s strong trading relationship and retaining ‘an invisible border.’ Key issues of importance to tourism interests. Challenging timetable The Brexit timetable is challenging. Talks on a trade deal can only commence when “sufficient progress” is made on the divorce talks currently underway. The window for political negotiations and agreement is effectively reduced to not much more than 12 months as the parliaments of all 27 member states must sign off on a UK-EU deal, assuming one can be negotiated, in advance of Brexit day on March 30th 2019. While Article 50 allows for the EU 27 to extend the two year negotiation window, the indications currently emanating from Brussels suggest little appetite to do so. The outcome could be a ‘no deal’ exit or more likely an agreed period of transition on the core issues to allow the UK a phased transition from EU membership.
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Brexit is hurting Irish tourism The number of British visitors over the first five months of 2017 is down 7%, almost 100,000 fewer arrivals than in the same period a year ago. Spending by British visitors in the first quarter of 2017 fell by 7.5%, as Ireland became more expensive and less competitive having enjoyed the benefits of favourable exchange rates over recent years. The value of sterling against the euro has remained low since its weakest point in October 2016, although has risen slightly following the recent election result. Exchange rate changes are forcing the British consumer to modify their travel behaviour and expenditure.
Ireland’s tourism has suffered a double whammy following the UK’s referendum in June 2016 and the consequential devaluation of sterling. Not only have the number, and value, of visits from Britain and Northern Ireland declined, but Ireland is also experiencing tougher competition for international tourists as Britain has become a more affordable destination for many markets.
Ireland losing share of UK outbound travel Most recent data on outbound travel by UK residents records a 3% increase in the number of trips, with spending up 5%, over the first four months of the year compared with the corresponding period a year earlier. Within the period UK residents took more holiday visits (+2%) and trips to visit friends and relatives (VFR +5%), with the number of business trips almost unchanged. Outbound trips to European destinations increased by 2%, with trips to EU15 (countries that joined the EU after January 2004) up 3%, while travel growth to other world regions was more robust albeit on significantly smaller volumes.
The challenge facing many tourism businesses in Ireland is to remain competitive to halt the absolute and share decline from Britain, while simultaneously intensifying efforts to develop new sustainable growth markets.
UK reaping the benefit of weak pound Britain is enjoying a bumper year in inbound tourism with arrivals in the first four months up 11% and revenue up 14%, thanks to the weakness of sterling. The bounce in demand is due mainly to a 26% increase in holiday visits which account for almost 40% of demand, while business trips (25% of demand) are down 4% and VFR up 7%. In addition to tourist from the euro zone, American, Australian, Canadian and Japanese tourist, amongst others, are benefiting from the drop in value of sterling since this time last year. European visitors are up 8% while visitors from North America and Rest of the World are up 16% and 24% respectively. While visits from North America to Ireland have grown faster than to the UK over the period, the rate of increase from the larger mainland European market to Britain has outpaced the growth to Ireland, estimated at least +10% compared to +3% to Ireland so far this year.
It is evident that Britain is enjoying the benefits of its weakened currency and as such is posing an increasing threat to Ireland’s competitiveness in several important source markets.
Visitors from Great Britain and Northern Ireland critical to many businesses and employment in Ireland While visitors from Britain and Northern Ireland reach into every part of the country, the relative importance of sterling spending tourists varies by region and by category of hospitality businesses. Dublin attracts one third of the revenue spent by British visitors in Ireland, earning an estimated €368m last year, with business visits and short break leisure trips key to this demand and the viability of many hospitality businesses in the capital. The South West region, highly popular with visitors from Britain, earned €200m from the market last year, while other regions each benefitted from upwards of €100m.
In terms of dependency the Border counties are more heavily dependent on sterling spending visitors than any other part of the country. Just over 40% of tourism income in the border region comes almost equally from visitors from Britain and Northern Ireland. Most other regions rely on these two markets for close to 20% of their tourism earnings, with dependency in the South East highest at 26%.
The fall-off in demand and any reduction in average expenditure per visit from Britain and/or from Northern Ireland leave many businesses exposed with the Border counties relatively most exposed, while the absolute loss in revenue is likely to be felt most in Dublin and the South West. Any decline in demand will inevitably lead to loss of employment in the sector with the threat greater in regions outside the capital.
Tourism facing loss at leat €100 million Demand from Britain this year, while down overall 7% in volume, has fluctuated dramatically on a monthly basis compared to the previous year. Typically the period January to May accounts for just fewer than 40% of annual demand, with a similar share arriving over the peak four months from June to September. Based on historical trends it is reasonable to project that the expenditure by British visitors this year will decline at a rate sharper than the drop in volume, given the weakness of sterling. The segment of demand more vulnerable to a sharp downturn is the holiday or discretionary travel segment of the market. Available data on the first quarter indicates that the fall off in holiday visits was steeper than 10%. Holiday visits increase over the peak months from June to September, both in absolute numbers and in share of the total travel demand. Holiday visitors are also more likely to be very conscious of the exchange rate and may compensate by trading down or curtailing the length of stay. A loss of at least €100 million in the current year on revenues earned from British visitors this year would be a conservative projection, based on currently available data. This equates to a drop of at least 10% on the €1.1 billion in receipts from the British market last year. In addition, one could anticipate a downturn in demand from Northern Ireland, perhaps of the order of €30 million.
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Brexit negotiations: Putting Ireland’s dependency on British tourists into perspective A primary issue for Ireland’s tourism industry is protecting its No.1 volume source market. However, Ireland is not the only EU member state with a high degree of dependency on the UK outbound travel market. The UK is also the top source volume market for tourism in several countries, notably Spain, Portugal, Cyprus and Malta, and a valuable component of inbound tourism to many other EU 27 destinations. Spain, the top destination for UK travel, with almost 15 million trips last year, is also home to an estimated 300,000 British people in addition to a further large number (variously estimated at close to 500,000) who spend at least part of the year in mainland Spain and the Canaries. Spain has been actively lobbying on the travel related issues in Brussels and with other EU member states. While Ireland may be relatively more dependent on the UK as a source market, the scale of demand and value of UK tourists is considerably greater for other EU members. Ireland ranks 4th in terms of volume of British visitors to EU destinations, and 5th in terms of revenue. Ireland’s ranking falls to 7th in respect of holiday travel from Britain, with the Netherlands and Greece each currently attracting a greater number of UK holiday visitors.
In addition, Malta, Cyprus and Gibraltar are each highly dependent on UK visitors, with 80% of visitors coming on holiday.
The scale and value of the UK outbound travel market will ensure that travel and tourism related issues will be high on the agenda of other EU member states during the negotiations.
PRIORITY 1: The preservation of the Common Travel Area (CTA) and a soft border; The threat of a disruption to the Common Travel Area – whereby visitors can move freely between the UK and Ireland - is the top concern of the tourism industry. The objectives of securing continuation of the common travel area have been well publicised. The UK’s demand for control over the movement of people poses a threat to the travel and tourism sector. The outcome of the UK’s negotiated withdrawal from the common market and customs union will be key to how migration controls will be implemented in the future. There are potentially many scenarios regarding a post Brexit relationship between the UK and the EU which will determine the scope and level of controls over the movement of people and goods. As Ireland and the UK are not part of the Schengen travel area in respect of border controls it is hoped that the CTA can be preserved. Thanks to the Government in securing the border issue in the EU negotiation guidelines, it is important that progress can be made alongside the issues of EU citizens’ rights and the size of Britain divorce bill before there can be any discussion about the future relationship between the UK and the EU and any trade agreements. An importance aspect of the CTA is the current reciprocal visitor visa arrangement in place between the UK and Ireland whereby approved visa holders can visit both countries, which has worked to the benefit of Ireland’s tourism industry. However, depending on the outcome of the Brexit negotiations on the issue, it may be in Ireland best interests to reevaluate the potential benefits of capturing a great share of the visitors from new emerging long haul markets who arrive in Europe via a gateway in the Schengen travel area. It is to be highly desirable that a frictionless border solution can be found, including the application of technology, which would minimise any disruption to cross- border tourisms flows between both parts of the island. However, the EU’s chief negotiator, Michel Barnier pointed out on a recent visit to the border area that it will become a land border with the EU with consequences for customs controls as part of the EU management to protect the single market, safety and standards for food and other goods. The introduction of new controls on the movement of people between the UK and Ireland, including the land border, would have serious consequences for the travel and tourism industry. The maintenance of the current CTA is seen as a priority to the industry’s sustainable growth. The reintroduction of land border controls would have serious implications for tourism businesses in the border region, particularly in Donegal.
PRIORITY 2: The retention of a liberalised aviation regime between the UK & Ireland, and avoiding the possible risk of disruption of air services. Potential disruption to the EU’s single aviation market. Brexit has the potential to disrupt aviation market between the UK and the remaining EU 27, including Ireland. One of the successes of the EU has been the creation of the internal aviation market encompassing 28 member states plus Norway, Switzerland and Iceland. Growth of European air traffic in the past 20 years has been driven by the low cost carriers through the introduction of the EU Liberalisation Package, allowing EU airlines operate across member countries, which has led to more choice, more competition, increased efficiency and lower fares. Common rules on safety, security and the environment are also in place. Consumers and airlines have benefited enormously. A withdrawal by the UK from membership of the European Common Aviation Area (ECAA) would impact traffic rights to/from the UK unless a transitional or replacement agreement is put in place between the EU and the UK. Without such an agreement there would be a return to old restrictive bilateral agreements, cutting routes, the number of flights and capacities. The prospect for severe disruption is very real. Airlines are already planning operations for summer schedule 2019, when Brexit is due to take effect, without any certainty as to what regimen will be in force at that time. The crux of the issue is that the UK has stated that it will withdraw from the jurisdiction of the European Court of Justice (ECJ) that underpins EU structures and legislation, including the ECAA. Negotiating a new aviation relationship between the UK and the EU will be difficult and complex. It involves much more than traffic rights and airline ownership rules, although these are key issues.
What’s at risk for Ireland? The air link between the two countries is the single largest access route for visitors to Ireland. 3.3 million visitors flew into Ireland from a British airport last year, almost two out of five visitors to the country. The air connection between the two islands was the preferred means of travel for 75% of British visitors, while 21% of North Americans and 32% of visitors from other long haul markets connected to Ireland on a flight from Britain. 156 daily flights provide 22,000 seats each way between Ireland and Britain, including London-Dublin, the second busiest air route in the world. Five airlines provide services on 54 routes linking 23 airports in Britain and 6 Irish airports.
Much is now at risk. A key priority in the negotiations needs to be an arrangement that will see the continuation of a liberal air regime between the UK & Ireland without interruption to services. As airlines services require a considerable lead time the resolution of air traffic rights issue is most urgent. Any disruption would damage trade and movement of people, including tourism, with enormous economic and social damage.
PRIORITY 3: Continued support to the marketing of Ireland as an all-island destination, and facilitation of cross-border visitor traffic flows. The marketing of Ireland on an all-island basis following on from the Good Friday Agreement and the formation of Tourism Ireland and Waterways Ireland has proven to be of benefit to the economic development of both parts of the island. The political aspiration and the ITIC position is that ideally it should be continued in a post Brexit era. However, the political, economic and business rationale may well be severely challenged depending on the outcome of the negotiations and specifically in relation to any new border arrangements and regulatory regimes governing tourism businesses in Northern Ireland outside of the EU. From a consumer perspective the all-island dimension of the destination makes eminent sense with increasing numbers of visitors enjoying the complimentary aspects of tourist experiences in both parts of the island. The current uncertainty presents a severe marketing challenge for Ireland. The absence of a real term increase in Tourism Ireland’s marketing budget in 2017 is limiting the agency’s capacity to effectively boost and diversify Ireland’s destination marketing campaigns to meet the challenges posed by Brexit. The industry is facing a decline in demand from its largest market and increasing competition from Britain for international visitors.
PRIORITY 4: Harmonisation of regulatory standards across the island of Ireland, to avoid distortion or unfair competition A post Brexit UK could present a serious competitive challenge to Ireland’s tourism industry. Already Britain and Ireland compete for visitors in many source markets and visitor segments. Brexit has the potential to deliver a competitive advantage to the UK, including businesses in Northern Ireland, depending on the outcome of negotiations. The outcome could result in a distortion in the marketplace as well as resulting in unfair competition due to a variance in the regulatory regime governing transport, food, retail and other components of the tourism experience. The areas of concern centre primarily regulations governing labour, food, hygiene and environmental standards, and consumer protection regimes. It is conceivable that distortion could arise within the tourism and hospitality sectors between the North and the South, resulting in a loss of competitiveness to businesses in the South who could face a heavier burden of compliance with EU regulations and standards. The tourism and hospitality industry, which consists of many businesses including transport, accommodation, food services, entertainment, and retail, is concerned to ensure that the competitiveness of the tourism offering is not disadvantaged as a result of the outcome of Brexit.
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ITIC renews its call for an immediate €12 million BREXIT FUND to consolidate market share in Britain, to diversify into new markets, and to support vulnerable tourism enterprises. ITIC acknowledges the extensive preparations by Government over recent months for the Brexit negotiations. The approach, including the all-island dialogue, to identify the principal areas of concern and to develop priorities, is especially welcome. The focus on the Good Friday Agreement and the peace process; maintaining an open Border; retaining the common travel area; and minimising the impact on the economy and businesses is fully supported by the tourism sector. Maintaining ongoing engagement by Government at political and official levels with EU partners and institutions, in highlighting and explaining the significant implications for Ireland arising from Brexit, will become all the more important as the negotiation progress.
Tourism in urgent need of support to mitigate Brexit impacts Tourism businesses have not benefited from the extensive support systems introduced by Government and relevant state agencies to counter the adverse impacts of Brexit on export sectors of the economy. The agri-food sector, manufacturing industries and other businesses, have seen budgets to their respective state agencies increased and are benefiting from new custom designed business support schemes to counter the impacts of Brexit. Enterprise Ireland, Bord Bia, IDA and other agencies have been actively innovative in launching support services to assist businesses cope with the impact of Brexit in the UK marketplace and to identify diversification opportunities. Recent examples of the roll-out of key state agency enterprise support services include:
It is high time that government provide resources and support for tourism, Ireland's largest indigenous industry in terms of employment, to allow the sector to minimise the impacts of Brexit.  |
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