Irish Tourism Industry Postcard – May 2017


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INTRODUCTION

CURRENT MARKET CONDITIONS & OUTLOOK

CURRENCY WATCH

TRANSPORT UPDATES

TRAVEL INDUSTRY NEWS

ECONOMIC UPDATES


Introduction: Q1 flat start to the year

Overseas arrivals from January to March were almost unchanged from the same period last year, but one must allow for a later Easter in 2017. The most recent data from the CSO would suggest that without growth in visitors from longhaul markets the bottom line would have been significantly worse as arrivals from Britain and Europe were down on the same period last year. Perhaps, not surprisingly, arrivals from Britain dipped by 7% reflecting Brexit uncertainty, the weakness of sterling, and a squeeze on consumer confidence in the UK. An analysis of the data points to a very soft first two months of the year, while on a more positive note, arrivals in March were almost level with last year which included Easter.

Undoubtedly the uncertainty surrounding Brexit and its immediate to longer term impacts is the primary challenge facing the industry. These challenges include ensuring competitiveness in the face of currency volatility and the absence of any certainty on maintenance of the status quo in regard to the free movement of people, the land border and airline service to/from Britain.

‘Ireland Connected: Trading and Investing in a Dynamic World’, the Government’s new strategy sets out how Ireland will be ready to face one of the most dynamic and challenging external environments in many decades. While the document gives credit to the recent growth in tourism’s export earnings, one is struck by the lack of detail and specifics around tourism’s potential compared to other export sectors and the absence of robust metrics which drive the state agencies in other sectors of the economy. The national 2025 tourism targets, which have almost been exceeded already, are still quoted while the substance of initiatives to counter the impacts of Brexit appears to be more practical and measurable for other export sectors and FDI. This makes ITIC’s stated objective to develop an industry-led, Government-enabled blueprint for the future development of the industry all the more necessary and urgent.

As always, your comments are most welcome by emailing info@itic.ie.

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£ Pound Sterling

After a 13% drop in value of sterling against the euro between the Brexit vote last June and the later part of the year, the pound recovered somewhat with a rally as Article 50 was triggered and the UK’s negotiating goals were defined. The pound currently buys €1.18 compared to €1.28 a year ago – a 8% drop in purchasing power of British visitors to the Eurozone. Over the coming months as EU negotiations get underway continued volatility in the exchange rate can be expected.

GRAPH-Sterling-May2017

$ US Dollar

The US dollar continues to hold strong against the euro, with 1US$ buying €0.93 cent on average during April. The current rate, while marginally below the recent record high of 0.94 in December/January, the current US $ is buying 6% more euro than at this time last year. Several experts are predicting a continuing move toward parity, if not beyond, for the dollar/euro exchange over the coming months. While the American tourists continue to enjoy the increased value of the dollar in the eurozone, they are now enjoying even better value in Britain.

GRAPH-USDollar-May2017

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Summer airlift up 5%

Total available capacity on direct scheduled air services to airports in the Republic over the peak summer months is 5% ahead of last year. This is driven by a significant uplift in air capacity this summer from North America. The following is the estimated capacity on offer into the country during the peak months:

UK: 154,000 seats per week in each direction;

Mainland Europe 229,000;

Transatlantic: 60,000; and

Middle East: 10,000

CHART-Airlift-2017v2016

Transatlantic Routes

Aer Lingus: 94 departures per week (May/June/July/August) compared to 81 last year, with a 21% increase in capacity, including new Newark and Hartford services since last summer, plus expanded service to Los Angeles, San Francisco, Chicago & Toronto, with a new Miami service from September.

American Airlines: 35 weekly departures.

Delta Air Lines: New Boston-Dublin service to a total of 28 weekly departures, up 15%.

Ethiopian Airlines: adding a fourth departure per week between Los Angeles and Dublin, effective June 01.

Norwegian: The new entrant low cost carrier with 19 weekly flights from Stewart Airport in New York State and Providence Rhode Island to Dublin, Shannon & Cork, from July 01.

United Airlines: 42 departures per week with capacity up 10%.

Canada

Air Canada Rouge: offering increased capacity on up to 14 services per week in the peak with 11 departures from Toronto and 3 from Vancouver.

Air Transat: adding service with 4 flights per week from Toronto and Montreal.

European Routes

The principal service and route changes compared to last summer include:

Aer Lingus will operate 67 routes, with new routes Dublin to Split and Fuerteventura.

KLM increases to 4 departures per day from Amsterdam to Dublin.

Lufthansa adding frequency from Munich to Dublin plus a new weekly Frankfurt to Shannon service.

Norwegian doubling Oslo-Dublin frequency and adding a new twice weekly service from Stockholm.

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Ryanair will operate 108 routes, including new Dublin to Hamburg and Sofia services.

SAS increased frequency from Oslo and Stockholm to Dublin plus new twice weekly seasonal service from Stockholm to Shannon effective August-October.

SWISS adds a new twice weekly Cork-Zurich service.

Transavia launching new Munich-Dublin service.

WOW Air increased service from Reykjavik to Dublin as well as launching a new Cork service

UK Routes

The principal changes for summer 2017 include a 1% decrease in capacity on London routes and a 3% decrease on routes from British provincial airports.

Ryanair is offering 6% less capacity on cross-channel services compared to last summer, while Aer Lingus’, including Aer Lingus Regional, capacity is down by 2%. Aggregate capacity on other carriers is up by 12%.

Middle East

Emirates maintain double daily Dubai-Dublin service

Etihad Airways double daily departures between Abu Dhabi and Dublin returned from April.

Qatar Airways will launch daily service from Doha to Dublin, effective June 12th.

Qatar-0517


FERRIES

Irish Continental Group plc invests €144 million in new ferry

The new cruise ferry, scheduled for delivery in May 2018, will accommodate 1,885 passengers and crew, with 435 cabins and with capacity for 2,800 lane metres of freight (165 freight vehicles) plus an additional dedicated car deck with capacity for 300 passenger cars. The new ferry is likely to be introduced on Irish Ferries’ routes served by the chartered ship MV Epsilon, (currently year round services Dublin – Holyhead midweek, and Ireland – France on weekends), providing additional freight and tourism capacity on both routes and delivering a much enhanced onboard experience for all customers. The cruise ferry, designed and built to the highest standards of cruise shipping, and equipped with efficiency and comfort in mind, is being built in Germany by Flensburger Schiffbau-Gesselschaft & Co.

IrishFerries-0517

Stena Line modifies Fishguard-Rosslare ferry timetable

From May 22nd a revised timetable will come into effect, with a choice of three day time sailings and one extended overnight crossing. The changes, based on an evaluation of extensive customer research and feedback, will see crossing times on some of sailings reduced by 15 mins and will provide a greater choice of convenient sailing times and better arrival times.

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Airline industry quietly confident for 2017

Global airline profitability is expected to slip from the profit cycle peak in the first half of last year, according to the latest IATA’s quarterly business confidence index. However, airlines expect profitability to rise over the coming 12 months consistent with robust growth in global demand seen in both passenger and freight volumes at the start of 2017. Respondents remain very positive about demand prospects for the year ahead with more than three-quarters expecting passenger volumes to rise.


UK outbound travel expected to drop in 2017

Travel from Britain is expected to be hit by Brexit blues, reduced consumer spending power, and the weaker pound. Meanwhile the fall in the value of the pound sterling is expected to boost inbound spending in the UK.

The economic impact of the Brexit vote is expected to have diverging implications for domestic and international business and leisure travel spending in 2017, according to the World Travel & Tourism Council (WTTC). Whilst the spending of international visitors is expected to increase, domestic and outbound spend in the UK will suffer. Due to higher inflation and weakened consumer spending prospects, the domestic spending outlook for 2017 has been downgraded from 3.2% to 2.6%.

UK outbound travel for the first two months of the year was up 4% in volume and up 7% in value, according to the latest Office for National Statistics (ONS) data.


Dublin Port report Q1 growth in trade but drop in passengers

Trade statistics for the first quarter of 2017 show continued strong growth of 4.2% with both imports and exports increasing after last year’s record throughput of 34.9 million gross tonnes, topping off a 25% growth in four years. However, passengers over the three month period dropped by 9% with tourist car traffic down 5%, primarily due to the late Easter this year.


New Carlingford Lough ferry to aid tourism in the area

The long awaited ferry service between Greenore and Greencastle, linking both sides of Carlingford Lough, will launch early this summer. The cross-border roll on/roll off service, which is estimated to have the potential to create 300 jobs directly and indirectly, will take just 13 minutes to cross the Lough, opening the region up to tourism by linking the Cooley Peninsula with the Mountains of Mourne.


EU ‘European Capital of Tourism’ Project

A pan-European programme, modelled on the successful European Capital of Culture concept, has been allocated a budget of €2.5m over the next three years. Cities and regions can bid for  funding by submitting progressive and innovative tourism development programmes to the European Commission. At a recent European Parliament event, Ryanair welcomed the initiative pointing to low cost aviation as a key driver of regional tourism and job growth, and outlining how dynamic and original aviation marketing can support tourism diversification.

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World economic outlook: Gaining momentum?

With buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way, world growth is projected to rise from 3.1% in 2016 to 3.5% in 2017 and 3.6% in 2018, according to the International Monetary Fund (IMF) in its latest World Economic Outlook forecast.

Momentum in the global economy has been building since the middle of last year, allowing the IMF to reaffirm its earlier forecasts of higher global growth this year and next. The latest projections are marginally higher than back in January. This improvement comes primarily from good economic news for Europe and Asia, as well as the continuing expectation for higher growth this year in the US. Consumer and business confidence in advanced economies could rise further, though confidence indicators are already at elevated levels, relatively speaking.

On the other hand, the world economy still faces headwinds. The political landscape still gives cause for concern. North Korea and Syria are potentially dangerous military flashpoints, coupled with the risk of protectionism, in the U.S. and elsewhere, which remains strong. Bad news from any of the foregoing would deal a heavy blow to investor and consumer confidence.

CHART-IMF-WorldEconOutlook


UK consumers feeling the pinch

The UK economy cooled considerably in the first three months of the year as sliding retail sales and a jump in living costs took their toll on growth. Gross domestic product (GDP) grew by 0.3% in the first quarter of 2017, down from 0.7% in the fourth quarter of last year, according to the initial estimates from the Office for National Statistics (ONS).

The slower pace in the January-to-March period was due mainly to the service sector, which accounts for four fifths of the UK economy, as consumers reined back on spending in the face of rising inflation. Consumers have been feeling the pinch since the beginning of 2017, with inflation sitting at its joint highest level for more than three years at 2.3% in March. The squeeze on household spending power has led to weaker retail sales, which recorded their biggest fall for seven years in the three months to March.

The negative effects of sterling’s slide since the EU referendum appear to be outweighing the positive effects, as the weaker pound has raised the cost of imported materials and pushed up inflation. As a consequence real wages, adjusted for inflation, fell in February for the first time in two and a half years despite a continuing drop in unemployment. The squeeze on living standards is back and so is the tight-fisted consumer.


US Economy is starting slow under Trump, but still in good shape

Americans say they feel more optimistic about the economy since President Donald Trump was elected, but the public optimism is not evident in spending. Consumers pulled back sharply on spending in early 2017, reducing the economy’s quarterly growth to its lowest level in three years, according to the latest data from the Commerce Department. GDP Q1 growth at 0.7% annual growth rate is far below the new administration’s forecast, while the Fed forecasts 2% annual growth for the next few years. The latter is in line with America’s economic growth which has averaged about 2% a year since 2010, held down by an environment of a weak global economy, a strong dollar that hurt U.S. trade, and Americans who have become more cautious spenders.

Despite the sluggish first quarter data, consumer and business confidence is buoyant while investors and Wall Street seem confident that a growth spurt is on its way – reflected in the 11% surge in stocks since the election. Trump’s proposals – from tax cuts to infrastructure spending – are unlikely to have an impact on the economy until next year if they get passed through Congress.


Eurozone economy gathers pace

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Confidence is improving and unemployment reducing as the recovery is now spreading across the euro-zone. However, despite marginally upping the economic forecasts for the region, the International Monetary Fund (IMF) has warned that the eurozone economic outlook was clouded by Brexit and election uncertainties.

In its latest World Economic Outlook report the IMF said growth this year in the 19-nation eurozone would be 1.7%, up 0.1% point from its January estimate but unchanged from the 2016 performance. The IMF sees the German economy slowing from a gain of 1.8% last year to 1.6% this year; second-ranked France, which has struggled to get its economy going, will rise to 1.4% this year up from 1.2% in 2016, expanding further nest year. In contrast, Italy will continue bumping along at 0.8% in both 2017 and 2018 after 0.9% last year, while Spain’s growth would drop from 3.2% in 2016 to 2.6% and then 2.1% this year and next.

The clouds on the horizon include political uncertainty as elections take place in France and Germany, coupled with uncertainty about the European Union’s future relationship with the UK. Future growth could also be held back by underlying fundamentals of the eurozone, including weak productivity, adverse demographics, and, in some countries, unresolved legacy problems of public and private debt. While European growth has been surprisingly good lately, underlying inflation remains sluggish according to the ECB, as headline inflation is hovering around the Central Bank’s target.

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