Industry Postcard – November 2016

A more challenging year ahead

2016 has certainly not been a good year for forecasters. Few, if any, predicted such further spectacular growth in Ireland’s tourism; the outcome of the Brexit referendum; and the election of Donald Trump.

However the year ahead is full of variables and may prove to be much more challenging for the tourism industry. Brexit in particular is likely to be an enormous challenge to Irish tourism. The economic consequences of Brexit not only dampens demand from Britain, but more significantly the fall in the value of sterling represents a serious threat to Ireland’s competitiveness in Europe and North America – combined these two source markets account for almost two thirds of holiday visitors and almost two thirds of overseas receipts.

STAMP-November
CURRENT MARKET CONDITIONS & OUTLOOK
CURRENCY WATCH
TRANSPORT UPDATES
TRAVEL INDUSTRY NEWS
ECONOMIC UPDATES
IRISH TOURISM INDUSTRY AWARDS 2017


Sustained Growth

Continuing growth in a sustainable manner is the challenge for Irish tourism. Airlines have committed increased capacity and launched new routes for 2017, while the quality and value of the visitor experiences continue to improve as businesses invest in the future despite growing public sector led pressure on labour costs. The risks though to sustaining the level of tourism growth are not inconsiderable.

Tourism as a job intensive industry is very exposed to currency fluctuations and loss of competitiveness to Britain. Historical evidence, most recently in 2008, amply demonstrates the adverse impacts of the collapse of the value of sterling on the sector. Having enjoyed the benefits of favourable external factors over the past two years the industry is now faced with challenging trading conditions in the global marketplace. This calls for both the State and the tourism industry to remain as competitive as possible. Additional and long overdue marketing and product funds are needed from Government if tourism into Ireland is to continue on an upward trajectory. Strategic investment of destination marketing resources will be required in tandem with the industry’s goals of market diversification for the years ahead. Exploiting market opportunities is essential if tourism is to continue to grow, generate more revenue and deliver more jobs from overseas visitors in 2017.

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

wx-nov-2016

 

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£ Pound Sterling

Despite a recent bounce the British pound has lost 12% in value against the euro since UK voters chose to leave the European Union. The pound currently buys €1.16. British visitors are finding Ireland more expensive. Over the coming months it is forecast that sterling will remain weak as the economic situation in the UK is expected to deteriorate.

graph-sterling-nov2016

 

$ US Dollar

The US dollar continues to trade at a 9 month high against the euro, with 1US$ buying €0.90 cent on average in mid November. This rate is unchanged from a year ago, having increased in value by almost 20% over the previous twelve months. While American tourists continue to enjoy the increased value of the dollar in the eurozone, they are now enjoying even better value in Britain as sterling is at a 30 year low against the US dollar.

graph-usdollar-nov2016

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Winter 2016/17

Capacity on air services is 3% up on last winter with 4% more seats on offer on mainland European routes and a 17% increase on US routes. Capacity on cross channel services is marginally ahead of last winter.

 

Summer 2017

The principal service changes, including new routes, planned for next summer include:

USA

Aer Lingus: offering 22% more capacity during the peak summer before launching a new Miami service on September 1st with 3 departures per week. The airline is increasing to daily frequency to Los Angeles from May 27 to August 30; adding flights to Chicago and Orlando; increasing capacity to San Francisco; while providing daily services to Newark and Hartford. Services to Shannon from New York and Boston remain unchanged.

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Delta: launching a daily service from Boston to Dublin, effective May 26.

Canada

Air Transat: increasing Toronto – Dublin service to 4 departures per week with one service routing via Montreal.

Air Canada Rouge: will again offer service from Vancouver and Toronto with up to 13 flights per week.

Europe

to Dublin

Aer Lingus: new services from Dublin to Porto (3 weekly departures effective April 27) and Split (2 departures per week May 27 to September 30).

SAS: adding 11% more seats with increased service from Stockholm (+9%); Oslo (+15%); and Copenhagen (+9%).

KLM: increasing its recently launched Amsterdam service to 4 flights per day from end March.

Finnair: adding capacity from Helsinki.

Lufthansa: increasing frequency from Munich.

SWISS: increasing service from Geneva.

Transavia: new service from Munich, effective April 11.

 

to Cork

SWISS: new Zurich service, effective June 02 to Sept 29, with up to 2 flights per week.

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WOW: new Reykjavik service from May 19 with up to 4 flights per week.

 

to Shannon

Lufthansa: new weekly service from Frankfurt, effective April 29-Oct 28.

SAS: new Copenhagen service with twice weekly departures, August 01-October 07.

pic-sas-a320neo-1116

Ryanair: Paris and Memmingen services dropped.

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ITIC the voice of the industry on Brexit

ITIC is positioned to be the industry’s leading informed voice on Brexit to safeguard Ireland’s reputation, competitiveness and future growth. Having attended the All-Island Dialogue on November 2nd, tourism and hospitality has been designated as one of eight sectors worthy of further dialogue to shape government policy and negotiations on Brexit.  A number of sectoral events are planned, led by the relevant Minister(s), to take place in a variety of locations across the country in advance of a second plenary of the All-Island Civic Dialogue in the New Year. ITIC is committed to working closely with politicians, Government Departments, state agencies and policy makers to ensure that the interests of tourism businesses are placed high on the agenda.

Aside from the immediate currency and competitiveness challenges, ITIC’s concerns relating to Brexit centre on 4 key policy areas: the common travel area, aviation access, regulatory regimes, and cross-border cooperation. These are fleshed out in more detail in ITIC’s most recent Brexit ezine: ‘Brexit and Irish Tourism; The Evolving Situation’.


Bullish UK tourism sector

Two thirds of inbound businesses are confident of seeing an increase in foreign visitors over the coming 12 months. The weakness of the pound, increased demand from Europe and the US have caused a spike in demand and expectations, according to the UK inbound’s latest business barometer. The US was cited as the top growth market.


London hotels hit a slump in October

Hotels in London suffered their sharpest fall in demand and price since the start of the financial crisis in 2008. The London-wide occupancy rate in October was 85%, down from 89% the year before, while average rates fell by 7.7% to below £150, with Revpar down 11.4%, according to preliminary figures from global hotel data firm STR. The number of empty hotel beds in the capital in October was up by a third compared to a year ago. It is likely that Dublin will see increased price competition from London for European and American visitors.


Airbnb moves beyond room rentals

Airbnb announced that it is expanding beyond its core short-term rental business, which faces push back from governments around the world, to become a fuller service travel agency. In a step toward that, the company launched a service called Trips, which will provide tours, tailored activities and other experiences created and provided by locals in the 12 cities where the service is initially being offered. Trips helps travellers “immerse in a local community,” said Brian Chesky, the chief executive and co-founder of Airbnb.

The new service helps Airbnb create an additional revenue source as it faces some challenges with its main business of matching travelers with hosts who want to rent out their homes for short stays. While the eight-year-old company lists nearly 3 million short-term rentals in more than 34,000 cities around the world, short-term rentals are illegal in some cities and have run into regulatory gray areas in others.

In addition to Trips and restaurant reservations, users will be able to rent cars through Airbnb, book flights and other services.


Destination winners in 2016

While Ireland is enjoying double digit growth, other countries having a bumper year include Iceland (+24%); Cuba (+11%), and Spain (+10%).

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The UK economy hums along despite Brexit

UK unemployment hit an 11 year low of 4.8% for the three months July to September, while the number of people in work remained at a record high of 31.8 million, according to the latest data from the Office for National Statistics (ONS). Despite UK Governments claim that the data show that the fundamentals of Britain’s economy are strong, there are signs that the labour market might be cooling, with employment growth slowing. The UK inflation rate registered a surprise fall in October, to 0.9%, from 1% in September although there were signs that pressure on consumer prices is starting to build.

While the UK economy grew by 0.5% in the third quarter, helped largely by the momentum built up ahead of the referendum, maintaining growth looks increasingly problematic. There are clear warning signals within the available data. Input prices jumped from 1.3% on the year in September to 2.1% in October and will feed through slowly into the economy. With wages growing at only 2.3% for the year through September, it seems only a matter of time before inflation starts to make people worse off. There is an expectation among economists that inflation is set to rise, fuelled by the fall in the value of sterling since the Brexit referendum, about 16% against the dollar and about 12% against the euro, which has pushed up the cost of imports. The concern is that consumers are driving the economy at the moment, and higher inflation is starting to eat into people’s spending power, subduing consumer spending. U.K. consumer confidence dipped slightly in October on concerns over the country’s economic prospects in the future. The Bank of England has forecast that unemployment is set to rise amid uncertainty over Brexit.

The UK’s Chancellor of the Exchequer, Philip Hammond, raised the borrowing outlook and cut growth forecast in his recent Autumn budget statement.

 


Europe: Modest growth in challenging times

Economic growth in Europe is expected to continue at a moderate pace, as recent labour market gains and rising private consumption are being counterbalanced by a number of hindrances to growth and the weakening of supportive factors. In its autumn forecast the European Commission expects GDP growth in the euro area at 1.7% in 2016, 1.5% in 2017 and 1.7% in 2018, revised marginally down from the earlier Spring forecasts. GDP growth in the EU as a whole should follow a similar pattern and is forecast at 1.8% this year, 1.6% in 2017 and 1.8% in 2018.

GER-0216

Private consumption is set to remain the primary engine of growth through to 2018, supported by expectations for employment to continue growing and wages to pick up slightly. Borrowing costs remain supportive to growth. However, political uncertainty, slow growth outside the EU and weak global trade weigh on growth prospects. There is also a risk that the economy’s weak performance in recent years could hold back growth. Moreover, in the coming years, the European economy will no longer be able to rely on the exceptional support it has been receiving from external factors, such as falling oil prices and currency depreciation.

Germany’s economic growth slowed in the third quarter of the year, dented by weaker exports. Europe’s largest economy grew by 0.2% between July and September, half the rate seen in the previous three months and slower than economists had expected. A slowing of exports was somewhat countered by positive domestic demand.

 


The US economy under President Trump?

Evidence that the US economy is growing strongly was boosted by the latest retail sales data which rose faster than expected in October. The combined sales rise over September and October was the largest two-month gain since early 2014. The dollar strengthened following the data, amid speculation that US interest rates could be increased in December. Earlier this month, the Federal Reserve – which holds its next policy meeting on 13-14 December – said it judged the case for an increase in rates had continued to strengthen. The US economy created 161,000 jobs last month, and the same data release showed the number of jobs created for the months of August and September was revised up. Consumer confidence rose to a five-month high in early November as Americans became more upbeat about the economy in the days before the presidential election. Analysts generally expect the year to close on a strong note, but there is some concern among experts that consumers spooked by President-elect Donald Trump’s unexpected victory could hold off on making big-ticket purchases to see what happens to the economy under new national leadership.

Analysts are largely split on whether the new administration will be good or bad for the economy. Some argue that lower corporate tax rates and spending on infrastructure could boost hirings and wages. Others speculate that the President-elect’s stance on external trade and immigration could hasten a recession. The US economy is entering uncharted waters.

 

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The deadline for submitting entries for the 2017 Irish Tourism Industry Awards is midnight this Friday November 25th.

To submit entries, for full information and to purchase tickets for the awards gala dinner on February 3rd 2017 go to: www.irishtourismindustryawards.ie

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