Irish Tourism Industry Postcard – May 2018


Industry Postcard stamp for May 2018

INTRODUCTION

CURRENT MARKET CONDITIONS & OUTLOOK

CURRENCY WATCH

TRANSPORT UPDATES

TRAVEL INDUSTRY NEWS

ECONOMIC UPDATES


ITIC Viewpoint

2018 has got off to a good start, with arrivals into Ireland up 7% for the first three months of the year – a performance broadly in line with the rate of growth in global travel demand. Most recent CSO data shows that numbers are up across most markets with the notable exception of arrivals from Great Britain. While the outlook continues to be positive in a worldwide travel market which continues to grow year on year, the horizon is not without some clouds – rising oil prices, political uncertainties, looming trade wars and, of course Brexit. On the positive side Ireland is enjoying a further boost in access capacity for summer season, a critical driver of demand as carriers and industry invest in expansion.

Despite less than a year to go to the UK’s exit from the European Union no definitive picture has emerged of the future relationship between the two large trading partners. From an Irish tourism perspective, while the common travel area is sacrosanct, a hard border would inevitably impact on cross-border tourism while the prospect of disruption of air travel between the UK and the EU after March 2019, although unlikely, cannot be ruled out. Hopefully, the upcoming June 28-29 Summit will bring some clarity to allow business to plan ahead.

An Industry’s Strategy for Growth to 2025, ITIC’s recently published road map for sustained growth aligned with Government’s policy, has recalibrated the industry’s ambitions for realistic growth over the coming years. The programme, set out in a comprehensive suite of recommendations for action, capitalises on the global opportunities for tourism. The strategy designed by business, if facilitated by Government and its agencies, can deliver greater economic benefits including jobs throughout the country. Businesses are confident about the prospects for continued growth as reflected in a very active investment in product and marketing, and are set to work with Government to realise the ambitious targets.

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

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International travel gets off to a good start in Q1 2018

Growth in demand for international travel over the first three months of the year has been strong, in the region of +7% over the same period a year ago. This provides a healthy momentum heading into the peak travel period. Benign economic conditions continue to fuel demand for travel as do lower real term airfares and increasing travel options on offer. Global travel and tourism continues on an upward trajectory with most destinations attracting record visitor levels year on year.

Arrivals into Ireland were in line with the overall growth trend as reflected in airline travel demand. While the rate of increase may slow as the peak season approaches the current expectation is that it will be another record year. However, there the danger of complacency as monthly press releases herald yet another ‘best ever’ volume performance. Ireland’s competitiveness in delivering value for money continues to be key to success, while the composition and characteristics of the demand deliver the more critical economic value in terms of earnings and employment.

Q1-2018-TrafficDemand-0518

Positive outlook for air travel 2018

Robust demand growth is driving the positive outlook for air travel, with more than two thirds of global airlines expecting volumes to rise over the year ahead with just 4% expecting a decline, according to IATA’s Business Confidence Survey. Importantly, the majority (61%) reported that they expect their level of profitability and passenger yields to improve further over the coming 12 months, despite an increase in input costs in Q1 most notable higher fuel prices.

Record 50 million seats from Asia to Europe

Non-stop airline capacity hits new heights with a 5% growth this year on the heels of 7% increase in 2017. While the rise of the Gulf carriers and their attractive fares and convenient schedules via Abu Dhabi Dubai, Doha has boosted access, there is still significant growth in non-stop connectivity between Europe and Asia, based on current published schedules from OAG.

WX-MAY-2018

 

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£ Pound Sterling

The pound to euro exchange rate has been relatively stable over recent months, with the pound buying €1.13 / €1.14. This compares to €1.17 a year ago, so a reduction in purchasing power for the British visitor.

Sterling has been under pressure in recent weeks, a situation that is unlikely to change, given the economic and political situation in the UK and the overhang of Brexit.

GraphSterling-0518

$ US Dollar

Following a softening against the euro over the first three months of the year, the US dollar has strengthened somewhat against the euro since end April, buying €0.84 cent in mid-May. This compares to €0.90 12 months ago and a drop from the peak of €0.94 at the end of 2016.

The US dollar’s continued rally over recent weeks in part is based on the expectations that the US economy will continue to strengthen over the coming months, while monetary policy between the
Federal Reserve and European Central Bank (ECB) is perceived to be on track to diverge even more.

The US dollar has been gaining more strongly against the Pound sterling, compared to the euro, resulting in a more attractive proposition for American tourists.

GraphicUSDollar-0518

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6% more seats on airline services into Ireland

Ireland is well served by an expansion in the number of routes, frequencies and seats on offer over the peak summer months.

Ireland-AirAccess2018-0518

Highlights include:

Transatlantic

Aer Lingus: new USA services from Seattle, Philadelphia and Miami

Air Canada: new services from Montreal to Dublin and from Toronto to Shannon

Norwegian International: increased frequencies from Stewart & Providence

China

Cathay Pacific: new service from Hong Kong

Hainan Airlines: new service from Beijing

 CHINA-AIR-ROUTES-BLU-0518

France

Aer Lingus: additional flights from Paris, Bordeaux, Lyon, Toulouse, Marseille, Nice, Montpellier, and Rennes.

Air France new Paris CDG-Cork service.

Germany

Lufthansa: increased frequencies from Frankfurt and Munich

Ryanair: new services from Munich and Stuttgart.

Switzerland

Swiss: adding service from Zurich to Dublin and Cork.


FERRY NEWS

Almost 100% increase in ferry sailings from mainland Europe

14 sailings per week will provide up to 5,000 car spaces in each direction in the peak, including a new service from Spain.

Irish Ferries: daily service from France to Ireland (July to September) with the introduction of its new €144 million cruise ferry W.B.Yeats to/from Dublin, operating alongside the Oscar Wilde to/from Rosslare.

Brittany Ferries: new route linking Spain and Ireland, with twice weekly sailings from Santander to Cork, effective May to November. The new ship will provide a second weekly return sailing between Roscoff and Cork.

Stena Line: maintains service from France to Rosslare.

Sailings on the Irish Sea remain largely unchanged over the peak months, with a marginal increase between Holyhead and Dublin. From mid-September Irish Ferries’ a new ship W.B.Yeats will be deployed on the Holyhead route with the fast ferry service suspended for the winter from October 8th.

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Ireland’s Hidden Heartlands

The new tourism branding of the Midlands, an area stretching from Leitrim to Limerick, hinging on the River Shannon and Beara-Breifne Way, was recently unveiled by Fáilte Ireland. The new brand, a political commitment of the Government, was long awaited and provides an identity for a region that can now be marketed alongside ‘Wild Atlantic Way’, ‘Ireland’s Ancient East’ and Dublin brands. Significant investment, beyond the initial €2 million announced, will be required to successfully develop and market the new tourism branded offering in the domestic and international markets.

Ireland-Regional-Brands-0518


One of every two Dublin rentals now only for tourists, Daft.ie study claims

(Irish Times headline, May 16th 2018)

Daft.ie claims that more than half (53%) of the available rental properties in Dublin are being listed as short-term tourist lets. The report suggests that landlords are opting for short term rentals to avoid tenancy regulations and reap greater yields. The report does not address the issue of planning regulations.

Airbnb disputed the findings, claiming Daft.ie had used “inaccurate scraped data to make misleading assumptions”. Airbnb claims to have generated more than €506m in economic activity in Ireland last year and had put forward suggestions to the Government for clear and fair home-sharing rules for listings in Dublin.

The tourism industry waits the outcome of the Cross-Government Working Group on the issues surrounding short term tourist rentals.


Airline travel to double by 2036

Airline passenger numbers are expected to hit 7.8 billion in 2036, almost doubling from the more than 4 billion recorded in 2017, according to the International Air Transport Association (IATA). The prediction is based on a 3.6% average Compound Annual Growth Rate (CAGR) determined by the last update to IATA’s 20-Year Air Passenger Forecast. The biggest driver of demand will be the Asia-Pacific region. The region will be the source of more than half the new passengers over the next two decades. IATA predicts that China will displace the United States as the world’s largest aviation market around 2022, two years earlier than in its 2016 forecast.


Have ‘official’ Tourism Information Centres a future?

Increasingly visitors around the world are accessing information on their mobile devises, while foot fall to ‘official’ tourism information centres is in decline despite a growth in international tourism. Digital information and the widespread use of mobile devices have transformed the way visitors source information and make bookings during their stay.

VisitScotland recently announced the closure of 39 of Scotland’s 65 tourist information centres over the next two years, despite growing numbers of visitors from overseas. The plan is to shift investment focus to digital communications “reaching as many people as possible with the information they want, in the way they want it, when they want it… with succinct inspirational and informational advice to visitors at every stage of their journey.”


Over tourism – visitor entry checkpoints!

‘Over tourism’ has slipped into our lexicon in recent years to describe destinations where hosts or guests, locals or visitors, feel that there are too many visitors and that the quality of life in the area or the quality of the experience has deteriorated unacceptably. Most regularly cited European destinations include Barcelona and Venice.

Venice, which attracts an average 60,000 visitors per day eclipsing its 55,000 residents, introduced multiple entry checkpoints to control visitor numbers over the busy May holiday weekend. Venezia Unica Cards allowed residents and tourists access to less-crowded route to their homes and popular attractions than those who didn’t have the card.

Venice-0518

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Europe outlook positive but not without risks

Economic growth slowed across Europe at the start of the year, with Germany seeing its pace of expansion cut in half amid weaker trade, while growth cooled more than expected in the Netherlands, Portugal and across central and eastern Europe. The single currency area’s annual growth slowed to 2.5 percent in Q1 from 2.8 percent the previous quarter. The deceleration is dismissed by most officials and many commentators arguing that euro-area growth remains solid and broad-based with particularly strong growth trends in domestic demand. The European Commission has also downplayed concerns and this month maintained its forecast that full-year growth will almost match the decade-high pace hit in 2017. Still, there are threats, including rising trade protectionism and a stronger euro that could act as dampers on the expansion in Germany and the euro zone.

Global risks have become more prominent, with trade concerns, the U.S. withdrawal from the Iran nuclear deal and higher oil prices potentially having a negative impact on the outlook. Some of those issues were highlighted by the International Monetary Fund in a recent report seeing “strong growth” for now, but citing a number of risks, including from the new populist coalition government in Italy, Brexit and US growing protectionist policies.

Private household consumer spending in the European Union is predicted to grow from 1.5 percent to 2 percent in real terms, according to GfK which reports that consumer sentiment remained cautiously optimistic despite a slight decline in Q1. Income expectations continued to rise on average across Europe. While data would suggest that consumer propensity to buy dipped slightly trace industry indicators point to continued strong travel demand in most countries.


U.S. economy in the ninth year of its post-crisis expansion despite threats of a trade war

U.S. consumer confidence rebounded in April and new home sales increased more than expected in March, pointing to underlying strength in the economy despite signs that growth slowed in the first quarter.

Philadelphia-0518

The U.S. economy grew again in April, the sixth straight month of gains, according the Conference Board’s Leading Economic Index, which combines 10 economic metrics. This follows on from 2.3 percent growth in the January-March period, with growth estimates for the second quarter at around a 3.0 percent annualised rate. The expectation is for continued strong growth into the second half of the year.

The U.S. economy has reached the threshold for maximum employment, as unemployment rate hit 3.9 percent. The last time the unemployment rate remained below 4 percent for a sustained period was in the late 1960s. Economists expect that low unemployment will lead to higher pay rates, which has so far evaded post-recession conventional wisdom – wages increased by 2.6 percent over the past year, not much faster than inflation.

Consumer confidence has remained strong, rebounding in April, despite stock market volatility in part triggered by fears of a trade war between the United States and China, as well as geopolitical worries. Retail sales increased moderately in April as rising gas prices cut into discretionary spending. However, consumer spending appeared on track to accelerate after slowing sharply in the first quarter. This despite a squeeze from rising interest rates and rising gasoline prices which could erode the stimulative impact of President Trump’s tax plan.

President Trump’s flirtation with a trade war casts a shadow over the economic picture – lots of uncertainty surrounding the recently imposed tariffs on steel and aluminum as well as economic and geopolitical tensions with China and North Korea respectively.


The UK economy stalled in Q1

GDP grew by just 0.1 percent in the first quarter of 2018 compared to the previous three months, representing the weakest expansion in more than five years. Economists were expecting growth of 0.3 percent, after a 0.4 percent expansion in the fourth quarter of 2017. Cold weather was partly to blame, but uncertainty surrounding Brexit and the squeeze on real pay levels are more likely to blame. Companies are still in the dark about Britain’s future relationship with the European Union, its biggest trading partner, and many have delayed investments as a result. The UK economy is growing slower than Europe, and the UK has slipped from fifth to sixth in the ranking of largest global economies.

Latest data shows that growth was also hit by a sharp decline in construction in both domestic and commercial properties. Consumer spending has impacted the retail, hospitality and entertainment sectors, with several high profile ‘high street’ closures.

Despite unemployment at the lowest in decades and inflation starting to drop, after hitting 3.1 percent last year, consumer confidence dropped even further in the month of April, according to market research institute GfK. Consumers appear to have slipped back on their outlook regarding the general economic situation, personal finances and savings. Although they are slightly more positive than this time last year, there is little evidence of optimism in respect of consumer propensity to shop, spend and plan for the future.

With less than a year to go before Brexit, investors are hoping for progress in another round of negotiations, while consumer confidence levels appear to be slipping. However, early indicators for travel from the UK to France and Spain indicate no downturn in demand.

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