Irish Tourism Industry Postcard – November 2017


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INTRODUCTION

CURRENT MARKET CONDITIONS & OUTLOOK

CURRENCY WATCH

TRANSPORT UPDATES

TRAVEL INDUSTRY NEWS

ECONOMIC UPDATES


Irish tourism faces challenges in sustaining growth

While the headlines will undoubtedly proclaim 2017 another ‘record year’ for Irish tourism, the results to date point to challenges from unprecedented uncertainty surrounding Brexit and pose questions as to Ireland’s competitiveness in a changing marketplace.

By year end Ireland will have welcomed close to 9 million overseas visitors, in the region of 3% more than last year – a modest increase compared to the atypical annual growth rates of recent years. However, this year has seen a marked shift in the relative importance of the main source markets. Long haul visitors, most notably from North America, are not only producing double digit volume growth but more importantly contributing significant revenue which to an extent has masked the downturn or insipid growth from short haul markets. In economic terms, the long haul markets continue to be the top incremental value performers, in many instances helping to sustain and expand businesses, their employees, and local communities across the country.

Looking ahead to 2018, the challenge is to focus on the markets with best prospects where Ireland can effectively compete, and allocate marketing resources accordingly. Accommodation capacity constraints, particularly at times of peak demand and in popular locations, call for a specific strategy to spread the demand to facilitate sustainable growth.

Businesses are investing heavily in providing for growth. In terms of access to Ireland the most notable examples include Aer Lingus’ continued expansion of transatlantic services, opening new gateways and increasing frequencies, while Irish Ferries is set to launch its new €144 million cruise ferry, and Cathay Pacific will provide Ireland’s first direct air link from Asia via Hong Kong. Hoteliers and other product providers continue to invest in the expansion and upgrading of the range of visitor services and experiences.

The opportunities to grow Ireland’s tourism are clearly recognised by the industry, which has stepped up to the mark by investing in product and international marketing. The Government’s response in maintaining a VAT rate comparable to our competitors is valued, but if Ireland is to continue to grow it needs adequate resources effectively allocated by the state agencies to meet the challenges of Brexit. There is an urgent need for a programme of investment in market diversification to ensure continued growth in export earnings, employment, and Exchequer receipts, which tourism has proven it can deliver.

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

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WX-SEPT-2017

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£ Pound Sterling

One British Pound will buy you around €1.12, compared to €1.40 24 months ago, a de facto 20% devaluation.

Brexit fears and rising inflation in the UK are some of the factors being blamed for a downward spiral in the value of sterling.

Increased public spending would tend to increase economic activity, which can generate growth, inflation, and then higher interest rates. Higher interest rates tend to boost the Pound by attracting more capital inflows from foreign investors seeking somewhere to park their money where it will earn higher returns.

GRAPH-Sterling-Nov2017

$ US Dollar

The US dollar has fluctuated against the euro within a range of buying €0.94 to €0.84 since the start of the year, and has recently been trading at close to €0.85.

The dollar has held strong against the euro over the past 3 years averaging close to €0.90, having strengthened by 20% from an average €0.75 in 2014.

GRAPH-USDollar-Nov2017

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Winter airlift up 7%

Total available capacity on direct scheduled air services to airports in the Republic over the winter months is 7% ahead of last year.

  • UK: 155,000 seats per week in each direction;
  • Mainland Europe: 146,000;
  • Transatlantic: 35,000 (as in previous years frequency will be reduced in January/February);
  • Middle East: 10,000

CHART-AirLift-18v17

Record capacity on transatlantic services this winter reflects expanded Aer Lingus operations, including new Miami gateway; the entry of Norwegian into the market; and the almost doubling of capacity from Toronto as Aer Lingus and Air Canada offer an expanded schedule.

New Ryanair services from Munich and Stuttgart to Dublin, together with increased frequency on Lufthansa services from Frankfurt and Munich to Dublin, provide a marked increase on routes from Germany.

Increased frequency by Etihad, and Qatar Airway’s new service provide, additional airlift via the Middle East from many emerging and developing markets.

Summer 2018 will see further growth in air services

Impressive growth on long haul services to Ireland next summer will provide a vehicle for continued growth in tourism from North America and further afield. The notable additions for next summer include:

Long Haul Routes

Aer Lingus continues its transatlantic expansion with new services from Miami, Philadelphia and Seattle. Aer Lingus will provide direct service to Ireland from 12 US gateways next summer, having launched six new services since it became part of the IAG in 2014.

Norwegian International will maintain its services launched in July 2017 from the US to Dublin, Shannon and Cork.

Direct services from Canada will receive a major boost as Air Canada launches new service from Montreal to Dublin and from Toronto to Shannon, while expanding frequency from Vancouver. At the same time Air Transat has announced increased frequency alongside Aer Lingus‘ and Air Canada’s daily Toronto services..

Cathay Pacific entry into the Ireland market, with the launch of flights between Hong Kong and Dublin from June next, is an exciting opportunity for Irish tourism.

Low cost indirect transatlantic services via Iceland are set to increase as WOW add frequency and Icelandair enters the market offering connecting services to/from Dublin.

Short Haul Routes

More flights from Germany with Ryanair’s new services from Munich and Stuttgart and more flights from Hamburg, together with Lufthansa’s increased frequencies from Frankfurt and Munich.

Aer Lingus is adding flights from Bordeaux, Lyon, Prague, Vienna, Rome and Lisbon to Dublin.

Barcelona will have more flights to Cork with Aer Lingus and to Shannon from Reus with Ryanair.

SWISS is adding services from Zurich to Dublin and Cork.

Increased frequencies will operate to Dublin from Helsinki (Finnair); Istanbul (Turkish); and Luxembourg (Luxair). Seasonal services to Cork from Verona (Volotea) and from Madrid (Iberia Express) will offer more seats than last summer.

Volotea-1117


FERRIES

Irish Ferries heralds in new era in 2018

Irish Ferries will introduce its new €144 million 55,000 tonnes cruise ferry, W.B. Yeats, the largest as well as the most luxurious ferry to operate on the Irish Sea, in July 2018. The arrival of the W.B.Yeats will enable Irish Ferries to double the current number of sailings between Ireland and France with daily departures in alternate directions. Daily sailings will operate on sailings between Dublin and Cherbourg in parallel with the existing ferry Oscar Wilde sailing from Rosslare to Cherbourg and Roscoff.

From mid-September next, W. B. Yeats will transfer to the busy Dublin – Holyhead route, adding capacity alongside the existing Irish Ferries vessel Ulysses. Given this additional investment in the route, the Dublin Swift fast ferry will operate a summer only schedule next year and will return to Irish Sea service in early April 2019.

IrishFerries-WB-1117

The new W.B.Yeats will have space on board for 1,885 passengers and crew, 1,200 cars in 4kms of vehicle deck space, and 441 cabins, with a variety of cabin grades including luxury suites.

CLICK HERE for full Ireland-France schedule.

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The Brexit clock is ticking

With the UK due to formally exit the European Union in March 2019, the travel and tourism industry is yet to see any clarity on a number of major issues impacting the sector, including any transitional arrangements.

The UK’s departure from the EU has serious implications for Ireland’s €7 billion export tourism industry. The pressing issues shaping the future include:

  • Border control arrangements with Northern Ireland, including maintenance of the common travel area with the UK;
  • The UK leaving the European Common Aviation Area (ECAA) potentially could disrupt air services between the UK and European countries;
  • Regulatory divergence between the two parts of the island, potentially competitively disadvantaging businesses in the Republic;
  • The continued importance of all island marketing post Brexit.

British travel abroad slows over the summer

The number of British residents going abroad in July and August declined by 2%, with spending also down. The latest official data shows outbound travel over the first eight months of the year is up 3%, with expenditure up 5%, compared to the same period a year ago. Up to end August outbound holiday travel was up 3%, with business trips showing no growth while Visiting Friends and Relatives (VFR) trips were up 7%. The data suggest that Ireland is losing market share in its top volume market.


2017 a good for visitor arrivals to the UK

Latest data shows an 8% increase in inbound visitors to the UK to end August, with receipts up 10%. Visitors from other EU countries, who account for just over 70% of the total, increased by 5%, on top of double digit growth from North America (+18%) and from the rest of the world (+16%). The UK is undoubtedly benefiting from the value presented by the weakened pound sterling as growth in receipts is outpacing volume growth. Demand is most buoyant from holiday visits, up 17%, while business visitors are marginally down alongside a 5% increase in VFR visits.

CHART-UK-IRL-Jan-Aug-2017


Air passengers to double by 2036

The International Air Transport Association (IATA) expects 7.8 billion passengers to travel in 2036, a near doubling of the 4 billion air travellers expected to fly this year. The prediction is based on a 3.6% average Compound Annual Growth Rate (CAGR) in the association’s latest 20-Year Air Passenger Forecast.

The biggest driver of demand will be the Asia-Pacific region, the predicted source of more than half the new passengers over the next two decades. Routes to, from and within Asia-Pacific are predicted to grow at an average annual rate of 4.6%, which will see an extra 2.1 billion annual passengers by 2036, for an overall market size of 3.5 billion. China is expected to displace the United States as the world’s largest aviation market around 2022.

North American and European regions are projected to grow by 2.3% annually over the period.

The report states that maximizing the potential benefits of aviation growth will depend on current levels of trade liberalization and visa facilitation being maintained. In addition, planning for growth will require partnerships to be strengthened between the aviation industry, communities and governments to expand and modernize infrastructure.

Fast-growing markets

The five fastest-growing markets in terms of annual additional passengers in 2036 compared to 2016 will be;

  • China (921 million new passengers for a total of 1.5 billion)
  • US (401 million new passengers for a total of 1.1 billion)
  • India (337 million new passengers for a total of 478 million)
  • Indonesia (235 million new passengers for a total of 355 million)
  • Turkey (119 million new passengers for a total of 196 million)

Source: IATA

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Gloomy outlook for UK economy

Consumers drove the British economy in the third quarter, as spending on cars rebounded, but Brexit appears to be inflicting a toll on business investment while net trade acted as a drag on growth. Overall GDP rose an unrevised 0.4 percent, up from 0.3 percent in the previous three months.

Despite the growth in consumer spending in Q3 it is apparent that British consumers are already tightening their belts. Retail sales recorded their first year-on- year decline since 2013 in October as consumers struggled with fast-rising price, stagnant wages, and a fall in the value of sterling. Some large retail groups reported a several straight weeks of sales decline missing analysts’ quarterly forecasts. The Bank of England raised interest rates on November 2nd, saying it forecast household consumption growth, adjusted for inflation, would slow to 1 percent next year from 1.5 percent.

Official data in early November showed that consumer price inflation held at a five-year high of 3 percent in October while regular pay, adjusted for inflation, suffered its longest run of falls in almost three years.

The economy is now expected to grow by just 1.5 per cent this year and at a slower rate next year, according to the latest downward revision contained in the Chancellor’s Budget Statement. The 5 year outlook sees GDP annual growth staying well below 2 per cent which will result in the UK falling out of the world’s top 5 economies.

Outlook: Uncertainty surrounding Brexit still poses a significant risk to the UK’s economic outlook. The picture to emerge from the latest forecasts point to the prospect of the longest fall in living standards since records began 60 years ago as real disposable income is set to fall for 19 successive quarters.


Eurozone’s economy enjoying its best year in a decade

Economic confidence in the eurozone has risen to its highest level since January 2001 following 14 consecutive months of upward movement.

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Latest data shows that GDP rose by 0.6 per cent in the three months to the end of September (an annualised rate of 2.4 per cent). The European Commission’s economic-sentiment index rose to its highest level in almost 17 years. Yet when the European Central Bank’s governing council gathered on October 26th, it decided to keep interest rates unchanged, at close to zero, and to extend its bond-buying programme (known as quantitative easing, or QE) for a further nine months.

Eurozone unemployment declined to 8.9 per cent in September, the lowest since January 2009, while inflation fell back to just 1.4 per cent in October, still well below the European Central Bank’s target of just below 2 per cent.

Germany leads the way as the eurozone enjoys robust recovery in industry, retail and construction. France’s GDP grew by 0.5 per cent in the third quarter, giving an annual rate of growth in the eurozone’s second largest economy at 2.2 per cent, the highest since 2011, driven by consumer spending and business investment. Official figures show Spain’s economy was broadly unaffected by the Catalonia independence crisis.

A sign of high consumer confidence, car sales in the European Union enjoyed their strongest October in eight years, with new car sales up by almost six percent.

The recent failure of German coalition talks to form a government potentially threatens a slowdown in Europe’s largest economy.

Outlook: Positive outlook as consumer sentiment is at a high.


Key indicators point to continued US economic growth

NYC-1117

The U.S. economy is heading into 2018 with strong momentum that is likely to boost wages and inflation more broadly, requiring the Federal Reserve to raise interest rates four times next year, Goldman Sachs Group Inc. economists said in a research note. Growth outlook for 2018 is forecast at 2.5 percent, with unemployment predicted to fall to 3.7 percent by the end of 2018.

For the first time since the middle of 2014, the US economy has sustained 3 percent growth for two consecutive quarters, providing strong momentum into next year. Business investment has recovered from a downturn in 2016, with capital investment on an upward trajectory including confidence in the manufacturing sector especially strong.

While consumer spending eased a bit in the third quarter, The Conference Board’s Consumer Confidence Index is still strong, housing prices are rising, and there has been a pickup in auto sales. Employment growth is expected to rebound quickly, from storm related decline, with a tighter labour market driving wage increases. A rise in consumer spending is expected into 2018, possibly further boosted by cuts in Federal income taxes. Real consumer spending is forecast to continue grow at close to 2.5 percent in 2018.

Outlook: Positive outlook for consumer spending augurs well for continued growth in travel, although a fall in the value of the dollar could moderate demand growth.

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