Irish Tourism Industry Postcard – September 2017


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INTRODUCTION

CURRENT MARKET CONDITIONS & OUTLOOK

CURRENCY WATCH

TRANSPORT UPDATES

TRAVEL INDUSTRY NEWS

ECONOMIC UPDATES


Irish tourism grows but faces a more challenging future

Spending by international tourists when in Ireland amounted to €2.1 billion for the first half of the year, up 7% on the same period in 2016. Earnings from all major markets saw a year on year increase other than from Britain where a weakened sterling has made Ireland significantly less attractive. The shift in the sterling-euro exchange rate is hurting many tourism businesses which depend on visitors from Britain and Northern Ireland.

The latest results from the CSO reaffirm the industry’s continuing dependence on long haul markets for earnings growth. This is particularly true of the US market which in recent years has benefitted from a strong dollar and substantial year on year increases in airlift delivering competitive fares.

Increasing global geo-political tensions, slow progress on Brexit, exchange rate volatility, together with natural disasters, could easily combine to present a more challenging trading environment for the industry after several years of benign external tailwinds.

Despite weak British performance, key performance indicators will overall be positive in 2017, although growth will be moderated. Growth in demand from other markets is in danger of masking what is perhaps a fundamental strategic weakness in Ireland’s positioning in tourism’s largest and closest market. It should be recalled that over a decade ago a loss of competitiveness in Britain led to a collapse of demand from which it took the industry many years to recover.

It is timely that as businesses face increasing competition in a fast changing marketplace that Irish tourism conducts a comprehensive strategic review of its product offering, investment and marketing strategies to ensure the success of the industry can be sustained over the coming years. The Irish Tourism Industry Confederation (ITIC), in conjunction with leaders of the business community, is well advanced on developing a road map for the future of the industry.

ITIC aims to produce an industry-led, Government-enabled, strategic action plan to secure the industry’s profitable expansion into the future.

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 circa €1.09, a far cry indeed from the €1.40 of 2015.

Brexit fears and rising inflation in the UK are some of the factors being blamed for a downward spiral in the value of sterling. The pound suffered its worst decline since last October over the past month, as global investors continued to shun the currency. Sterling fell against both the dollar and the euro, the currency’s fourth consecutive month of declines against the euro.

Some analysts believe that Sterling will finally reach parity with the common European currency towards the end of 2017, and remain there for some time to come. The current atmosphere of uncertainty surrounding the final cost of Great Britain’s exit from the European Union will likely keep the value of Sterling down, before normalising after the Brexit till has rang the final bill.

GRAPH-Sterling-Sept2017

$ US Dollar

The US dollar has slid against most currencies, including the euro in recent weeks with 1US$ buying €0.84 cent on average over the past week.

The shift appears to have more to do with the dollar weakening against all currencies rather than a strengthening euro. While the real economy in Europe is visibly picking up, the uncertainty or perceived hesitancy on the part of the current US Administration in regards to investment, taxation and other factors are impacting confidence in the US dollar.

GRAPH-USDollar-Sept2017

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Winter 2017/18

Transatlantic Routes

Aer Lingus’ largest ever winter schedule, up 13% on last winter, with new Miami route; 12 flights per week to US West Coast; added frequency from Washington; more capacity from Toronto. Up to 85 departures per week will serve US routes, reducing to 60 per week in post New Year period.

Norwegian International plan Stewart-Dublin 6 departures per week; Stewart-Shannon 2 per week; Providence-Dublin 3 per week with 2 per week to Cork and Shannon.

United Airlines will suspend Newark-Shannon service from November 26th to March 9th, 2018.

Air Canada mainline replaces Rouge from Toronto with 3 class A330-300 service, effective October 30th.

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Air Transat will operate special Christmas holiday flight from Toronto to Dublin.

European Routes

Ryanair expands to Dublin: New routes Munich (2 daily), Stuttgart (daily) and Naples (5 per week), plus increased frequency on other routes.

Aer Lingus adds Bordeaux and Bilbao for winter; and increases frequency from Hamburg, Zurich, Rome, Lyon and Venice together with more Canary Island departures.

Ryanair Berlin twice weekly service will switch from Shannon to Kerry.

Lufthansa adds Dublin services with 4 daily departures from Frankfurt and 13 per week from Munich.

Air France reduces Paris-Dublin from 5 to 4 daily.

KLM increases Amsterdam-Dublin to 5 services per day.

Cobalt goes year round with weekly winter Larnaca-Dublin service.

WOW Air suspends Cork-Reykjavik service.

UK Routes

Aer Lingus adds frequency from Birmingham & London to Dublin.

Aer Lingus Regional / Stobart: Newcastle-Dublin reduced to daily; Bristol-Dublin reduced to 19 departures per week.

Ryanair ups frequency from Manchester to Shannon.

Flybe: Southend-Dublin service resumes with 15 flights per week operated by franchise partner Stobart Air; Cardiff-Cork increases to 3 days per week

Africa

Air Arabia Maroc commencing new twice weekly scheduled service from Dublin to the Moroccan city of Agadir from October 4th.

 

Summer 2018 – ‘heads up’

Aer Lingus with the latest addition to the fleet and launch of Miami route plan to offer increased capacity for summer 2018.

Cathay Pacific: New Hong Kong –Dublin service will launch Dublin Airport’s first ever direct route to the Asia-Pacific region from June 2nd, 2018 operating 4 days per week.

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Norwegian Air International plan to increase to daily Stewart-Dublin and 3 days per week from Stewart to Shannon. Providence frequencies unchanged.

American Airlines will extend daily seasonal Philadelphia-Shannon service from April 4th to early October.

Ryanair: in addition to new routes – Munich, Stuttgart and Naples – launched for winter will add Paphos and Marrakesh in March.

Luxair will double to 12 departures per week from Luxembourg to Dublin.

Aer Lingus to reduce Amsterdam-Cork.

Turkish Airlines to add frequency on Istanbul-Dublin from double daily service to 17 departures per week.

Finnair to increase frequency from Helsinki to Dublin.


FERRIES

Irish Continental Group plc (ICG) reports solid first half year performance

Irish Ferries’ parent ICG reported revenue up 3.7% to €156m, underpinned by a 2.3% growth in car traffic to 174,500 units and the consolidation of the strong RoRo freight growth over the last two years. The Group’s profit more than doubled to €43m in the six months to 30 June, however included in this profit was the one-off €25m sale of a ferry. Earnings before interest, taxation, depreciation, and amortisation – a measure of a company’s operating cash flow – was down 3% to €29.6m. Net cash at ICG was €26.7m at 30 June, a considerable improvement on the €37.9m in net debt which the company held at 31 December 2016.

BIG SHIP NEEDS BIG NAME

IrishFerries-BigShipBigName

Irish Ferries will add a new €144m ferry to its fleet in 2018, the biggest to sail the Irish Sea. The company is looking for help in finding an Irish literary inspired name for its new ship. Follow progress on the build at www.bigshipbigname.com

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Irish tourism earnings up 7% in first half year

Visitors spent €2,092 million in the country over the first six months, compared to €1,954 million, a 7% increase on the same period a year ago. On top of that Irish carriers earned an estimated €729 million in fares from overseas visitors. Visitor volumes increased by 4% over the period.

Nett change in earnings amounted to €138m. Earnings from North American visitors were €90m ahead of a year ago, while earnings from mainland Europeans and visitors from the rest of the world added €46m and €22m respectively. Receipts from British visitors fell by 4%, down by €18m.

TABLE-ReceiptsByMarket-H1

Spending by holiday visitors increased by 12%, while receipts from visiting friends and relatives (VFR) and business trips grew by 3% and 5% respectively.

TABLE-ReceiptsByPurpose-H1

Total bednights in the country by overseas visitors grew by 2% to close to 29.5 million. A 20% increase in bednights from North American visitors and a 7% increase from other long haul markets compensated for a 6% drop in nights from Europe, and no growth from Britain.

The positive impact of higher spending visitors from long haul markets is evident from the increase in demand for hotels and other paid serviced accommodations. These categories enjoyed a boost in demand and increased their market share over the half year. Hotel demand from overseas was up 8% to an estimated 8.7 million bednights, while Guesthouses/B&Bs saw a 11% increase to 3.3 million bednights. Nights spent in rented accommodation or with friends/relatives each appear to have declined.

[Commentary and estimates derived from CSO’s Tourism and Travel Quarter 2 2017, published September 6th, 2017]


Global travel set to hit another record high in 2018

More people than ever before are travelling this year. Airlines have witnessed the biggest growth in passenger traffic since 2005, with year on year growth of 7.9% for the first 6 months and are flying with close to a record number of filled seats, according to latest data from the International Air Transport Association (IATA). European airlines reported growth of 8.8% for the first half of the year. Global demand continued to grow in July with a robust 6.8% year-on-year increase as airlines achieved an all-time high industry-wide load factor of 85%. The increase in demand is being driven a brighter global economic backdrop and lower airfares.


Britain enjoying a bumper year

19.1 million overseas visitors spent a record £10.6 billion in the first half of 2017. Revenue over the six months grew by 11% on a 9% increase in visitors. Holiday visits are driving the growth with a record 20% increase to 7.5 million visits in the first half of the year, while VFRs were up 4% and business visits down 3%. The sharpest growth came from North America (+25%) and Rest of the World (+20%), while arrivals from the EU, the largest market, were up 4% and from other European countries up 13%. Domestic demand for leisure trips grew by 7% over the first five months of the year. The weaker pound, advertising and publicity campaigns are driving foreign visits as British hotels and the leisure industry are set for a record year with a substantial increase in both home and international visitors.


Ireland’s largest hotel group (Dalata) profit up 80% for half year

The country’s largest hotel group reported profits of €32.7m, on revenue up 24% to €162m, for the six months to end June. Revenue per available room (RevPAR) rose by 9.8% to €82.27, while the company’s Dublin room revenues outperformed the market with growth of 11.2%. The group said it spent €17.1m in new builds and extensions to properties during the six month period, while the company has a pipeline of over 1,280 new rooms on target to open in 2018. Dalata noted that Dublin, one of its key markets, has seen a dropoff in visitor numbers from the UK due to the weakening of sterling but reported that has been more than offset by an increase in visitor numbers from North America and other European countries.

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The UK economy is losing momentum as Brexit weighs

The latest round of UK economic indicators point to a loss of momentum as fears mount about Brexit, rising inflation and slumping investor confidence. UK consumer confidence edged up in August from 12-month lows the month before, but British business remains pessimistic compared to last year, according to closely watched surveys.

On the production side, the Purchasing Managers’ Index for services in August came in weaker than expected and represented the slowest pace of expansion since September 2016. Meanwhile, UK construction slumped to lowest in 2017 as real estate projects are delayed in Brexit run-up.

Consumer spending was responsible for the surprisingly strong GDP growth in the wake of last year’s referendum, and the slowdown since the turn of the year is largely responsible for the weakening of the economy in 2017. Spending by British consumers is growing at the weakest rate in almost three years, as households come under pressure to tighten their belts from higher prices fuelled by a drop in the value of the pound since the EU referendum and incomes failing to keep pace with inflation. While retail sales picked up slightly in August, analysts warned that the consumer sector’s stress was far from over. Retail sales account for around 30% of household spending, which in turn accounts for around 60% of UK GDP.

Sterling suffered its worst performance in 10 months as investors shunned the currency, which saw the currency’s fourth consecutive month of declines against the euro, pushing up cost of imports.

Inflation in July was 2.6 %, unchanged from the previous month, but up from just 0.5% at the time of the 2016 Brexit vote. Many analysts expect inflation to hit 2.9% later this year.

Outlook: short to medium term continued uncertainty depressing consumer demand, with decreasing spending power further hitting travel prospects.


Eurozone economy on track for best performance since 2010

While the Eurozone economy appears to be slowing slightly, it remains on course for its strongest year since 2010. The currency bloc has been one of the positive surprises for the global economy this year, as it outpaced the U.S. in the first quarter and accelerated further in the three months to June. The Eurozone’s major economic indicators including the manufacturing PMI (Purchasing Managers’ Index), the business sentiment index, inflation, and GDP growth, are improving gradually.

paris-0916

The Eurozone economy continued to expand in August helped by an acceleration in manufacturing production. Output in Germany and Ireland were the only countries in the survey to see output growth accelerate in August, while rates of economic expansion eased in France, Italy and Spain, but nevertheless remained solid. A robust increase in new business has helped to drive growth in employment throughout the zone.

Consumer confidence is also signaling a recovery, according to the European Commission’s Eurozone Consumer Confidence Index, which has been showing gradual improvement since February 2017. In 2Q17, household consumption and consumer spending contributed the most to the Eurozone’s GDP. The rising consumer demand is indicating that the demand outlook is changing. The higher demand will likely improve the profit margin of various companies. However, the stronger euro in the last three months has hampered exports.

Eurozone monetary policymakers face the perilous task of unwinding the economy’s gigantic support programme without plunging the bloc back into crisis. The European Central Bank is postponing taking action on so-called Quantitative Easing through bond buying for fear of pushing the euro exchange higher.

Outlook: positive outlook as consumer sentiment improves and prospect of any upheaval following German election recedes.


US GDP growth stronger than expected

The economy grew by an annualised 3% exceeding expectations in the second quarter, more than double the 1.2% increase seen in the first three months of the year. The acceleration in real GDP primarily reflected upturns in private inventory investment, federal government spending and an acceleration in personal consumption expenditure.

President Trump’s decision to ‘wind down’ the Deferred Action for Childhood Arrivals (DACA) programme could damage the U.S. economy. The move to potentially remove from the workforce and deport hundreds of thousands of young immigrants could cost the economy as it impacts businesses across a range of sectors from agriculture and manufacturing to service industries. The move following on from the threat to pull back on trade with South Korea, and even China, is seen as anti-business and could undoubtedly hurt the economy. The impact of hurricanes on the economy and consumer behaviour is unknown as yet.

Outlook: travel prospects remain positive but economic pressure on businesses and a fall in the value of the dollar could moderate demand growth.

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