Irish tourism must remain competitive – the key message from Brexit

Dear ITIC Members,

Irish tourism has been a great success story in recent years. As an industry we must do all within our power to continue in that vein particularly in light of the recent Brexit vote which could significantly dampen visitor numbers from our biggest international source market, that of Great Britain.

2015 was a record year in terms of volume and value from nearly all markets, and when quantifying domestic tourism, overseas visitors and carrier receipts, the industry was worth €7.3 billion to the economy. Tourism now employs 227,840 people nationally making it Ireland’s largest indigenous sectoral employer. Indeed during the period of recession and austerity tourism was one of the main drivers of economic recovery with over 1 in every 5 new jobs created since 2011 being within the tourism and hospitality sector. Unlike FDI or other economic activities, tourism provides jobs in all parts of the country both rural and urban. Growth has been a testament to the quality and competitiveness of the Irish tourism product in recent times and it is vital that we not lose sight of this, or become complacent to the need for re-investment, particularly in light of the new economic reality heralded by the Brexit vote. Irish tourism must continue to be vigilant on value for money perceptions; a judicious pricing model is the corner stone to sustainable growth.

The UK’s decision to leave the EU is one of those external factors that can quickly make the environment for tourism more vulnerable. Sterling has weakened considerably and UK growth rates are being revised downwards. With the Bank of England signalling an interest rate cut sterling’s depreciation is likely to continue and this means that holidays to Ireland will be more expensive for UK holidaymakers. The British market remains vitally important for Irish tourism – it is our largest single source market for inbound visitors with, according to the Central Statistics Office, 3.55 million visitors coming here in 2015, generating revenue spend of €995 million in the Irish economy. This year has also seen a 16% increase year-to-date but such a growth trajectory was before the economic and political uncertainty caused by Brexit, and cannot reasonably be expected to be maintained.

Brexit’s impact on Irish tourism is difficult to exactly quantify but it will be negative, in the short to medium term at least. The industry is at one in identifying competitiveness and offering good value for money as being more vital than ever at this uncertain time. In the context of Brexit we must ensure that both as a State and as an industry we compare favourably on price, value and experience. We should also look to opportunity, remembering that a weaker sterling makes visits to all euro or dollar denominated destinations more expensive for British holidaymakers.

ITIC’s pre-budget submission will be focussing on this vital need to maintain competitiveness. The previous Government’s decision to put the tourism tax rate on an even keel with other competing European countries, to reduce the airport departure tax to zero, and to support initiatives such as the Gathering, were all highly successful policies in facilitating strong tourism growth. Some of those measures were to have been temporary, but results show it is undeniable that VAT at 9% is right sized for our industry. When compared to the 32 other European nations, there are only 9 states with VAT above 10%. Crucially the recovery in visitor numbers in the major urban areas masks the continued struggle of many in the tourism sector over large swathes of the country where recovery is still in its infancy.

The importance of those measures have helped generate 35,000 new tourism jobs throughout the country and provided a significant economic boost to the exchequer. Those policy actions are continued within the current Programme for Government but other state-induced charges, such as rising minimum wages and utility costs as outlined within the latest National Competitiveness Council Report, mean that Ireland risks coming out of line with our competitors.

The tourism sector must continue to ensure that holidays or business trips to Ireland represent affordable, good value for money experiences. Ireland will never be – nor should aspire to be – a cheap destination, but offering value for money and remaining competitive with competing destinations is critical to ensuring continued growth.

Dublin has a particular issue as the number of visitors to the capital alone has increased by 33% over 5 years at the very time – due to the legacy of the property and financial crash – that the supply of hotel accommodation in the city has fallen by 6%. This has led to an evident increase in room rates but the industry as a whole must be mindful to continue offering good value for money experiences. New hotels are in the pipeline which will add to competition and these are to be welcomed, but due to construction and planning timelines, there will be a delay of 2-4 years before they are open and trading. In the meantime it is critically important that hotels and all tourism suppliers reflect on the current delicate economic climate which we appear to have entered, and ensure that value and competitiveness remain top of our daily agenda.

The national targets for tourism to 2025 are modest and ITIC is of the view that they are eminently achievable and should be more ambitious for a sector with such established potential. However growth and further jobs are not guaranteed unless correct policies and investment strategies are pursued by Government while the industry must continue to remain competitive and agile. We must all work to avoid the “boom-bust” cycles of the previous decade and strive for sustainable growth for the tourism sector which will mean jobs and economic development throughout the country.

From a tourism perspective retaining competitiveness is key to continued growth. Put simply, cost competiveness is the critical foundation which will enable the industry to withstand external economic shocks such as Brexit. Industry and its leaders will need to show restraint on price inflation, with value for money being the order of the day. The next recession may be closer than the last one and preparedness and competitiveness are key tools in facing the next challenges.

Yours Sincerely,

Paul Gallagher


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