ITIC on CSO numbers Jan-Sept 2014

THE HEADLINES

Half a million more visitors so far this year

The good news delivered by the latest CSO data shows a 9% year on year volume growth over the first 9 months of 2014. This translates into more than 500,000 additional visitors so far this year compared to 2013. This increase is sustaining and creating new jobs as well as delivering more revenue to the Exchequer. The fillip in overseas visitors reflects primarily the upturn in economic conditions in most source markets combined with the improved competitiveness of the Irish product. In addition, increased capacity on air and sea services into Ireland, particularly on transatlantic routes; the impact of the newly launched Wild Atlantic Way, which has captured the imagination of the overseas markets; some new marketing strategies by Tourism Ireland, within a reduced marketing spend; and a greater investment in marketing by the industry, have all combined to deliver sizeable volume increases from all major source markets.

 

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The return to growth of Ireland’s tourism industry is very evident from the 12 month rolling data to end September which clearly shows the steady improvement over the past 36 months. The long haul markets have shown dramatic increases with double digit growth over the past 24 month period, while mainland Europe has produced solid growth of 6% to 7% over the same period. Britain has recovered to produce a 10% growth over the past 12 months.

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Source: Derived from CSO data

While 2014 is proving to be another good year of growth in international travel around the world, Ireland looks set to outperform most of its competitors this year, with consensus forecasts pointing to growth of up to 5% in global travel. But Ireland after several years of lack lustre aggregate volume performance will grow its share in a number of outbound markets, most notably North America, Britain and Germany.

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While the number of visitors this year will not reach back to the heady days of 2007 & 2008 it is not far off the all-time record. However, we will have to wait for another two months or so before we have the key sector metric of visitor expenditure for the first nine months, in addition to a breakdown of the composition of the demand by purpose of visit. The half year results while showing good volume growth identified that VFR traffic was driving the growth, while there was little or no growth in expenditure by the promotable segment. The hope would be that the performance of the promotable segments – the target of the state marketing budgets – would improve over the peak season.

BEHIND THE HEADLINES

Not surprisingly the rate of growth slowed from most markets as the volumes increased through the peak season. The aggregate volume of visits between July and September grew by 8%, with North America generating 18% more visits than in the same period a year ago. Arrivals from mainland European markets showed an almost 10% increase on the previous summer. However, the number of British visitors, the largest source market, increased by only 2% in Q3.

Overall the rate of increase in arrivals was strongest in April, May & June, with a very credible high single digit growth in July, August and September.

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NORTH AMERICA – STAR PERFORMER

The growth from North America has been spectacular, particularly when set against the strong consistent growth from the market over recent years. The double digit growth in each month since April is setting another new record for the market. The growth in demand to Ireland far outperforms travel demand from the US to Britain and Continental Europe, as has been the case for the past two years, yielding a significant market share gain for Ireland. The expansion of demand has been facilitated in each of the past three years by an increase in capacity together with a sharp downturn in outbound demand from Ireland which released more seats for US originating traffic. While a breakdown between arrivals from the US and Canada is not yet available, it is expected that demand from Canada will show a strong increase this year following the launch of new air services, although the market represents less than 15% of the total North American demand.

Of greater significance than the volume increase from this market is the value of the North American visitor – amongst the higher spenders and consumers of high capital investment products in Ireland.

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MAINLAND EUROPE

Aggregate arrivals from mainland Europe show a fairly consistent growth pattern since April, with good strong growth over the peak summer months, the traditional peak demand period from this market..

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Within Europe the performance has varied across individual source markets, with Germany up 16.5% for the first nine months, including 14% growth between July to September. The market has produced consistent double digit growth across each quarter. In contrast, France the next largest mainland European source market has produced only 3% growth year to date, despite a 16% increase in Q3 which followed on a very soft Q1 and an indifferent Q2 performance, which led to a 5% decline in the first half of the year.

Arrivals from Spain, showed very strong growth in Q1 and Q2, +15% and +27% respectively, followed by a much softer Q3 which grew by 2%. Good double digit growth (+17%) from Italy over the July to September period, compensated for no growth in Q2 after a very buoyant first quarter demand.

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BRITAIN

While the overall recovery of Ireland’s largest source market is most welcome, the pattern of demand so far gives rise to a number of questions. The market has been specifically targeted for recovery with a new segmentation strategy to grow promotable demand. The first half results suggested that a high proportion of the increase from Britain was due to a very buoyant VFR sector. It is difficult to account for the sharp slow down in the growth trend over the peak holiday period. July arrivals were 1% ahead of the same month last year, while August arrivals were down 2% – this after double digit monthly growth over the first half of the year and a return to 9% growth in September. On the basis of data currently available, it would appear that Ireland is increasing its share of outbound travel from Britain this year, which despite an improving economic environment including a stronger pound against the euro, has been soft with a marked decrease in expenditure abroad by Britons.

On the basis that there is no evidence of a lack of capacity to accommodate demand growth over the July/August period, it could suggest that the growth in demand is heavily skewed to short breaks or events, largely favouring Dublin, and possibly including VFR visits, rather than attracting main holiday visitors over the summer. As the focus of the strategy and the sizeable investment in this market is to regain share of the promotable sector, the recent performance would appear to warrant serious examination in advance of strategic decisions and budgetary commitments for 2015.

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NEW & DEVELOPING MARKETS

Traffic from the long haul markets outside of North America is experiencing good growth in volume of high spending tourists, although the level of demand is still relatively small but growing fast.

Arrivals so far this year from the more established markets of Australia and New Zealand, totalled 150,000, up 4% on the previous year – perhaps a little surprising that the recent wave of emigration has not boosted demand further. In contrast, other long haul markets around the world have been the source of 220,000 arrivals over the first 9 months of 2014, up 16% on the same period a year ago.

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