Industry Postcard – November 2015

Building on a record year of sustainable growth

2015 is set to be a record year for arrivals into Ireland with the number of overseas visitors showing growth of 12% over the first nine months compared to the same period last year according to the Central Statistics Office. The increase in visits in 2015 is especially welcome as it builds on the 7% growth achieved in 2014 and represents double digit year on year growth across all the main source markets. Although the domestic market is less buoyant there are signs of a recovery in demand albeit at a slower pace.

Ireland looks set to welcome close to 8 million overseas visitors (excluding up to an estimated 800,000 day visitors) in 2015. This perhaps casts the government’s volume target of 10 million visitors by 2025 as not being particularly ambitious, even recognising that the current rate of growth is not sustainable.

As plans are being finalised for 2016 it is important to identify the key triggers for growth – including competitiveness, currency, airlift, and marketing expenditure – in each source market. Last December national targets for 2015 included 6% growth in volume and 7% increase in revenue – with hindsight the targets were conservative. Perhaps we need to look more closely at the basis on which projections are based and to better anticipate external and internal factors influencing performance, especially at a time when state investment in destination marketing is under pressure.

On the surface the key indicators look good into 2016 – favourable currency exchange rates, more air services and a good reputation all point to what should be another positive tourism year for Ireland. Saying this there are some economic clouds on the horizon and there is no place for complacency particularly in respect of the value for money the visitor receives. Continued lack of adequate state investment in tourism product infrastructure and destination marketing budgets put pressure on the tourism industry and the key to continued success will be delivering value and top quality service to the visitor.

As always, your comments are most welcome on itic@eircom.net.

STAMP-November
CURRENT MARKET CONDITIONS & OUTLOOK
CURRENCY WATCH
TRANSPORT UPDATES
TRAVEL INDUSTRY NEWS
ECONOMIC UPDATES

 

 


Record year for Ireland’s inbound tourism

The 12% increase in visitor arrivals over the 9 months to end September sets a new record, with over 6.65m arrivals. Growth trends experienced in the earlier part of the year carried through the peak months, strengthening in some markets, with arrivals in the July-September period up 14% (330,000 more visitors), on the same period last year. An estimated total of 2.77m arrivals in Q3 surpassed the previous peak of 2.47m in 2008. All main source markets are recording double digit year on year growth and traditionally 20% of international visitors come in the final quarter thus indicating that Ireland may exceed 8 million annual overseas visitors for the first time ever this year.

Source: CSO: Overseas Travel July – September 2015, released 23rd October 2015

While many factors combined to produce this result – including a more buoyant consumer demand in source markets, favourable currency exchange rates, expanded capacity on air and sea routes into Ireland and investment in marketing by the industry and state agencies – the performance far outstrips indicators from other destinations and the airline industry.

 


Domestic demand sluggish in first half of 2015

Domestic trips taken by Irish residents in the first six months grew by only 1% on the same period a year ago, although spending increased by 5%. An estimated 3.2 million trips, and almost 7.5 million nights spent within Ireland but away from home, generated €584 million in expenditure.

Demand for holiday trips proved to be more buoyant with volume demand up 6% and expenditure up 11%. The emerging pattern suggests higher average spend per day as the number of nights spent away on leisure trips increased by only 1%. The holiday segment accounted for 47% of all trips by volume but 56% share of the value and 50% share of bednights.

Domestic demand for hotels over the first half of the year generated just over 2.5 million bednights, down 7% on the previous year. Hotels captured 34% share of bednights spent away from home.

Source: CSO: Household Travel Survey, released 23 October 2015.

 

 


Demand for outbound travel more buoyant than domestic travel

Irish residents spent an estimated €2.55 billion on trips out of Ireland in the first half of the year, an increase of 6% on the previous year. The number of trips, at 3.3 million, was up 8%.

Demand for overseas holiday trips was up 18% to 1.8 million, with corresponding expenditure up 14% to €1.55 billion.

Source: CSO: Household Travel Survey, released 23 October 2015.

 

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A visit to a Eurozone country, including Ireland, continues to be attractive to British and American visitors given the strength of their respective currencies. Over the past 6 months one pound sterling has exchanged for an average of €1.39, around 14% stronger than 18 months ago.

US dollar visitors have gained 25% in euro compared to 18 months ago. Over the past 6 months the dollar exchange rate has fluctuated between €0.87 and €0.92.

While forecasting exchange rates is far from an exact science, some commentators are forecasting US dollar parity with the euro by the end of the year. The US dollar gained across the board in recent days as the Fed’s monetary policy committee appeared more bullish than the market expected, hinting that December is still an option for an interest rate hike. The pound sterling could gain from an uplift against the euro, if the Bank of England moves to increase interest rates as inflation bottoms out. However, the uplift may be short lived as the euro is expected to rally in 2016, while uncertainty surrounding the UK’s continued membership of the EU may damage investor confidence and the pound.

 

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9% more winter airlift

Capacity on scheduled services over the winter period (October 25 to March 27) is up 7% on routes to/from the UK; up 13% on mainland European routes and increases of up to 8% on transatlantic services. Services to the Middle East will see a reduction compared to last winter. A feature of the schedule is increased capacity and competition from several key short haul gateways, including Amsterdam, Paris, Madrid, Barcelona, Berlin, Munich, Brussels, Manchester, Birmingham, Liverpool and London. More seats are on offer from US gateways as Aer Lingus increases the number of departures to 63 per week and Delta introduces a larger aircraft, as United and American maintain the same frequency as last year.

 

Latest news on expanded services for summer 2016

 

Ryanair

  • 15% more capacity to/from Dublin with increased frequencies on 14 routes, in addition to the new Amsterdam recently launched service.

Aer Lingus

  • New Los Angeles service from May with new services from Newark and Hartford (Connecticut) from September.
  • 3 new routes from Dublin to Murcia; Pisa; and Montpellier. Increased capacity on several routes including from Athens, Barcelona, Bilbao, Bordeaux, Lisbon, Malaga, Naples, Palma, Perpignan, Toulouse and Venice. (Dublin-Fuerteventura has been dropped).
  • New Dusseldorf – Cork service and an increase in frequency on Paris, Barcelona, Palma and Faro services from Cork (Cork-Brussels service dropped).
  • Increased capacity on routes to Heathrow, Faro and Malaga from Shannon.

Delta Airlines

  • Increased capacity between JFK and Shannon by almost 25%

Norwegian Air International

  • New Cork – Boston service with up to 4 departures per week from May 2016.
  • New Cork – Barcelona service

Europe Airpost

  • Extended season for Paris-Dublin-Halifax services launched in 2015.

CityJet

  • A new La Rochelle and Nantes services to Cork, in addition to the recently launched Cork-London City Airport service.

Aegean Airlines

  • New Athens- Dublin service

WOW

  • Increased frequency from Keflavik (Iceland) to Dublin

Vienna – Shannon charter

  • Planned by Prima Reisen
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New brand and marketing campaign for Dublin

A new tourism marketing campaign for Dublin has been launched, with €1m earmarked for the first phase, funded by Fáilte Ireland, the four Dublin local authorities and a collection of private sector partners. The campaign will centre on a new brand for Dublin and will be pitched at potential visitors in the UK and Europe.

The initiative follows many months of comprehensive work and consultation, coordinated by the ‘Grow Dublin Tourism Alliance’ (GDTA), between all the key players within the tourism industry in Dublin – both public and private sector. The GDTA was established by Fáilte Ireland, following ITIC’s report ‘Capitalising on Dublin’s Potential’ published in June 2012. The GDTA developed the plans set out in ‘Destination Dublin – A Collective Strategy for Growth to 2020’.

For more information click on the following link for a recent video-interview that ITIC did with Orla Carroll, Director for Strategic Development for Fáilte Ireland, to hear more about the development of the brand and what it hopes to achieve: http://tinyurl.com/Dublin-ITIC


New Secretary General to the Department of Transport, Tourism and Sport

The Government recently appointed Graham Doyle as Secretary General of the Department of Transport, Tourism and Sport. The appointment, which will take effect following the retirement of the current Secretary General, Tom O’Mahony, follows a public competition under the Top Level Appointments Committee. Mr Doyle (41), a native of Waterford, joined the Department of Transport, Tourism and Sport in 2013 as an external recruit to the Civil Service. He was formerly CEO of Waterford Airport and a Financial Advisor to the Department of Transport on secondment from PwC, where he worked on the consulting side for eleven years. A Chartered Accountant by profession, Graham also holds a Bachelor of Business Studies, a Masters of Accounting and an MBA. He recently graduated from the British Civil Service’s Major Projects Leadership Academy at Oxford University.


France targets €1 billon investment in tourism

To meet the goal of welcoming 100 million foreign tourists in 2020 (85 million in 2015), France has set the target of mobilising investment of almost €1 billion in upgrading and expanding the country’s tourism infrastructure and facilities. ‘France Développement Tourisme’ investment project is aimed at three priorities: accommodation; equipment and infrastructure; and businesses.

Read more: http://www.pagtour.net

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Global growth forecast by the International Monetary Fund (IMF) has been downgraded to 3.6% in 2016 as the slowdown in emerging markets is pushing the world economy into its weakest expansion since the financial crisis. Modest growth in the US and a meagre recovery in the Eurozone haven’t been able to offset falling output in emerging markets, principally China’s deceleration which is leading to falling commodity prices. The IMF cut its projections for global growth to 3.1% this year from its previous forecast of 3.3% as it warned of a rising risk of a global recession.

Eurozone economic sentiment improved more than expected in October, mainly driven by stronger confidence in the retail and construction sectors, while the consumer inflation forecast dipped, according to the latest European Commission Economic Sentiment Indicator. The increased confidence has been a tailwind to the consumption growth, and the latest readings suggest the trend might continue. Economists are expecting the European Central Bank to press on with fresh stimulus measures, even though the eurozone has escaped deflation for the second time this year and the rate of unemployment across the EU has hit a six-year low. The growth in private consumption expenditures, which have been making up for the slack in export earnings, despite a weakened euro, augur well for continued expansion of spending on travel.

The US economy has been described as a ‘dizzying roller-coaster ride’ as the latest data shows an economy expanding at a lacklustre annual rate of 1.5% between July and September, less than half the pace of the previous quarter, due largely to waning exports. However, many economists suggest that the US economy is poised to rise again. Fortunately consumers have kept spending this year, a trend that analysts expect to continue. This is a vital factor because consumers account for roughly 70% of economic activity. Households are benefiting from solid employment gains, which have driven the unemployment rate to a seven-year low of 5.1%. Though pay growth has remained modest, more people working means more income to spend. Many economists think spending will be the leading factor to support growth into 2016, as households benefit from lower oil prices, low interest rates and a strong stock market. The profile of the wealthier cohort enjoying an improvement in their fortunes has been boosting demand for international travel and is expected to continue into 2016.

UK consumer confidence slipped to a 4 month low in October, with the outlook for the economy over the next 12 months at the lowest level this year, according to GfK’s latest monthly consumer confidence index. Britain’s economy slowed slightly more than expected in the three months to September, due to a big fall in construction and a continued export-led recession in manufacturing, leaving consumer and investment demand as the main drivers of growth. Low inflation is easing concerns about personal finances.

The survey reflects the contrast between weakening global growth and the record-low interest rates and higher wages helping consumers, while the economy may be falling prey to headwinds emanating from emerging markets. The strengthening of consumer confidence and disposable income levels suggest a continued growth in demand for outbound travel.

Airline profit expectations for the year ahead have fallen further but remain positive, according to IATA’s quarterly survey of airline CFOs in October, suggesting that improvements in key drivers might have peaked earlier in the year. Recent gains in profitability have been driven by strong growth in passenger volumes and falling input costs, with passenger volumes reported to have expanded at a robust rate during Q3. The growth outlook is positive but not at the strong pace that was expected earlier in the year, reflecting concerns over weakness in the global business environment and emerging market economies.

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