Industry Postcard – September 2016

2016 continues to break records

Ireland continues to experience record number of visitors. Arrivals to the end of July were up 13% with impressive double digit volume increases from each of the top source markets – Britain, mainland Europe and North America.

The tailwind of a competitive visitor experience in terms of price and quality against a backdrop of a pickup in consumer confidence in most source markets, more airline seats on offer, together with currency advantage for US and pre-Brexit British travellers have been driving the upsurge in demand. In addition Ireland is seen as a safe destination as terrorism hurts tourism in some European destinations. The future though, is likely to be more challenging.

Key to sustainable growth in tourism will be maintaining Ireland’s competitiveness, the key objective of the Irish Tourist Industry Confederation’s (ITIC) recent pre-Budget submission to Government. The continued contribution of tourism to the country’s economic growth and the creation of more jobs require a cost and regulatory environment that is supportive of tourism businesses, including the retention of the 9% VAT rate, sensible levels of labour cost increases and investment in infrastructure, facilities and services.

STAMP-November
CURRENT MARKET CONDITIONS & OUTLOOK
CURRENCY WATCH
TRANSPORT UPDATES
TRAVEL INDUSTRY NEWS
ECONOMIC UPDATES
IRISH TOURISM INDUSTRY AWARDS 2017
soc-med-Facebook-sm
soc-med-Twitter-sm

Like many other business sectors, tourism is facing a challenging future particularly in its top source market, Britain, following the fall in the value of sterling after the Brexit vote, while clouds are gathering over the economies of several mainland European markets.

While businesses continue to invest to expand and upgrade to cater for growth, the industry faces some supply side short term challenges in catering to the growing demand for Dublin. Early indications suggest that there will be ample capacity on offer by airlines and ferry operators to allow for continued growth next year. However, Government decisions in the upcoming Budget together with the level, and alignment of the state’s destination marketing budgets with best opportunities, will be key to determining how Ireland fares in 2017.

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

wx-sep-2016

 

Back to top

$ US Dollar

The US dollar continues to hold strong against the euro, with 1US$ buying €0.89 cent on average over recent months. This rate is unchanged from a year ago, having increased in value by almost 20% over the previous twelve months. While American tourists continue to enjoy the increased value of the dollar in the eurozone, they are now enjoying even better value in Britain as sterling is at a 30 year low against the US dollar.

graph-usdollar-sept2016

 

£ Pound Sterling

The pound has depreciated by 13% against the euro since UK voters chose to leave the European Union three months ago. While the value of the pound jumped by 1% in the first days of September, after a survey indicated the UK’s manufacturing sector rebounded sharply in August, the value against the euro in mid-September is 16% lower than a year ago. The pound currently buys €1.18. British visitors are finding Ireland more expensive. Over the coming months it is forecast that sterling will continue to weaken as the economic situation in the UK is expected to deteriorate.

graph-sterling-sept2016

 

Back to top

Winter 2016/17

Transatlantic Routes

Aer Lingus adds 19 weekly transatlantic departures on services to Los Angeles, Newark, Hartford and Chicago.

United Airlines upgrades Newark-Dublin daily service to wide-body aircraft for the winter. Newark-Shannon frequency is reduced to 6 departures per week.

European Routes

Aer Lingus to offer 15% more seats on sun routes to Malaga, Los Palmas, Lanzarote, Tenerife, Fuerteventura, Faro and Lisbon.

KLM launches service from Amsterdam to Dublin.

klm-0916

Norwegian extend seasonal Helsinki-Dublin service through the winter.

Ryanair launches new flight from Sofia to Dublin as well as operating winter services for the first time from Porto, Hamburg, Athens, Bologna, Bucharest, Saville and Murcia to Dublin.

Ryanair routes from Cork to Malaga, Las Palmas, and Tenerife, together with Shannon to Malaga, go year round.

ryanair-ork-0619

Ryanair drops Paris-Shannon service.

Turkish Airlines reduces frequency from Istanbul to Dublin from 14 to 10 weekly departures.

UK Routes

Aer Lingus Regional adds Bristol-Dublin service and drops service from Nottingham East Midlands to Dublin.

Flybe takes over Cardiff-Dublin & Doncaster/Sheffield-Dublin routes from Aer Lingus Regional.

Ryanair reduces Shannon-Manchester from daily to 5 per week, while cutting back from daily service from Cork, Kerry and Knock to Stansted on selective dates outside the holiday periods.

Middle East

Etihad will revert to daily service from Abu Dhabi to Dublin as of mid-September having operated two services each day over the summer.


Aer Lingus expands transatlantic services

The first of Aer Lingus’ latest additions to its Airbus 330 transatlantic fleet arrived on August 31 to be followed by another delivery later this month, enabling the airline to launch services to Newark and Hartford. Next year will see two further aircraft added, with the first delivery in May. The airline is planning to launch at least one new transatlantic route from Dublin in time for next summer, as well as possible capacity increases on existing routes, according to IAG’s boss.

ei-fng-0916


Irish Ferries report good first half year results

Car traffic grew by 5.5% to 170,500, while freight traffic was up 5.6%, for the half year ended June 30. Interim Management Report from Irish Continental Group (ICG), Irish Ferries’ parent, shows a solid financial performance for the period with revenues up 5.2% supported by lower fuel costs and increased charter revenues. Tourism carryings over the key summer months were reported to be broadly in line with expectation though the continuing Sterling weakness since the end of June has resulted in lower euro equivalent yields.


Norwegian Air International gets support from top US travel industry leaders

The proposal to start service from Boston to Cork has been dogged by US authorities stalling on awarding final approval for a foreign air permit to the low-cost carrier. Now twelve top executives of US travel companies have written directly to President Barack Obama urging immediate action pointing out the value created by Open Skies agreement between the EU and the US. Meanwhile, the EU last month gave formal notice to the US Department of Transportation (DOT) that it would begin arbitration over the question of NAI’s access to the US market. The entry of the Norwegian into the market has been strenuously opposed by several major airlines and labour unions.


Northern Ireland Executive props up air services

Northern Ireland’s only transatlantic service has been rescued with a £9m subsidy over 3 years after United Airlines threatened to discontinue its Belfast-Newark service. The Stormont subsidy is valued at close to £150 per return ticket.

After Ryanair announced it will cut back service to City of Derry Airport from next March, including withdrawing its daily Stansted service, a £7 million package of support for the airport, including a £2.5m route development, has been promised. Ryanair is currently the sole airline providing scheduled services at the airport which requires at least £2m annual subsidy from the Local Authority. The airport has indicated that they are in discussion with another carrier, and have made an application for PSO support, for a replacement London service.

Back to top


Ireland’s tourism exposure post-Brexit

As Britain has yet to trigger formal exit talks and to open negotiations on its new relationship with the EU, something which is only likely to be resolved in 2019 or later, the focus has turned to the short term impacts on tourism to Ireland. Latest economic data from Britain would suggest that after the initial shock consumers have settled into a new “wait and see” reality of a post Brexit era as the threat of recession appears to have been averted, at least for now.

cork-0916

 

The fall in the value of sterling, which is down at least 10% against both euro and the US dollar, is the most apparent change in the marketplace. This has resulted in Ireland becoming less competitive. The British consumer is finding Ireland more expensive, while Americans are eying good value to be had in Britain. There are already anecdotal reports of a falloff in bookings from Britain, a trend which would be particularly damaging to demand for short breaks to Dublin over the coming months. Reports are also coming in of a downturn in expenditure including a reduction in visits to attractions as British visitors who booked before Brexit curtail their expenditure while in Ireland. Ireland is particularly vulnerable to a falloff in demand from Britain – the top volume source of year round visitors, particularly short leisure breaks. Furthermore, the competitiveness of Ireland in the US market, which has been the source of much of the incremental revenue gains in recent years, has taken a hit with the devaluation of sterling. A strategic and coordinated industry response will be required to safeguard market share positions in each of these markets in 2017.


British tourism eyes post-Brexit boom

Britain’s inbound tourism has seen an 18% rise and an 11% increase in domestic bookings in the month following Brexit, according to a survey of 500 tourism businesses by Tourism Alliance. The fall in the value of the pound is reported to be attracting overseas tourists and encouraging British residents to holiday at home. But the Tourism Alliance has warned the ‘mini-boom’ is likely to be short lived.

Not surprisingly as the pound is at a 30 year low against the dollar interest in travel to Britain has reached a new high in the USA. A recent article in the New York Times Travel Section quoted a surge in searches on travel websites such as ba.com, expedia.com and visitlondon.com since the Brexit vote. Clearly Britain is currently viewed by Americans as an affordable European destination with tour operators and UK hotels aggressively marketing good value offers.


UK launches new Tourism Action Plan

A series of measures designed to boost tourism has been launched by the UK Government which includes liberalisation of regulations governing B&Bs and a new flexible apprentice scheme for seasonal workers. The Government cites the “real opportunities for growth” as a result of the Brexit vote. Other initiatives are aimed at boosting public transport use by tourists, extending the season and spreading demand outside of London.

Projects to be supported by a £40 million Discover England fund to build world-class ‘bookable’ tourism products that showcase the best of England to international and domestic visitors have been selected. Round two of the fund is now open for large-scale collaborative projects to be delivered over the period 2017-2019.


The House of Waterford Crystal hits one million visitors

waterfordcrystal-0916

Waterford City’s top visitor attraction welcomed its one millionth visitor in July. The centre, showcasing the world famous Waterford Crystal, attracts almost 200,000 annually and the company employs 178 staff in Waterford including highly skilled craftsmen and artisans. The visitor attraction received the TripAdvisor Certificate of Excellence 2016.

Back to top

The UK economy – post-Brexit, pre-exit

British consumer morale in August recovered some of its post-Brexit slump, a sign that consumers are adjusting to the decision to leave the EU. The latest GfK monthly survey showed a rise in consumer confidence from a low in July, when it suffered its sharpest drop in over 26 years. The improvement was in keeping with recent official data suggesting consumers have remained resilient after the Brexit referendum, even though there have been some indications that they are more reluctant to make big purchases.

Official data has shown retail sales jumped in August while the number of people claiming unemployment benefit fell unexpectedly in July. Britain’s high streets are seeing more shoppers reversing much of the immediate post Brexit drop on sales as retailers report their strongest sales for 6 months, partly due to a weaker pound attracting overseas shoppers. Nearly half of mortgage borrowers look set to gain from the Bank of England’s interest rate cut on Aug. 4, while British equity markets have risen. The manufacturing activity rebounded sharply in August as exports increased on the back of a weaker pound. However, in the broad business community there is evidence of scaling back investment and hiring plans.

The overwhelming view from economists is that it is too early to know how Britain will cope with years of Brexit uncertainty – but there is a growing belief the country can avoid a recession that only weeks ago was regarded, by many, as inevitable. Some economists have already raised their forecasts on the back of increased optimism, largely due to the current resilience of the consumer, suggesting that forecast GDP could grow by 1.9% this year, slowing to just 0.6% in 2017.


Eurozone clouds gathering?

The Eurozone’s economy, supported by loose monetary policy and an improving labour market, expanded over the first half of the year despite a loss of traction in the second quarter. Many of the conditions that have driven the recovery remain in place suggesting stable growth in economic performance over the remainder of the year with GDP growth of close to 1.5%. Risks to the Eurozone include political developments as support for the status quo is waning across a number of countries and the Eurozone’s two largest economies, France and Germany, face key elections next year. Together with the threat of terrorism and Brexit these factors have led to increased uncertainty into 2017 & 2018.

While the region’s recovery appears firmly on track, growth patterns within the individual countries show a very different picture.

Germany, the Eurozone’s largest economy, saw GDP growth slow a little in Q2 but is expected to continue robust, if not spectacular, growth over the remainder of the year. The outlook for private consumption remains positive as unemployment remains low and consumer confidence is high. A reported fall in investment, most marked in the manufacturing sector, represents a risk to exports and sustained growth.

paris-0916

France’s contentious labour reform bill caused massive disruptions by striking workers resulting in a stagnant economy in Q2. Consumers appear to be pessimistic despite a drop in unemployment while businesses show little optimism. The government’s labour reforms aimed at rekindling growth in the medium term run the risk of being derailed by the political backlash, upcoming elections and the impact of Brexit.

Italy’s economy faces an uncertain future following further deceleration in Q2, a decline in both business and consumer confidence in August, and a decline in industrial production in July. Banking sector stability concerns coupled with weak domestic and global demand and ongoing political uncertainty associated with the upcoming constitutional referendum, are dampening economic growth outlook.

Spain’s economy remains on healthy footing despite political stalemate with recent growth mainly driven by a surge in exports and strong private consumption. Economic activity is expected to benefit from an improving labour market, favorable financing conditions and continued growth in tourism.


US – signs that the economy continues to expand but at a slower pace

US consumer confidence reached its highest point in nearly a year in August as economic conditions continue to improve. The data suggests that Americans expect the economy to remain strong through the second half of the year, according to the Conference Board, which tracks consumer sentiment. Short-term expectations regarding business and employment conditions, as well as personal income prospects, improved. Consumer spending increased for a fourth straight month in July, pointing to a pickup in economic growth.

The expanding US economy added another 151,000 jobs in August, according to the US Labour Department, while the unemployment rate stayed at 4.9% suggesting that the labour market is close to full strength. The increase in jobs was sharply down from July and is lower than the average monthly increase over the past 12 months. But despite the apparent slowdown in August, the continued expansion of employment and increase in consumer spending point to the possibility that the Federal Reserve could raise interest rates later in the year, most probably in December.

Back to top

itia-2017-logo-0916

The 2017 Irish Tourism Industry Awards were launched recently by Minister for Transport, Tourism & Sport, Shane Ross T.D. The Irish Tourist Industry Confederation (ITIC) is partnering with Fáilte Ireland, Tourism Ireland, and a number of industry sponsors, in presenting awards which recognise success, leadership and innovation in Ireland’s tourism industry.

For full information, to submit entries and to purchase tickets for the awards gala dinner on February 3rd 2017 go to: www.irishtourismindustryawards.ie. The closing date for entries is November 18th 2016.

Back to top
Share this:Share on FacebookTweet about this on TwitterShare on Google+Share on TumblrPin on PinterestShare on LinkedIn

We would very much welcome any feedback or suggestions you may have regarding the Industry Postcard. Help us to make it more relevant to your needs by simply dropping a note to info@itic.ie or by finding us on our social media channels.

To unsubscribe from the ITIC newsletter, please email info@itic.ie with "Unsubscribe From Ezine List" as the subject.