THE ITIC VIEWPOINT
The prospects are good for another year of continued growth in global tourism, although momentum may slow a little. Apart from the external economic and geopolitical clouds the industry in Ireland is facing particular challenges posed by the uncertainty around Brexit and threats to competitiveness resulting from the VAT rate increase, a tightening labour market and above inflation rate rises in some cost inputs. On the positive side investment by air and sea carriers sees more capacity and new routes on offer, an expansion of hotel capacity, and an increase in State funding for tourism.
January CSO figures on tourism arrivals have started positively (+11%) but this month only accounts for 5% of annual traffic flows so it is too early to identify a trend or momentum.
Of immediate concern to many businesses is the Brexit cliff hanger. Uncertainty is not good for business with many travel and hospitality enterprises exposed to the risk of a ‘no deal’ Brexit or any significant change in cross border trade and travel. Tourism businesses, unlike other export sectors, do not have access to Brexit grants to assist in market research, customer base diversification or operating efficiencies. This discrimination negatively impacts tourism businesses’ ability to cope with the fallout from Brexit and is of concern to the Irish Tourism Industry Confederation (ITIC).
ITIC’s priority for the year ahead is to continue to push the implementation of its 8 year roadmap for the sector Tourism: An Industry Strategy for Growth to 2025. In addition, ITIC will undertake research into the factors impacting competitiveness in the tourism sector, particularly looking at state imposed costs, with a view to influencing policy.
Despite the challenges the industry continues to invest in expansion and international marketing campaigns and looks forward to welcoming more tourists in 2019.
As always, your comments are most welcome by emailing email@example.com.
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£ Pound Sterling
One British Pound currently buys close to €1.14, having hovered between €1.11 and €1.13 over recent months.
The outlook for Sterling hinges largely on Brexit – a ‘No Deal’ continues to be the key threat to future outlook for the currency.
$ US Dollar
1US$ buys €0.88. The exchange rate has been roughly steady over the past four months. The US$ currently buys 9% more than at this time last year.
The euro-to-Dollar exchange rate is likely to continue to be subject to some volatility from US political events and the economic sentiment in Europe after Brexit.
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Ireland is set to enjoy a further increase in airlift this year:
New Long haul routes and services
Aer Lingus will launch daily service to Minneapolis (July) and Montreal (August). The two new routes will bring the number of destinations in North America served by Aer Lingus to 15 with 129 weekly departures, adding an estimated 250,000 seats to the Aer Lingus transatlantic network.
American Airlines’ new daily seasonal service from Dallas Fort Worth to Dublin, effective June 06 to Sept. 28 will provide Ireland’s first direct service from Texas.
Hainan Airlines opened its second route to Ireland from Shenzhen with twice weekly departures on February 25. This follows on the airline’s Beijing service launched in June 2018.
Norwegian will launch its first Canada service between Hamilton, Ontario and Dublin with daily service from March 31.
Norwegian is planning to increase US service with 33 weekly departures, compared to 29 last year, from Stewart to Dublin and Shannon, and from Providence to Dublin, Shannon and Cork.
WestJets’ new Calgary-Dublin service from June 01 will add to a significant increase in capacity between the two countries. WestJet is also switching its Dublin service from St. John to Halifax.
New European routes and services
Aer Lingus – from Lisbon and Dubrovnik to Cork.
Aer Lingus – Nice-Cork service.
Aeroflot – Moscow-Dublin daily service.
Air Baltic – Riga to Dublin service.
Great Dane Airlines – plans to launch weekly service from Aalborg to Dublin.
LaudaMotion – Vienna-Dublin daily service.
Ryanair – to Dublin from Frankfurt, Bordeaux, Gothenburg, Luxembourg, Kiev, Thessaloniki, Dubrovnik, Lourdes, Split, Cagliari, Bodrum and Dalaman.
Ryanair – to Cork from Naples, Budapest, Malta, and Poznan.
Ryanair – to Knock from Cologne.
Ryanair – to Shannon from Ibiza.
TAP Air Portugal – Lisbon to Dublin.
In addition to the above new services several carriers are increasing frequency on selected routes.
New UK routes and services
Ryanair – Luton-Cork daily service.
Ryanair – from Bournemouth and Southend to Dublin.
Ryanair – East Midlands-Shannon service
In addition to the above, Ryanair and Aer Lingus are adjusting frequencies and capacities on selected routes.
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Global international tourist arrivals up 6% in 2018
Worldwide international tourist arrivals (overnight visitors) increased 6% to 1.4 billion in 2018, ahead of the 3.7% growth registered in the global economy, according to the latest estimates from UNWTO. The long-term forecast published in 2010 predicted the 1.4 billion mark of international tourist arrivals for 2020. Yet stronger economic growth, more affordable air travel, technological changes, new businesses models and greater visa facilitation around the word have accelerated growth in recent years.
International tourist arrivals in Europe reached 713 million in 2018, a notable 6% increase over an exceptionally strong 2017. Growth was driven by Southern and Mediterranean Europe (+7%), Central and Eastern Europe (+6%) and Western Europe (+6%). Results in Northern Europe were flat due to the weakness of arrivals to the United Kingdom.
Tourism growth expected to return to historical trends in 2019
Based on current trends and economic prospects the UNWTO is forecasting a 3% to 4% growth in international arrivals this year, in line with historic growth trends. As a general backdrop, the stability of fuel prices tends to translate into affordable air travel while air connectivity continues to improve in many destinations, facilitating the diversification of source markets. Trends also show strong outbound travel from emerging markets, especially India and Russia but also from smaller Asian and Arab source markets. At the same time, the global economic slowdown, the uncertainty related to the Brexit, as well as geopolitical and trade tensions may prompt a “wait and see” attitude among investors and travellers.
2019 air travel forecast to expand at around 6%
Passenger traffic growth is expected to moderate in 2019 following on a record 2018 when global air travel demand, measured in revenue passenger kilometers (RPKs), increased by 6.5%. The International Air Transport Association (IATA) projects a moderating rise in traffic following a slowing of growth in the second half of 2018 coupled with concerns over issues including Brexit and US-China trade tensions that are creating some uncertainty to a positive outlook.
European carriers’ international traffic climbed 6.6% in 2018 compared to the previous year, which was down from 9.4% growth the year before. Airlines reported record load factors, higher than any other region of the world.
Work begins on Dublin Airport’s new North Runway
An Taoiseach and the Minister for Transport Tourism and Sport performed the official sod-turning for the €320 million project on February 13. The new 3.1km runway, funded through a combination of daa’s own revenues and borrowings, at no cost to the State, will take about two years to construct followed by a nine-month period of commissioning before becoming operational in 2022. While construction progresses, daa will continue to seek the amendment of two planning conditions restricting flights between 11pm and 7am that will apply once the new runway is built. Legislation to establish a new independent aircraft noise regulator at Dublin Airport is currently going through the Oireachtas.
Tourism supported over 12,000 new jobs in Q4’2018
The tourism sector continued to create job opportunities with a 5% increase in employment in the final quarter of 2018, following on from a very strong 10% more jobs added over the July-September period, based on the latest CSO data.
2018 saw 25,000 new jobs generated by tourism to reach a record 270,000 over the peak summer months.
Employment estimates for the Accommodation & Food Services sector, as measured by the CSO, shows a total of 176,800 in employment an increase of 8,100 on the same period a year earlier. Based on Fáilte Ireland’s multiplier for the broader tourism sector just over 12,150 jobs were added over October to December period, as the tourism year wound down.
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2019 – A year of weakening global expansion
While the global economy continues to expand, most forecasts point to a slowing down in 2019 and 2020. The world’s economy is projected to grow by 3.5% in 2019 and 3.6% in 2020, compared to estimated 3.7% in 2018, according to the IMF’s World Economic Outlook. The slowdown reflects the softer momentum in the latter half of 2018, the ongoing uncertainty surrounding US-China trade tensions and a greater than forecast slowdown in China, the threat of a ‘no deal’ Brexit and the weakening financial market sentiment. Crude oil prices, an important driver of travel demand, have been volatile since August, reflecting supply influences. Currently at around $55 a barrel, the average oil prices are projected at just below $60 per barrel in 2019 and 2020.
UK outlook highly uncertain due to Brexit cliffhanger
The Brexit outcome remains uncertain and has potentially serious implications not only for the UK economy but for its knock-on impacts on the entire European economy. Reflecting this uncertainty, the Bank of England recently cuts its forecast for 2019 growth to 1.2% from 1.7%. This would be the weakest growth since the recession of 2009. The Monetary Policy Committee voted unanimously for no change in the base rate at 0.75%.
UK consumers’ outlook for the economy over the next year is at the lowest level for more than seven years, according to the latest Gfk’s Consumer Confidence Index, close to the levels experienced during the recession in 2008/9. While consumers took advantage of high street discounts to boost retail sales in January (+1%) after a disappointing Christmas, the overall index reflects a ‘wait and see’ holding pattern in the face of political chaos. This despite people feeling more confident about their personal finances thanks to high employment levels, low interest and inflation rates, and rising household incomes.
Outlook: challenging outlook focused on Brexit outcome and its impact on consumer confidence and sterling exchange rates.
European growth moderates in face of uncertainties
The European economy is expected to grow for the seventh year in a row in 2019, with expansion forecast in every Member State. The pace of growth overall is projected to moderate compared to the high rates of recent years and the outlook is subject to large uncertainty. Growth in the euro area is set to moderate from 1.9% in 2018 to 1.5% in 2019 and 1.7% in 2020, according to the EU Commission’s latest projections. The factors slowing down the rate of growth, in addition to the global risks, include a softening of private consumption and weaker industrial production in Germany, the impact of protests and industrial actions in France, weak domestic demand and high borrowing in Italy, together with the overhanging cloud of Brexit uncertainty.
The European Central Bank ended its net asset purchases in December. However, it also confirmed that monetary policy would remain amply accommodative, with no increase in policy rates until at least summer 2019.
Consumer price inflation in the euro area fell towards the end of 2018 due to a sharp drop in energy prices and lower food price inflation, with overall inflation (HICP) averaging 1.7% in 2018. With oil price assumptions for this year and next year now lower, EU inflation is forecast to moderate to 1.6% in 2019 before picking up mildly to 1.8% in 2020.
Outlook: broadly positive as consumer sentiment drives demand.
Strong US economy but growth slowing
The growth forecast is expected to slip to 2.5% in 2019 and soften further to 1.8% in 2020 with the unwinding of fiscal stimulus, higher interest rates, and international trade tensions. Nevertheless, the projected pace of expansion is above the US economy’s estimated potential growth rate in both years. The labour market is tight as the unemployment rate continues to hover close to 4% leading to strong domestic demand growth which may support rising imports and contribute to a widening of the US current account deficit. Consumer price inflation has inched up in recent months.
U.S. consumer sentiment rebounded in February by more than forecast from a two-year low, suggesting recent weak retail sales will be a temporary blip after the government shutdown ended and the Federal Reserve signaled it would hold off on interest-rate hikes. However, a 25% tariff on $50 billion worth of imports from China, including washing machines, aluminum, and steel announced in the first half of 2018, and a 10% tariff on an additional $200 billion of imports rising to 25% after the current 90-day “truce” ends on March 1, 2019, could see consumers facing price increases.
Outlook: travel demand expected to continue to grow while rate may moderate.
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