Irish Tourism Industry Postcard – October 2018


Industry Postcard stamp for May 2018

INTRODUCTION

CURRENT MARKET CONDITIONS & OUTLOOK

CURRENCY WATCH

TRANSPORT UPDATES

TRAVEL INDUSTRY NEWS

ECONOMIC UPDATES


Viewpoint from the Irish Tourism Industry Confederation (ITIC)

Solid growth so far this year with arrivals to end August up 8% confirms tourism as an industry delivering growth in export revenues, employment and taxes to the Exchequer. Receipts from tourism for the first half of 2018 were up 8% to just over €3 billion, including €800 million in fares to Irish carriers from overseas visitors. The success of Ireland’s tourism industry in recent years has been built on investment by businesses and improved value for money on offer. The result has been the creation of over 70,000 jobs throughout the country over the past seven years. The single largest risk to sustained growth is a loss of competitiveness.  Already thanks to a weakened pound sterling Ireland is facing increased competition from Britain for tourists.

Budget 2019 regretfully proved unfriendly to the Irish tourism and hospitality industry with the tourism Vat rate increased from 9% to 13.5%, damaging the sector, and potentially jeopardizing economic growth.

While the cloud of uncertainty surrounding Brexit and the possible implications of a ‘no deal’ or hard Brexit continue to exercise the industry, carriers continue to invest heavily in increasing air and ferry services to drive further visitor growth in 2019 and beyond. New gateways and added services to Ireland have been announced providing the opportunity to attract more visitors. The industry has set ambitious plans over the next few years and the sector, despite a withdrawal of Government support in key areas such as the Vat rate, can be confident of continued progress in the immediate term as it invests heavily in its capacity for growth.

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

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8.5% increase in half year tourism earnings

Ireland earned €2,270 million from visitors over the first six months in 2018, an 8.5% increase on a 7% growth in visitor numbers. The industry earned an additional €178m underpinning a sustained growth in employment in the sector. On top of that Irish carriers earned almost €800million in fares from overseas visitors. The very positive result for the start of the year is all the more welcome as it includes an 11% increase in expenditure by holiday visitors to almost €1.3 billion.

The robust first half performance was due to very strong earnings from mainland Europe and long haul markets more than compensating for little change in receipts from Britain. Mainland European markets, the top earner for Irish tourism, delivered good growth with receipts up 12% on a 10% increase in arrivals – for the first time the number of Europeans was almost equal to visitor numbers from Britain. Germany was the star market performer, with a 20% increase in demand and value. Demand from Britain showed little change with volume inching up 2% while expenditure was virtually unchanged. Earnings from long haul markets – North America and Rest of the World – returned a 9% increase in earnings.

Spending by holiday visitors increased by 11%, while receipts from VFR trips grew by 4% as spending by business visitors dropped 2%.

CHART-GROWTH-1H-18

31 million bednights in the country by overseas visitors was up 6% on a year earlier. A 13% increase in bednights from mainland Europe, and increases of +5% and +3% from North American and other long haul markets more than compensated for a 4% decline in nights from Britain.

Guesthouses, B&Bs and rented accommodations saw demand increase by almost 20%, while bednights in hotels saw a 2% decline in volume. Hotels are the most popular with an estimated 30% share of demand, although the category’s share dipped by 2 percentage points. The decline in hotel demand would appear to be due mainly to a 6% drop in demand from Britain and a softening of business travel demand. Hotels’ share of holiday bednights dropped 2 points to an estimated 44% share, despite a 3% increase in volume.

[Commentary and estimates derived from CSO’s Tourism and Travel Quarter 2 2018, published September 05, 2018]

WX-OCT-2018

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£ Pound Sterling

One British Pound currently buys around €1.12, with marginal shifts over the past 12 months.

While the Bank of England’s half-full view of the economy has kept the Pound’s slow recovery alive, a ‘No Deal’ Brexit is still the key threat to future outlook for the currency. The Pound has gained in value against the US dollar in September while broadly holding its own against the euro.

GraphSterling-1018

$ US Dollar

1US$ buys €0.86 cent on average over the past three months, buying marginally more than in the earlier months of the year.

The euro-to-Dollar exchange rate has declined in recent weeks mainly as a result of weakness for the euro due to a combination of concerns about the Italian economy and fading inflation pressures. Meanwhile the US Dollar’s rise, on the back of more positive outlook from the Federal Reserve, has exacerbated EUR/USD’s downtrend.

GraphUSDollar-1018

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Winter 2018/2019

The principal additions to air services compared to last winter include:

Long Haul Routes

Recently inaugurated services by Cathay Pacific from Hong Kong and Hainan Airlines from Beijing.

Aer Lingus’  largest ever winter schedule, with double digit growth in capacity, including new routes to Seattle and Philadelphia, plus increased frequency on several of the 15 routes to the US & Canada.

Norwegian International is offering almost a doubling of capacity compared to last winter with more flights from Stewart to Dublin and Shannon, and daily flights between Providence and Dublin.

European Routes

New Aeroflot Moscow-Dublin daily service

Aeroflot-A321-1018

New LaudaMotion daily Vienna-Dublin service

Germany-Ireland capacity boosted by increased frequency from Frankfurt to Dublin by Lufthansa, Aer Lingus and Ryanair plus increased service from Cologne on Ryanair

Air France will connect Paris to Cork daily

New Lisbon-Cork service with Aer Lingus

Ryanair is increasing frequency from Barcelona and Madrid to Dublin

New Ryanair service from Luxemburg to Dublin

 UK Routes

Ryanair – New Luton-Cork service

Aer Lingus adds frequency from Glasgow and Edinburgh to Dublin

Aer Lingus Regional increases frequency from Manchester to Cork.

 

Summer 2019 – ‘heads up’

Next summer schedules promise a further increase in transatlantic airlift

Aer Lingus will launch 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, and will see the airline’s number of weekly services across the Atlantic increase to 129, adding an estimated 250,000 seats to the Aer Lingus transatlantic network.

AerLingus-TA-2019-New

American Airlines will launch daily seasonal service from Dallas Fort Worth to Dublin, effective June 06 to Sept. 28 – Ireland’s first direct service from Texas.

Norwegian is planning to increase US service with 33 weekly departures, compared to 29 in S19 on services from Stewart to Dublin and Shannon, and from Providence to Dublin, Shannon and Cork.

Norwegian will launch its first Canada service between Hamilton, Ontario and Dublin with daily service from March 31

WestJet will launch 3 x weekly service between Calgary and Dublin from June 1 (2 x weekly for winter season from Sept 11)

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Europe

Ryanair is launching a number of new services for summer 2019

Dublin to Bordeaux (2 x weekly), Bournemouth (4 x weekly), Cagliari (2 x weekly), Frankfurt (2 x daily), Gothenburg (2 x weekly), Lourdes (2 x weekly), Luxembourg (3 x weekly), London Southend (2 x daily) and Thessaloniki (2 x weekly)
Cork to Budapest (2 x weekly), London Luton (daily), Malta (2 weekly), Naples (2 x weekly) and Poznan (2 x weekly)
Shannon to Ibiza (2 x weekly)

TAP Air Portugal will launch double daily service between Lisbon and Dublin from March 31

TAP-AirPortugal-1018

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Tourism outpaced global economic growth for the 7th successive year in 2017

Worldwide tourism grew by 4.6% in 2017, one of the strongest years of GDP growth in a decade which drove robust consumer spending worldwide. Tourism and travel continues to be one of the world’s largest economic sectors, creating jobs, driving exports, and generating prosperity. The sector accounted for 10.4% of global GDP and 313 million jobs, or 9.9% of total employment, in 2017.


Ireland is ranked 25th for tourism growth over the period 2011-2017

The rate of absolute growth of tourism in economic terms over the past 6 years places Ireland in 25th position in the world, according to a recent report from the World Travel & Tourism Council (WTTC). The ranking is based on the absolute level of growth across four main indicators: total contribution to Gross Domestic Product (GDP), visitor exports (international tourism spend), domestic spending, and capital investment. Ireland is ranked 10th in terms of growth in capital investment by the sector over the period and 19th in terms of increase in export earnings.


€900 million investment for Dublin Airport

daa has announced plans to spend €900 million by 2023 on new stands and piers at the airport to cope with growing passenger throughput and facilitate further expansion of Aer Lingus’ hub strategy at the airport. The plan is to increase the number of aircraft stands by 30% from 112 to 147, as well as enhancing security and immigration facilities and expanding US pre-clearance. The development is in addition to the planned €340m new runway.

Last month saw the opening of a new passenger transfer facility within Pier 4 to ease passengers through a one-stop flight connection process.

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Brexit weighs heavily on UK economic outlook

The overall economic outlook remains mixed as households remain under pressure from inflation that has been rising faster than their pay for much of the past decade. But they have shown little sign of slowing their spending as Brexit approaches. UK Retail sales beat forecasts as consumer spending remains buoyant despite Brexit uncertainty, as British consumers spent more on their credit cards in August. Spending by households has taken some of the sting out of a general slowing in Britain’s economy since the 2016 Brexit vote. However, the British inflation rate rose in August to 2.7%, the highest level in six months.

Businesses appear to be more nervous than consumers in the run-up to Brexit with, as yet, little clarity on its future trading ties with the EU after March 29, 2019. Overall business borrowing remains subdued as the ongoing uncertainty over the UK’s future relationship with the EU continues to stifle business investment and export growth. The British Chambers of Commerce (BCC) has lowered its UK growth forecast for 2018 from 1.3% to 1.1% and in 2019 from 1.4% to 1.3%. Its forecast for 2020 is unchanged at 1.6% growth. The downgrades are driven by a weaker outlook for trade and investment.

The labour market is expected to continue to be a source of strength for the economy, with the unemployment rate predicted to remain close to its record low. However, workers are unlikely to experience meaningful real wage growth as the gap between pay and price growth is forecast to remain negligible.

Outlook: short to medium term continued uncertainty as Brexit outcome impacts trade, consumer demand and the value of sterling.


Brussels-1018

Eurozone economy on track to maintain momentum into 2019

Economic data confirms that growth within the Eurozone was stable in quarter-on-quarter terms throughout the first half of the year, expanding a seasonally-adjusted 0.4% in both Q1 and Q2. Although the data pointed to solid economic fundamentals, these numbers are soft compared with last year’s robust outturn. Internal dynamics across the euro-zone were uneven in the second quarter. Consumer spending was dampened by higher inflation and deteriorating economic sentiment, while fixed investment recorded a marked improvement as firms took advantage of easy credit conditions. The expectation is that Q3 GDP growth will remain unchanged at close to 0.4%, with global uncertainty threatening external trade.

Germany, Europe’s largest economy with its export oriented manufacturing sector, faces a threat after nine years of growth from global business and trade uncertainty. GDP forecast have been revised downwards to close to 2% as weaker demand for exports due to US trade policy and Brexit, as well as growing xenophobia at home.

Healthy demand-side fundamentals should maintain momentum into next year, although growth across the euro-zone is expected to moderate somewhat in line with slower growth in employment. GDP growth forecast for 2019 suggest that Spain will grow by over 2%, with Germany just below 2%, with Italy, Belgium and France the laggards.

Outlook: broadly positive as consumer sentiment drives demand.


US economic numbers still looking good

The key metrics continue to look good -strong economic growth (+4.2% in Q2), job number continue on the up, evidence of wage growth starting to pick up, and while inflation shows signs of rising slightly but not a cause of concern. So the immediate outlook continues to be good, with GPD growth of upwards of 2.2% into 2019.

However, with the escalating bilateral trade war between the US and China, one can expect to see some negative impacts, initially evident in a softening of business and consumer confidence. The visible impact is expected to be twofold – a slowdown in manufacturing output as input costs rise, and an increase in final consumer product prices within 6 months.

So while the economy is doing well there are clouds on the horizon. The Trump administration has prioritised fast GDP growth – tax cuts were aimed at higher growth rates and increased consumer spending.

Despite the gathering clouds, consumers are upbeat. The Conference Board’s index of consumer confidence rose to 138.4, up from 134.7 in August—an 18 year high.

Outlook: Lofty consumer sentiment bodes well for economic growth in the third quarter, and a positive indicator for spending going into the holiday shopping season and for forward travel plans.

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