Competitiveness Threat To Tourism As Spend Falls

14 Aug 2019 | 10.18 am

Competitiveness Threat To Tourism As Spend Falls

Irish Tourism Industry Confederation report

14 Aug 2019 | 10.18 am

The value of tourism to the Irish economy was down by 4% in the first quarter of this year, according to a report from the Irish Tourism Industry Confederation.

Visitor spend for the three months of 2019 fell by 4% compared to a year earlier even though the numbers of visitors rose, says the report, with Brexit having a major impact. At the same time, costs rose.

The drop in revenue is in stark contrast with the record of the previous five years, when earnings from overseas visitors rose by an average of 9.6% per year and added 90,000 new jobs to the sector during that time.

ITIC chief executive Eoghan O’Mara Walsh (pictured) commented: “Brexit has had a major impact on Irish tourism, but this report highlights that the competitiveness of Irish tourism has diminished as costs of business have risen sharply.  As a result trading circumstances are more challenging for the estimated 20,000 Irish businesses in the tourism and hospitality sector.”

O’Mara Walsh stressed that the focus of the report was on competitiveness in the sector, and expressed concern at recent trends.  Referring to the 2018 ITIC roadmap for growth, he added: “A number of key enabling factors were identified and the  first among equals was the need for a competitive environment within which the tourism businesses could operate.  Put simply, all stakeholders in the industry agreed that a competitive sector would deliver growth, an uncompetitive sector would struggle to do so.”

Tourism: A Competitiveness Report points the finger at government, saying that “many of the competitiveness challenges” are government or state-induced, and sets out measures to improve this. 

Inevitably, these involve even more public funding for the sector, with the first recommendation being to increase state investment in tourism product development to €600m from the current €300m in the National Development Plan 2018-27. 

Number two on ITIC’s list is significant improvement in the enabling infrastructure for tourism, including public transport, followed by rapid roll-out of the National Broadband Plan and reduced costs for businesses by improving the use of technology in the public service.

Worried about the likely impact of Ireland falling behind its climate change obligations on tourism’s green credentials, the report says the sector needs “a major programme for change at national policy level, as well as at cost effective actions at sectoral level to ensure that the tourism sector is not competitively disadvantaged in competing for international tourists”. 

“A programme of actions and incentives for the tourism sector is urgently needed to support enterprise investment to increase its energy efficiency.”

The list concludes by asking that legislation, regulations, and other state initiatives be tourism-proofed to “minimise the potential negative impact on tourism competitiveness, together with a properly phased timescale for the introduction of new regulatory regimes, most especially any involving price increases”. 

Rising Staff Costs

With unemployment at its lowest since October 2005 and wages rising as a result, the report places personnel costs at the centre of its concerns for the next few years.

In addition, the sector is facing supply challenges, one being the current shortage of chefs. In 2015 an expert group reported that the hospitality sector was facing a deficit of about 5,000 chef trainees annually, a number that has now grown to more than 7,500, while less than 2,000 chefs are qualifying annually. 

To answer that challenge, ITIC wants hospitality sector apprentices to be paid their off-the-job training allowance by the state, as with other apprenticeship schemes, rather than by employers, and a vastly expanded system of work permits for foreign workers.

Among other threats to competitiveness identified in the report are increased insurance costs, local authority rates, higher water charges, increased energy costs, and inadequate and uneven access to fast broadband across the country. And not least, the report points out that the cost of credit for Irish tourism businesses is significantly higher than their counterparts in other Eurozone countries. 

“Small loan interest rates in Ireland are substantially above euro area averages, with rates on new loans below €250,000 in Ireland in January 2019 at 5.7%, versus 2.5% across the Eurozone,” the report states.

Compliance Burden

Lack of efficiency in the oversight of the sector by regulatory agencies, together with the increasing burden of compliance, is also cited, and ITIC wants both “rationalisation” and consistency measures implemented to reduce the cost burden for tourism businesses.

Apart from the requested government action, ITIC proposes a series of measures to improve measurement and monitoring of competitiveness, to alleviate labour cost pressures, to speed up reform in the insurance area, and in the areas of commercial rates, taxation, marketing and enterprise supports. 

According to O’Mara Walsh: “Tourism has the potential to generate an additional €3 billion in annual export earnings by 2025, enabling employment to increase by 40,000, as well as delivering an extra €700m annually to the Exchequer. The government must prioritise tourism as an indigenous growth industry in order to ensure that goal is achieved.

The full report is available here. 


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