CHIEF EXECUTIVE’S REVIEW

Chief Executive
John Power

According to preliminary estimates, the year 2000 saw an increase to 6.3 million in the number of overseas visitors coming to Ireland. Domestic market indications are that domestic holidays increased by almost 7% to 3.3 million. The revenue indications would suggest that the tourist industry had a turnover of about £3.9billion in 2000. Using normal criteria this would have resulted in approximately £1.8billion in taxation revenue to the Irish exchequer. There are now 45,000 hotel and guesthouse bedrooms in Ireland an increase of 4% on 1999. Employment in the sector now exceeds 60,000 people, almost 90% of whom are permanent.

The North American market, from which arrival numbers, for the first time, exceed 1million, had the strongest market growth performance with revenues increasing by 26%. The strong dollar contributed to the attractiveness of Ireland in this particular market. While the central statistics office figures for the first nine months of the year suggests that British visitors increased by 5%, the evidence from our members throughout the country was that most of this growth took place in short break category, principally to Dublin or that there was a notable reduction in the longer stay holiday market to the traditional tourist areas. While acknowledging that our strong GNP growth underwrites the increase in the corporate sector of our business, we must have concern for the recent economic indicators in the American market. The additional marketing funding allocated in the recent budget are absolutely essential in funding increased activity to ensure that our two principal overseas markets Britain and the United States re c e i v e increased promotion activities.

The Federation now has 897 members, 614 hotels and 283 guesthouses.

STRATEGIC REVIEW OF THE HOTEL AND GUESTHOUSE SECTOR

A major amount of time and resources, in the year under review, were dedicated to a major strategic review of the hotel and guesthouse industry. The President’s overview covers the background to the commissioning of this review. The findings of this review will form a major part of the conference in Kilkenny and a report on its findings will, be circulated to all members. The need for such a review was driven by the rapid growth and changing structure of the hotel and guesthouse product. The demand for such products has been driven by growth in international tourism and travel growth in the Irish economy and expanding domestic market, major investment growth, and quality improvements in our product. Much of this g rowth was achieved in an era of low energy prices, reasonably controlled wage increases and low inflation. However the environment is changing, costs are rising and we are operating in a new era of full employment. There are changes to the markets in which we operate and technology is having a major impact. The regulatory environment in which we operated to-date may no longer be appropriate. These are some of the reasons behind our embarking on this Strategic Review. We appreciate the support of Bord Fáilte, ICC Bank and CERT, which enabled us to carry out this review. A team of international consultants led by CHL Consulting Group with special inputs from Accenture (formerly Andersen Consulting) GHH Consulting Germany and economic input from Dr. Peter Bacon carried out this wide-ranging study. It is hoped that recommendations and the action plan arising from the study will guide our industry in the next decade.

QUALITY EMPLOYER PROGRAMME (QEP)

We committed substantial resources to the Quality Employer Programme (QEP) during 2000. The work of Anne O’Carroll our Manager – Employment Services and her team, has resulted in our having 360 properties now fully accredited. This means that almost 60% of all employees in the hotel and guesthouse sector are now employed in QEP accredited business. Existing QEP accredited properties were visited to ensure that the a c c reditation standards were maintained. Work has now commenced on the up dating of the QEP Manual and in making it available in a CD ROM format. During the year a code of practice for staff accommodation was developed and this will shortly become part of the requirements for QEP. The National Minimum Wage Act of 2000 which came into effect in April 2000 has within it, provisions for staff benefiting from bona fide training. Within the Quality Employer Programme we developed a booklet which outlines the criteria and guidelines to ensure that employers have in place proper training s t ru c t u res and pro c e d u res if they are availing of these facilities.

The placement division organised placements for 240 overseas personnel. The promotion of work placement in QEP accredited hotels and guesthouses was carried out in Newfoundland, Helsinki, Granada, Paris, Cardiff, Prague, Canada and South Africa. During the year, we also operated a system of verifying applications for work permits, which enabled them to be processed quickly by the Department of Enterprise, Trade and Employment. It is hoped that this facility will also be available in 2001 and we are presently in discussions with the Department to expedite this and other work permit related matters.

The coming into force of the National Minimum Wage Act had a minimal impact on some CERT trainee wage rates and these were adjusted to ensure that they complied with the legal requirements. The conditions of participation in the joint IHF, CERT, IHCI Training Management Development Programme and the provision of part of the academic content of its programme by the Galway/Mayo Institute of Technology was put in place during the year.

MARKETING ACTIVITIES

The 2001 “Be Our Guest Guide” was published, as usual, just in advance of the World Travel Market. Again it has a print run of 400,000 copies and has over 1,055 entries, 52 of which are from Northern Ireland. The 2001 Guide is also on the Internet and on www.irelandhotels.com

As indicated at last years Annual General Meeting progress has been made in planning the introduction of an on-line reservation system as a support to Be Our Guest website. This is a major p roject, a steering group was put in place under the C h a i rmanship of Eric Rotschild to give guidance on the development of a systems specification and the development of the system. The alternatives on the delivery of this system and its on-going operation are presently being appraised. During last year the Federation attended, promoted and distributed “Be Our Guest Guides” at consumer fairs in Dublin, Cork, Belfast, London, Manchester, Birmingham, Glasgow, Oslo, Stuttgart, Munich, Amsterdam, Helsinki, Brussels and Gothenburg. The operations of the Overseas Tourism Marketing Initiative (OTMI) came to an end following the main spring tourist promotions in Britain, United States, Germany and France.

The 2001 overseas marketing campaign is the first being delivered under the National Development Plan 2000- 2006. To facilitate an efficient and effective employment of all funds to i n t e rnational tourism marketing through a stru c t u re d p a rtnership created between Bord Fáilte and the tourist industry, Tourism Marketing Partnership (TMP) was established consisting of four Bord Fáilte nominees and four tourist industry nominees with the Minister of Tourism Sport and Recreation appointing the chairman. The chairman of TMP is Mr. Redmond O’ Donoghue who is also the Chairman of Bord Fáilte and I am one of the four industry nominees. Our former president Gerry O’Connor represents industry on the International Destination Marketing sub-group, which influences and guides marketing activities in our key overseas markets.

Tourism Ireland Limited was incorporated in December 2000. This company was set-up in accordance with the policy directives of the North-South Ministerial Council with the objective of planning and delivering international tourism marketing programmes including programmes in partnership with industry north and south, the publishing and dissemination in overseas markets of information of a comprehensive nature on the island of Ireland as a tourist destination and to subsume the activities previously carried out by OTMI. It will also carry out, overseas, marketing and promotion activities for Bord Fáilte and the Northern Ireland Tourist Board. It was a privilege for me to have been appointed by the North-South Ministerial Council to the board of Tourism Ireland. I see this as recognition of the efforts of the Federation as a representative body of the sector with the largest capital investment and employing the largest number of people in tourism in Ireland. The Chairman of Tourism Ireland Limited is Mr. Andrew Coppel, a Belfast man who is currently Group Chief Executive of Queens Moate Houses, plc. which has 105 hotels in U.K, Germany and the Netherlands. The Vice-chairperson is Ms. Ann Riordan, Marketing Manager, M i c rosoft Ireland. The other board members are Charles Sinnott, a Federation member and owner of Sinnott Hotels, Howard Hastings, Managing Director of Hastings Hotel Group and President of the Northern Ireland Hotels Federation, Felix Mooney, Chief Executive of the Mooney Hotel Group and former President of the Hospitality Association Northern Ireland, Tony K e l l y, Marketing Director of Irish Ferries Limited, Denis Galway, Director and General Manager of Larne Harbour Limited and Director of P&O Ferries (Irish Sea). The Chairman and Chief Executive of Bord Fáilte and Northern Ireland Tourist Board, Redmond O’Donoghue, Roy Bailie, John Dully, and David McAuley are also directors.

ENVIRONMENT

The Federation supported the Institute of Technology Tralee, in a project funded by Shannon Development under the operational programme for Tourism 1994-1999 to develop and publish an environmental guide for Hotels. The Federation condensed this guide into a practical checklist, which was circulated to members during the year. The Federation was represented by Lee Kidney, as a member of the steering group which guided the launch by ITIC of tourism aware n e s s programme “People and Place”. This was another programme funded under the Operational Programme for Tourism, by the OTMI, Bord Fáilte, CERT and the Northern Ireland Tourist Board. We are delighted that the future of the “People in Place” programme has been secured by the agreement of Bord Fáilte take over the programme as an on-going project. Bord Fáilte will be appointing a project officer to lead the programme and work with the industry in further developing and implementing the various projects under the programme.

The “Be Our Guest” bathroom notices to encourage more efficient use of towels have been reprinted and made available to members. We are at present at the preliminary stage of investigating the possibilities, opened up by the deregulation of electricity generation, and exploring these possibilities with our members, who operate combined heat and power plants, being in a position to sell excess energy back into the national grid. Waste Management is becoming a major issue, not just in our industry.

It has serious implications for hotels and guesthouses. The focus on recycling and the reduction of the amount of waste having to be deposited in land fill sites is an issue on which we have had discussions with the appropriate national bodies. We accept that, if this is not to become a national crisis, a waste management infrastructure needs to be developed. I see this as an issue in which the Federation will become heavily involved in the coming year.

UNFAIR COMPETITION

Whenever possible we continue to promote the need for statutory licensing system for all providers of tourist accommodation. The environmental blight which the uncontrolled proliferation of Bed and Breakfast signs are on our countryside is a disgrace. We again wrote to the Minister for the Environment seeking to revoke the provision of the 1994 Planning Regulations, which exempt private residences, which operate up to 4 bedrooms on a commercial B&B basis, from the obligation to obtain planning permission for change of use. We were disappointed that the Valuation Bill, as published, does not bring within the rates net, all commercial providers of tourist accommodation.

During the year we met with the Minster of State at the Department of Finance and reiterated the inequity of the imposition of local authority rates on such a narrow rate-paying base when other competing industries do not have to incur similar costs.

LIQUOR LICENSING

We had many meetings, with the Minister for Justice, Equality and Law Reform and his officials, leading up to the coming into force, last July, of the Intoxicating Liquor Act 2000. A detailed memorandum was immediately circulated to our members outlining the changes brought about by this Act. These changes included the elimination of the distinction between Summer time and Winter time serving hours the allowing of premises to be open on Mondays, Tuesdays and Wednesdays from 10:30am to 11:30pm and on Thursdays, Fridays and S a t u rdays from 10:30am to 12:30am. Other than the elimination of the Holy hours there was no change to the permitted hours on Sundays. There is a 30-minute drinking up time at the end of the times mentioned. We had lobbied for a 2-hour differential to be maintained for dances, discos and nightclubs in hotel premises. The Act provided that Special Exemption Orders should be granted up to 2:30am, or 1:00am on a Monday that is not a public holiday, unless the Court, for stated reasons, consider it expedient to grant an order for a shorter period. The obligation to provide a meal, in order to obtain a special exemption, no longer applies however there 9 continues to be a requirement to have a dance licence. More stringent regulations to combat under-age drinking were introduced, including the removal of “reasonable grounds to believe” defence in any proceedings against the licensee and the Court has been allowed to close licensed premises for a specified period where there have been breaches of the under age drinking requirements. This closure period can be up to seven days for a first offence and up to 30 days for second or subsequent offences.

I was appointed to represent the Federation on the Commission on Liquor Licensing, which the Minister for Justice, Equality and Law Reform announced last November. The remit of the Commission is to review the Liquor Licensing system in the light of all relevant factors, including systems for licensing of alcohol in other countries and to make recommendations for a liquor licensing system geared to meeting the needs of consumers, in a competitive market environment, while taking due account of the social, health and economic interests of a modern society. In particular the Commission will review the scope for the system of additional licences and the demand in areas, which are under-pubbed due to increasing population, and tourist areas. It will also examine other aspects of licensing such as licence of residential accommodation interpretative centres, theatres and places of public entertainment. It is also expected to make recommendations on the licensing requirements for off-licences. The Commission has two years in which to prepare its report with a more demanding deadline of three months to make recommendations on off-licences.

COPYRIGHT

The Copyright Related Rights Act 2000 came into effect in January 2001. The Federation put enormous eff o rt and committed substantial funds to lobbying at the various stages of the passage of the Bill through the houses of the Oireachtas. It is an Act of 205 pages, possibly the largest Act through the Oireachtas, with exception of Finance and Taxation Acts. Its contents are of highly technical nature but the impact of some of the proposals in the original Bill would have had serious long-term implications on hotels and guesthouses. As originally introduced, it would have made radios and televisions in hotel bedrooms subject to copyright fees both to the composers and producers of recordings. It would have given the collecting body on behalf of record producers, presently, Phonographic Performance Ireland Limited (PPI), an absolute copyright and enable them to restrict businesses from using their repertoire unless they paid in advance the fee, which they demanded. We successfully lobbied for the exclusion of televisions and radios in hotel and guesthouse bedrooms from being liable to copyright fees and we influenced inclusion in the Act, the notion of licence by right under which a property can play in public, sound recordings without having to obtain in advance the permission of the record publisher or the collecting agency acting on the publishers behalf. There is a requirement to make fair payment to the record producer or their collecting body, this payment to be paid not later than quarterly in arrears of where the user is not happy with the amount being demanded by the collecting body he or she can refer to issues of the Controller of Patents, Designs and Trademarks for adjudication. Pending the decision of the Controller the user should pay what he/she deems to be fair remuneration. There are procedures with which to be complied, to ensure that, the user is protected by these provisions of the Act, and the Federation will shortly circulate guidelines on the actions to be taken.

The long running issue of determining the level of equitable remuneration payable to the PPI has at last come before the Arbitrator acting on behalf of the Controller of Patents, Designs and Trademarks. This issue, in many cases, goes back as far as 1988 when the PPI began to seek exorbitant fees for the use of their repertoire and tried to enforce collection of these fees by the threat of injunction. This threat continued until the Irish Supreme Court, in 1995, determined that the PPI did not have an exclusive right, but were merely entitled to equitable remuneration for the use of sound recordings and that the equitable remuneration could be paid in arrears. The arbitrator selected two of the cases, which had been referred to the Controller, and had submissions from the PPI, the properties involved and the legal advisors for the Irish Hotels Federation and Irish Night Club Industry Association. Oral submissions extended over seven days and the summing up has yet to take place. This is an expensive process involving an excellent team of legal and financial experts. In order that the costs of this p rocess do not entirely come from the resources of the Federation’s general membership, a special fund has been put in place to which members involved in the discotheque and nightclub business are expected to make a contribution.

EMPLOYMENT ISSUES

With payroll costs and the current level of wage inflation far exceeding that anticipated in the Programme for Prosperity and F a i rness, it is appropriate that a large amount of eff o rt throughout the year is dedicated to employment issues. I have already refer red, in this review, to the activities of the Quality Employer Programme and Placement Division.

The programmed for Prosperity and Fairness agreed at the beginning of the year, came in effect as the pre v i o u s agreement, Partnership 2000, expired. This is an agreement spanning two years and nine months, with basic pay increases of 5.5% for each for the first two years and a 4% increase for the following nine months. There is also provision for minimum level of increases. However, this agreement ran into serious difficulties in the latter part of the year and an adjustment to the pay terms was agreed which results in the right to negotiate for a further 2% of basic pay with effect from the 1 April 2001 and a once off lump sum payment equal to 1% of basic pay to be implemented on the 1 April 2002. Negotiations in relation to these elements are to take full account of the implications of competitiveness of employment and the need for flexibility and change and there is an agreement that pursuit of the claims should not be through any industrial action with disputes being referred to the Labour Court and the parties agreeing to comply with the Courts findings.

The National Minimum Wage Act 2000 became effective on the 1 April 2000. Enshrined in law was the national minimum wage rage of £4.40 per hour with reductions for job entrants, employees under 18 and those involved in structured training. The Federation lobbied effectively for the inclusion in the calculation of the National Minimum Wage such items as service charge, guaranteed gratuities and a value of board and lodgings. A detailed memo was issued to our members giving guidance on the application of the Act and a booklet outlining the measures necessary to ensure that employers benefit from the provision allowing for reduced wages where structured training is in place.

The Hotel’s Joint Labour Committee met in May for the purpose of amending the JLC to take account of the application of the National Minimum Wage Act. However a dispute arose over the interpretation of the Act as far as it covered the guaranteed gratuities element of wages. It was necessary for the Federation to obtain legal advice supporting our contention that this was a reckonable part of wages. The Federation appealed to the Labour Court not to implement the JLC decision. This resulted in the JLC, following receiving legal advice from the Attorney General’s office, deciding to reconvene, whereupon the Federations view prevailed.

A new JLC incorporating the provisions of the Minimum Wage Act and the first phase of PPF came into effect on 19 December 2000.

As the Protection of Young Persons Act prohibits the employment of 16 and 17 year olds after 10.00pm we engaged in discussions in conjunction with the Vintner Associations and the Restaurant Association of Ireland with ITCU and the Parents Association under the auspices of the Department of Enterprise, Trade and Employment. A code of practice was agreed which would enable the employment of 16 or 17 year olds until 11.00pm provided the employer complies with the requirements of the code of practice. It is anticipated that this code will be signed into law in the early part of 2001.

The Protection of Employees (part-time work) Bill 2000 was circulated at the end of December. The objective of this Bill is to ensure that part-time employees are not treated any less favourably than can be justified on objective ground, in respect of their conditions of employment than comparable full-time employees. We are closely monitoring this legalisation.

BUDGET 2000

In our pre-budget submission we called for measures to increase the attraction of the work place for workers, both home based and overseas. We again called for a special £2,000 per year as a homemakers allowance, the granting of personal tax allowance on childcare costs and the provision of a detailed all encompassing national immigration policy including the granting of work visas and business permissions that are simple, speedy and transparent. The submission included guaranteed funding for the current and future North-South tourism initiatives and in particular sought additional funding for the next three years to address concerns about the British market. With the local authority rates bill being borne by such a narrow base of businesses, we asked the G o v e rnment to cap the current level of local authority commercial rates, to extend the charge of rates to government buildings which would result in substantial reductions in the rate paying liability of other businesses and the inclusion of all commercial providers of accommodation in the rate paying net.

We continued in our submission the campaign to reduce the impact of Capital Acquisition Tax and Capital Gains Tax on re t i re m e n t on the many family businesses, which make up our membership.

Following the budget speech we welcomed the allocation of an additional £12.5million for tourism marketing purposes and expressed particular welcome for the additional £5million to address the emerging challenges in the British market, a further widening of regional tourism spread and the support of marketing of smaller properties. The increase to £200,000 of the threshold qualifying for the 12.5% Corporation Tax rate is p a rticularly valuable to many small businesses run as companies. In line with our consistent demand for reducing the Capital Acquisition Tax impact, we welcomed the abolition of Probate Tax. In a recently submitted post budget submission, we focused on claiming that the claw back of business relief for Capital Acquisition Tax should only be applicable where the property or business has been disposed of for cash. The size of the Capital Gains Tax retirement relief threshold should have some relationship to the present value of businesses and roll-over relief should be available when part of the proceeds, up to £1.5million, are invested in a pension fund. We also called for the reinstatement of the ceiling on employers PRSI contributions.

HOTREC and IH&RA

Within HOTREC we actively participated in many issues including the lobbying to have the reduced of VAT on hotels and restaurants included in any uniform system of EU VAT and to have the full allowance, to VAT registered businesses, of hotels and restaurants expenses incurred for business reasons as VAT inputs. In addition to attending general assemblies in Paris and Malmo, I also attended and contributed to a NET (Network of European Private Entrepreneurs in Tourism Sectors) seminar at the European Parliament in Brussels which was attended by a large number of MEPs and Commission officials and a symposium on copyright convened by the European Commission Internal Market DG.

I submitted a paper on the copyright development in Ireland and the on-going arbitration process with PPI to the National Association of Chief Executives meeting of the IH&RA in London in November.

Further details of the HOTREC involvement are included in the Reports from Committees and Other Bodies section of the Annual Report.

NORTHERN IRELAND

We continue our close relationship with the Northern Ireland Hotels Federation (“NIHF”) and give them whatever support and assistance we can in the pursuit of our common aims. We are particularly pleased that the current President of NIHF, Mr. Howard Hastings, and a past President of the Hospitality Association Mr. Felix Mooney also serve on the Board of Tourism Ireland Limited. A joint Council Meeting with NIHF took place last April and a meeting is being planned to coincide with the NIHF conference later in 2001.

BRANCH ACTIVITIES

Throughout the year I, and the staff of Northbrook Road, attended branch meetings in each branch of the Federation. These meetings up-dated the members on current issues being addressed and gave the Executive the opportunity to listen, directly, to the views of members. Such visits will continue in the year ahead. In the year under review, in some cases, my visits to some branches coincided with workshops enabling members to have input into the Strategic Review of the industry. Following the publication of the report at the annual conference, branch briefings will take place to ensure that our members are fully aware of the findings of this review and to obtain the reaction and comments on the recommendations.

ASSOCIATE MEMBERSHIP

We continue to promote Associate Members and we presently have 77 such members. These businesses see their association with the Federation as being of benefit to them and I urge our members to support them where appropriate.

APPRECIATIONS

On a personal note I wish to thank our President for the guidance, assistance and enormous support, which she gave to me and the staff of Northbrook Road. Her encouragement and words of appreciation were greatly appreciated. The guidance and support, which the staff and I receive from the management committee, council members and general membership of the Federation, was most helpful and is always welcome. The willingness of many members to actively lobby when asked to do so by the Executive and Council is a major reason as to why the views of the Federation are listened to with so much interest by legislators. We will again be calling on our member’s support and activity in the foreseeable future as the next General Election becomes eminent. As usual, all the staff of Northbrook displayed a dedicated contribution of patience and support and for this I am truly grateful. During the year Theresa Budds retired after 27 years of dedicated and loyal service to the Federation and its members. I wish her a long happy retirement.

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