In its Pre-Budget Submission to the Minister for Finance, Brian Cowen TD, the Irish Hotels Federation (IHF) has called for the allowance of VAT on business expenses incurred on hotel and restaurant costs, as inputs for VAT registered businesses. The IHF stresses that this anomaly in the Irish VAT regime places Irish hotels and restaurants at a serious disadvantage, even to its nearest neighbour Northern Ireland, when competing for the high yielding, growing travel sector. The non availability of this VAT allowance in effect, means Ireland cannot expect to attract a reasonable proportion of the €40 billion global conference, corporate meeting and incentive travel business. The current VAT regime is also a serious barrier to achieving the targets set by the Government appointed Tourism Policy Review Group to double overseas tourism revenue by 2012.

At 13.5%, Ireland has the second highest VAT rate in the eurozone for hotel accommodation charges (2nd only to Germany), and compounding the issue is that this high VAT rate is non recoverable for legitimate business expenditure.

According to John Power, Chief Executive, IHF, “Ireland has one of the worst VAT regimes for the hotel sector in Europe on two issues. The VAT rate applied to accommodation and meals, as well as the fact that the Irish tax system prohibits the refunding of VAT on corporate hotel and restaurant expenditure. Even an Irish VAT registered company can reclaim the VAT on accommodation and restaurant charges in most European countries but cannot do so in Ireland.” In summary, the IHF proposes that Budget 2005 should contain four specific measures including:

• Reducing the hotel VAT rate from 13.5% to 10%.

• Allowing VAT on Hotel and Restaurant as an input for business VAT purposes

• Pending the completion of the review on the funding of Local Authorities (to which the IHF has made a submission to the Department of the Environment, Heritage and Local Government calling for a more equitable funding structure for local authorities) limiting to not more than 50% of the previous year’s inflation rate, any increases in local authority commercial rates or charges

• Maintaining the present level of funding of tourism marketing and allocation of an additional €15m to specified domestic and international marketing activities.

Continued on Pg 2

ABOLISH LOCAL AUTHORITY RATES CALLS IHF

In a detailed submission The Funding of Local Government in Ireland made to the Department of the Environment, Heritage and Local Government, the IHF has urged the Government to fund local authorities in a more equitable manner stating that the commercial sector contributes 40% of the €3.4 billion required by local authorities annually. The Federation estimates an additional €500m would be required in 2004. IHF President, Richard Bourke, states that local authorities cannot keep calling on the commercial sector to foot the bill at a time when hotels and other such service businesses are seeking avenues to remain competitive.

The IHF proposes that the existing rates system should be replaced by a system of local taxation that in the case of commercial enterprises would be based on profitability and not property valuations. In the case of individuals, a portion of current income tax should be allocated as a local income tax to support local amenities. Continued on Pg 3

Pictured at the awards ceremony is Anthony E. Collins, Chairman, AA Motoring Policy Committee with main award winners Janet and Padraig Treacy of the Killarney Park Hotel, Killarney, Co Kerry. See Pg 5

Adrian Cummins has been appointed by the Irish Hotel and Catering Institute as its new Chief Executive, taking over from Karl Reinhardt.

Mr. Cummins has over 12 years experience in the tourism and marketing sector, having previously worked as Sales and Marketing Manager for the Shannon Oaks Hotel & Country Club and as Business and Marketing Consultant for A Touch of Class Promotions. He has also acted as special media advisor to Minister of State, Noel Treacy.

A graduate of NUIG, GMIT, and the Institute of Languages and Business, Galway, Mr. Cummins has represented Ireland in the US through the Tourism Policy Makers Programme under the Good Friday Agreement.

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Mr. Power commended the Government on some excellent fiscal measures in recent years and stated that while the Government had no control on interest rates, exchange rates, international growth and oil prices, all of which impact on competitiveness, it should continuously seek to improve the competitive environment in the fiscal matters over which it has control. “The low corporation tax and income tax levels are very welcome aspects of the Government’s fiscal policy. However, other aspects of fiscal policy are very much against the interests of the tourism industry and the hotel sector and must be addressed if we are to take best advantage of growth opportunities in worldwide tourism. It is surprising that, although 52% of every euro spent by overseas visitors ends up going to the exchequer, fiscal policies are still in place that inhibit the industry’s potential future development” he said.

The IHF’s pre-budget submission is available on its website – www.ihf.ie

The Irish Hotels Federation (IHF) welcomed the retention of John O’Donoghue as Minister for Arts, Sport and Tourism stating that his work in this Department to date in placing tourism high on the Government’s agenda augers well for the industry for the remainder of his term. The IHF also welcomed Mr. Martin Cullen to the position of Minister for Transport, adding that it hoped he would apply the same energy and urgency as his predecessor to resolving some of Ireland’s internal and external transport issues and upgrading the road infrastructure.

The Federation’s President, Richard Bourke, stated that a number of areas now require priority attention from both Government departments in order to assist growth in the tourism industry and he hoped that this would now be a combined priority of both Ministers. They include the speedy development of a national conference centre, and the renegotiation of the US/Ireland bi-lateral air agreement, which would remove the current constraints on US route access to and from Ireland.

The Irish Hotels Federation has welcomed the announcement by the Minister for Arts, Sport and Tourism, John O’Donoghue, TD, that Kerry is to be unified at regional level for tourism marketing and development purposes. With effect from early 2005, all of County Kerry will come under the remit of Cork-Kerry Tourism, the South-West Regional Tourism Authority.

The Chairman of the Federation’s Kerry Branch, Michael Rosney, is confident that the unification of the county for regional marketing purposes will have positive ramifications for Kerry’s tourism as a whole. He commented, “This is a very important and strategic decision taken by the Minister. Cork-Kerry Tourism taking on responsibility for the whole of Kerry is sure to result in more effective and streamlined marketing of the region and the seamless packaging of Kerry as a tourism destination of choice”.

At present, North Kerry is part of the Mid-West region which is administered by Shannon Development, while South Kerry is part of Cork-Kerry Tourism.

Minister O’Donoghue said of the change that he is pleased that there is broad agreement at industry and political level that Kerry should be re-united for tourism marketing and development purposes at regional level. “The main emphasis now has to be marketing and promotion in what are increasingly competitive times for the tourism sector. Therefore, I think it makes sense that Kerry be promoted in its totality under the regional tourism authority that carries Kerry in its name, – Cork-Kerry Tourism” he said.

The Minister for Justice has extended the curfew on children in the bar areas of licensed premises to 10 p.m. during the summer months.

Minister McDowell accepted an amendment to the liquor licensing legislation from the Fine Gael TD and Justice spokesman Mr. Jim O’Keeffe. The time limit on children in bars will be extended to 10 p.m. from May to September.

Mr. McDowell agreed that the 9pm time limit was ‘a bit too tough’, particularly in tourist areas. However, he said the issue would be revisited when more comprehensive legislation is brought forward to deal with the licensing laws.

Fine Gael’s tourism spokesman Mr. Jimmy Deenihan welcomed the amendment. “Accepting this amendment is a victory for common sense and will enable families on holidays during the summer months to enjoy a meal or outing together until a reasonable hour. The 9 p.m. deadline adversely affected family holidays this year and seriously damaged summer business,” he said.

While welcoming the change, the Irish Hotels Federation Chief Executive, Mr. John Power, said hoteliers would push for more concessions when the IHF makes a submission to the Department of Justice.

“It is a move in the right direction, but it doesn’t go far enough. The change affects the summer months only, but the legislation has an impact all year. It is a year-round issue,” Mr. Power said.

A new Intergroup for tourism which would be recognised by the European Parliament was put forward at a recent HOTREC dinner for MEPs in Brussels to celebrate the start of the sixth term of the European Parliament.

The dinner provided an informal occasion for HOTREC members including the IHF and RAI to establish first contacts with policymakers during the evening, which will be a valuable resource for HOTREC to draw upon in its work of expressing the hospitality industry’s concerns at European level. The European hospitality sector has over 7 million employees and 1.5 million businesses, 95% of which have less than 10 staff.

MEPs Margie Sudre and Toine Manders together with Klaus-Heiner Lehne and Manuel Medina Ortega announced their intention of establishing a new parliamentary intergroup for tourism. If sufficient support for this initiative can be gathered, the group could become officially recognised by the European Parliament as of November. In Ms. Sudre’s view, the setting up of an intergroup would be a logical response to the strengthening of the EU’s competence in tourism matters, which will result from the Constitution. She emphasised that an intergroup for tourism would reflect the social and cultural importance of the tourism sector, and invited the MEPs present at the dinner to join the initiative. Mr. Cabrita Neto, President, HOTREC welcomed the initiative on behalf of HOTREC and expressed his hope that it would receive broad support in the European Parliament.

Speaking at the dinner, Mr. Cabrita Neto told guests that its aim was to make its voice heard in all matters affecting the hospitality sector at European level. “HOTREC seeks to achieve regulation which is simple to understand and apply by small enterprises. EU measures should be taken only where proven to be necessary and on the basis of careful cost/benefit analysis. Within its field of competence, the hospitality sector is happy to provide the European institutions with information and expertise which could form the basis for more business-friendly regulation.”

The guests represented 17 different countries and the main political groups in the European Parliament. The parliamentary committees in which they sit cover issues of great importance to the hospitality sector, including taxation, food safety, social affairs, and tourism. High-ranking Commission officials from the Taxation and Enterprise Directorate Generals were also present.

HOTREC is the association representing hotels, restaurants, and cafés throughout Europe.

Three Irish MEPs attended the event – Sean O’Neachtain, Simon Coveney and Eoin Ryan. These MEPs, through their membership of the Transport & Tourism, Foreign Affairs and Economic & Monetary Affairs committees of the European Parliament respectively will have substantial influence on EU activities likely to affect tourism. John Power, Chief Executive, IHF, and Henry O’Neill, Chief Executive, RAI, also attended the event and undertook to keep the Irish MEPs briefed on HOTREC and Irish issues and how they are then affected by EU actions and proposals.

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“Rates are a fixed charge, incurred annually, that are based on notional property values and bear no relationship to the size or scale of the business or its ability to pay,” says Mr. Bourke. “The current valuation system does not recognise the wide variations in revenue or profit by different types of business and so the burden of rates is disproportional on businesses such as hotels and guesthouses where, in many cases, city or town centre locations are required, but where revenues per square metre are inferior to other businesses.”

The IHF suggests replacing the current system which is based on rates, charges and levies with a combination of:

• A local income tax based on profitability as opposed to property valuations to pay for the provision of community based services such as parks, libraries, street cleaning, local contribution to road maintenance;
• User charges for services for both businesses and households where the levels of use can be determined such as water provision, waste collection, planning fees;
• Central government funding for social services specifically social housing, assistance to elderly and disabled people to adapt their houses.

Mr. Bourke maintains that a corporation tax rate of about 2.25% on profits would provide similar funding to the current rates system, and the replacement of the current personal tax rates with “national” rates of 18% and 38% (standard and higher rates respectively), coupled with a 2% and 4% standard and higher rate of local income tax would fund local government adequately. The IHF also proposes that all users of services, including water, would pay a charge related to the extent to which that service is used.

It also suggests that a new funding system could be complemented by improved efficiencies within local authorities. Specific proposals to provide better value-for-money in local authorities include:

• Amalgamating small local government units such as towns and boroughs with Counties to generate improved economies of scale;
• The establishment of financial shared service centres for financial accounting and reporting or outsourcing housing loan administration to generate operational efficiencies;
• Removal of the financial distortions that arise from the existing treatment of local authorities in respect of VAT.

The full submission is available on the IHF website – www.ihf.ie

Fáilte Ireland’s Responsible Serving of Alcohol (RSA) autumn schedule of workshops began at the end of September. The workshops provide training for the bar trade to help owners, managers and staff deal with difficult customers and other problems associated with irresponsible alcohol consumption. The workshops have now been updated to include a new module covering the recent Intoxicating Liquor Act 2003.

The RSA programme is designed to be highly practical and relevant to the day-to-day concerns of staff and management in the bar trade. Fáilte Ireland’s Professional Development Manager, Martin Shanahan, said: “The programme aims to effect attitudinal change amongst participants towards the service of alcohol as well as providing factual information and advice on how to ensure responsible service.”

2004 has proven to be a difficult year for tourism in Ireland. Despite the increases recorded to date by the Central Statistics Office (CSO) in both overseas and domestic tourism numbers and expenditure, it is apparent that many sectors of the industry and many regions throughout the country are not experiencing the benefits of these increases. Hotels are one sector of the industry that appear to be doing well this year but even hotel gains have been achieved at a price with a majority of hoteliers reporting no increase in room yield in 2004.

There are a number of reasons why certain sectors of the tourism industry are struggling and these include changes in the mix of tourism business, a continuing drift from the western seaboard to the more accessible regions in the east of the country, a migration from rural to urban locations, an increasing trend towards shorter stays, and the decline in visitors arriving in Ireland with their own car, particularly from Britain. Many of these trends emerged in the nineties but their impacts have become more noticeable in the more difficult trading environment that all tourism enterprises have experienced since 2001.

Overall Performance Year to Date

Latest figures available from the CSO indicate that overseas visitors to Ireland are up 4% on last year for the first seven months of the year, in line with the overall target set for the year. North America is the strongest performing market, up 10% on last year due to a recovery following the negative travel effects of the Iraq war in the early months of 2003. Mainland European visitor numbers are up 8% for the seven months, however, visitors from Britain show no change on last year. The performance from Britain should be viewed in the context of a 3% drop in the number of UK resident visits to Western Europe in total during the same period.

Despite these increases in total overseas visitors, the latest CSO estimates indicate that holiday/leisure visits from overseas are not performing as well with only North America and other long haul areas registering increases, while Mainland European holiday numbers show no change on last year with declines from major markets such as France and Germany, and holiday/leisure visitors from Britain down. This situation has significant impacts on many tourism enterprises throughout the country. The growth in North American holiday/leisure business will invariably benefit certain sectors such as hotels, coach operators and car rental companies more than others.

The CSO also reports an increase of almost 9% in domestic holidays for the first six months of the year.

Hotel Performance

Preliminary results from the Fáilte Ireland Hotel Survey for the period January to August this year show no change in overall room occupancy (60%) when compared to the same period in each of the last two years, however, room occupancy remains 6 percentage points below the level achieved in 2000. Hotel bed occupancy at 45% shows no change over the past five years and remains on a par with the 2000 level.

Amongst the regions there is very little change in room occupancy year on year with Ireland West enjoying increased room occupancy for the second year running and the Midlands/East and North West showing a small decline. Overall bednights sales in hotels are up 3% on last year for January to August and up 9% on the same period in 2000. The increase in bednight sales over 2000 is due entirely to growth from the domestic market as overseas bednight sales are down 9% on 2000 levels.

Fáilte Ireland’s Tourism Barometer

The most recent Tourism Barometer conducted by Fáilte Ireland in September and based on responses from almost 900 tourism establishments, also indicates that the hotel sector has performed better than other accommodation sectors but would suggest that the gains have been achieved at a cost, with half of the hoteliers who responded to the survey reporting no increase in room yield when compared to last year. Only one in four cited increased room yields.

A majority of both Guesthouses and B&Bs reported overall business down on last year and whereas a majority of respondents in other accommodation categories report business either on a par with last year or up, all would report overall business to be down on balance. A similar picture emerges in respect of activities such as fishing, golf and cabin cruising where a majority of enterprises report business down, and also with regard to equestrian centres and visitor attractions where business is reported to be down on balance. The only sectors citing increased business are coach operators and car hire companies thanks to the strong recovery in the US market in the early months of the year.

Overall, the most salient issues that are affecting accommodation providers in 2004 according to the survey are high running costs, the high cost of insurance and labour, increasing competition in Ireland, the perception of high prices in Ireland, and difficulties experienced in recruiting and retaining suitably trained staff.

Article provided by Brian Maher, Statistician, Fáilte Ireland

The IHF in conjunction with Hibernia College held a successful one day training course on Revenue Management earlier this month in the Berkeley Court Hotel. The course was attended by Owners, Senior Managers, Sales Managers and Reservations/Front Office Managers from throughout the country and was tutored by Kate Varini, a Professor at the University of Lausanne.

Pictured at the Revenue Management Course in the Berkley Court (l-r) Stephen Hanley, General Manager, Clarion IFSC; Richard Bourke, President IHF; Professor Kate Varini and Michael Loftus, Sales and Marketing Manager, Red Bank Restaurant and Guesthouse, Skerries Co. Dublin.

The topic of Yield/Revenue Management has become more apparent recently as competition increases and members continue to chase the same business. This often leads to a price war and dropping rates to attract business does not make long term good business sense. Ms. Varini’s presentation gave practical tools which could be implemented in each property and therefore the course was very relevant and action driven as opposed to being purely academic.

Pictured (l-r) Grainne O'Malley, Sales and Marketing Manager Osprey Hotel, Co. Kildare; Mary O'Connor, Proprietor, Derrynane Hotel, Co. Kerry; Richard Bourke, President, IHF and Professor Kate Varini.

Feedback from the course was excellent and more similar courses are planned. The feedback was so good that many attendees have agreed to sign up to the 12 week On Line Masters module which Kate Varini presents in this subject. The second in the series will be held on Tuesday 23rd November and will be in the area of Operations Management and Productivity. As costs spiral upwards and these increases cannot be passed on to customers in a highly competitive market, the course will look at what can be done to review and improve productivity in the property. This course will be presented by Dolf Morgendorf of the University of Leeds.

Members will be notified shortly of this event. To reserve a place contact Anne O’Carroll at 01 – 4068265.