Monday, 7th March 2005

GOVERNMENT MUST ASSIST REIGN-IN OF MASSIVE COST INCREASES
Tourism Chief Tells IHF Annual Conference

The single biggest threat to running a tourism business in Ireland is soaring overheads. Costs are rising far more rapidly than in other competing destinations and, a lack of tangible Government action to partner with Irish businesses on sustainable measures to remain competitive, is weakening Ireland’s tourism offering. Delegates at the Irish Hotels Federation’s (IHF) 67th Annual Conference in Cork today heard that the majority of costs impacting on their businesses have continued to rise at a rate of at least three times that of inflation in the last two years alone, a trend which the Federation states cannot be allowed to escalate any further. It is urging the Government to immediately put in place measures to assist the tourism industry reign in its costs.

According to the IHF, tourism providers have witnessed cumulative increases of up to 24% in the last two years on services and costs outside their control. According to Richard Bourke, IHF President, local authority charges, including water charges, have seen an increase of some 18.4%, waste collection and treatment up by some 31%; electricity up by 18%, telecommunications up over 10% with postal charges increasing by 13% and insurance, still an issue despite Government intervention, increasing by 33%. These levels of increases, combined with high VAT and excessive excise duties are the real drivers of the difficulties in competitiveness and the high costs for business operators.

“Running a tourism business in Ireland with a continually increasing cost base and being competitive, is like trying to complete a jigsaw when people keep changing the picture. Unfortunately, this is the basis of the economic environment we are operating in where utilities, goods and staff costs are soaring and showing no sign of stopping,” said Richard Bourke. “It is unsustainable for our businesses that the costs of essential services are increasing year on year way above the rate of inflation.”

“While the hotel industry is trying to cut its cost back to remain competitive, many hotels and guesthouses are struggling to keep basic overheads under control. We operate in a highly competitive international tourism environment. It needs national policy supports on state services and other inputs if real competitiveness is to be achieved. Visitors to Ireland and home holidaymakers are increasingly frustrated by what they perceive to be unduly high prices, but in reality the prices are a direct knock-on effect of the business environment in which we operate. ‘Rip off’ criticisms would be better levelled at local authorities and other service providers, than at businesses who are doing their utmost to provide a competitively priced tourism product,” he continued.

Tourism impacts on the livelihoods of the vast majority of Irish people, not just the 165,000 people employed in the sector. Almost 60,000 people are employed in hotels and guesthouses in Ireland – many multiples greater than the number of people employed by the top ten multinational companies located here. The IHF maintains that the sector is not asking for handouts but rather an equitable business operating environment on a par with other European and international destinations, all of which are vying for Ireland’s share of the global tourism market.

Richard Bourke suggested that the Government cap price rises on essential services, which it controls such as local authority rates and charges, energy costs, telecommunications and transport.

“Tourism generates over €5 billion in revenue, with €2.4 billion of this revenue finding its way directly into the Government’s coffers. It is an easy option for the Government to continue to let indirect taxes and state services continually rise and then be seen to offer a low personal tax environment. In the end we all have to pay but the visibility of those indirect taxes is opaque and industry is tarnished with the high price tag. It must acknowledge its responsibility to assist in creating an environment where the cost of doing business is less onerous.”

“Government can influence and take appropriate action to address those areas that hit our bottom line and that we all know are exorbitant when compared to our EU counterparts. Our industry is continually seeking ways to be more competitive and in a way it is simply impossible as there is a limited number of avenues we can take to achieve this. We are managers of businesses that have no control over the vast majority of our cost inputs,” he continued.

The IHF is also seeking Government to allow VAT as a business input. Hotel and restaurant costs are recognised as legitimate business expenses in most EU economies, but not in Ireland. Irish hotels and restaurants are at a competitive disadvantage when dealing with EU business customers who are registered for VAT and can claim credit for it for similar expenses in other EU countries but not for business expenses incurred in the Republic of Ireland.

“Due to market conditions and the high cost of doing business in Ireland, there is low profitability in much of the hotel sector at present. This is notwithstanding that the quality and price of our accommodation product competes with and exceeds the standards available in most countries with whom we compete,” Mr Bourke concluded.

World tourism is expected to double in the next 20 years. Unless Ireland’s competitiveness is enhanced, the IHF suggests other countries will reap the rewards of a tourism upsurge, with Ireland left at the starting line.

FOR FURTHER INFORMATION:

Siobhan Molloy/Niamh Boylan Tel: 01 6760168 (Dublin office)
Weber Shandwick FCC Mobiles: 086 8175066 or 086 3809191