Sunday, 21st September 2008

Budget 2009: Hoteliers Call for Increased Banking Liquidity & Freeze in Tourism Related Taxes

Measures to improve banking liquidity and access to seasonal funding, a commitment to a minimum of €3 million in additional marketing funds for conferencing/business/golf tourism as well as a freeze on tourism related taxes are the key measures being called for in Budget 2009 by the Irish Hotels Federation (IHF). In its pre-budget submission today, the IHF urges the Government to preserve the significant tourism success achieved by Ireland over the past 20 years which is now experiencing substantial downward pressures in the current challenging economic environment. These measures would put the sector on a more secure footing as hotels and guesthouses seek to trade through rapidly deteriorating market circumstances where access to financial assistance is constricted.

In its submission Consolidating the Achievements of Tourism presented to Minister for Finance, Brian Lenihan, T.D., the IHF calls on the Government to ensure sufficient and adequately priced credit facilities are available in the banking system for hotels and guesthouses requiring additional short term finance facilities. Failing that, the IHF calls for the introduction of a loan guarantee scheme to assist commercially sound hotels and guesthouses requiring short term financial assistance due to the current credit squeeze.

According to Matthew Ryan, President of the IHF, which represents 1,000 hotels and guesthouses, the sudden decline in the economic environment, has generated difficulties for the hotel industry which is being adversely affected by falling revenues and rising costs. “The industry has invested heavily over the recent years to expand stock, upgrade facilities and enhance the quality and range of its product offering in line with the Government’s tourism growth plan. The situation now calls for liquidity measures to be introduced to assist those commercially sound businesses to trade through a period of economic turbulence.”

“The industry is seeking to be as competitive as possible against a backdrop where energy, labour costs, interest rates and public services charges are eating into our efforts. Combined with exchange rates hampering our attractiveness in the dollar and sterling markets, this is having a real impact on the hotel sector in 2008. 53% of hotels and 59% of guesthouses did less business in Jan to June 2008 compared with 2007 with room occupancy rates down from 61% to 54% in 2008 to date. All major overseas tourism markets were substantially weaker with North America, Continental Europe and the British hotel bednights down 25%, 18% and 5% respectively – not a pleasant situation for businesses who have invested heavily in their premises and are now finding trading difficult and access to additional seasonal financial resources difficult due to the credit crunch,” says Mr Ryan.

The IHF key measures it is calling for in Budget 2009:

• Funding for tourism marketing: The IHF seeks an increase in real terms in the marketing budgets of Fáilte Ireland and Tourism Ireland in order to maintain existing levels of marketing activity. Marketing spend is proven to generate a direct and immediate return in terms of increased tourism business. The IHF wants an additional allocation of €3 million for specific drives to attract new business/conference visitors. The national conference centre is due to come online in 2010 and must be poised to tap into this segment of the market, which is worth €200 billion worldwide. In addition, the Federation is calling for funding to be allocated to attract additional golf business by building on Ireland’s recent high profile international golf successes. Ireland has underperformed compared to the rest of Europe in relation to these market segments, and these now require dedicated marketing initiatives.

• Access to adequately priced credit facilities: The Federation is calling on the Government to include provisions in Budget 2009 to ensure there is sufficient and reasonably priced liquidity in the banking system to meet the increased financing needs of otherwise commercially sound hotels and guesthouses to see them through the lean 2008/09 period. The need for additional financial facilities comes at a time when banks are reluctant to extend additional credit and follows a period of strong increased investment by hotels and guesthouse to develop Ireland’s tourism product. Given the strategic importance of tourism to the Irish economy, it is vital that the Government ensure businesses within the sector are given the necessary breathing space and time for adjustment to the sudden, substantial deterioration in economic and financial trading environment.

• No increases in tourism related taxes and Charges: The IHF calls on the Minister to avoid any tax increases in tourism related products and services at national and local levels and to introduce a freeze on all public sector charges. The Federations calls on the Government to ensure the introduction of any carbon tax is revenue neutral and does not increase the tax burden for Irish businesses.
  

The IHF states that tourism has been a significant pillar of the Irish economy over the last 20 years. The largest indigenous industry in the country, it has over the years witnessed good and bad economic conditions and has clearly shown that the sector can be resilient if the right measures are adopted at Government level to maintain its buoyancy during periods of economic uncertainty.

“We need protective, prudent measures now so that the industry can be in a strong position to take best advantage of the market opportunities when the resumption of normal economic growth rates return in 2010. It is essential that the short term economic slowdown should not do long term harm to the tourism sector because protective measures where not put in place at this critical time,” states Matthew Ryan.

“Tourism is a large, strategically important industry which is deeply embedded in the Irish economy and should be supported in Budget 2009. Based on current trends, hotels are looking at potential reductions in average profit per room of up to 50%, resulting in serious short term financing problems for some of our member. Competitiveness clearly remains an issue requiring urgent action and this has been intensified by the international economic slowdown. We compete in a global market for both domestic and overseas tourists and are impacted by taxation, costs and marketing funding. These areas can be improved through appropriate fiscal measures in both taxation and expenditure policy in Budget 2009.”

“We recognise that the Government’s finances will be in a difficult position in 2009. However, we need the marketing budgets and financial liquidity issues to be dealt with immediately so that the sector is well positioned to take best advantage of improved circumstances in 2010,” concludes Mr Ryan.

The tourism industry is this country’s biggest indigenous employer with approximately 140,000 people employed in the sector. It is a major contributor to the economy and remains a substantial economic asset worthy of significant ongoing public policy support. In 2006, the Exchequer received €2.8 billion in taxation from tourism and, allowing for indirect and induced effects, tourism accounted for 3.8% of GNP in 2006. It provides employment in every single city, town and village in Ireland.

Economic contributions of the tourism

Over the longer term, the tourism and hotel industries have achieved substantial growth and have invested in skills, marketing, technology, products and services and physical facilities. The main economic contributions of the tourism industry include:

• Almost €5 billion in foreign exchange earnings in 2007 compared to €2.1 billion in 1995 and €4.3 billion in 2005;
• 8.3 million visitors;
• Domestic tourism expenditure of €1.5 billion in 2007;
• Almost €3 billion in revenues to the exchequer from tourism in 2007;
• Tourism accounted for about 4% of GNP
• Hospitality industry accounts for 250,000 full-time, part-time and seasonal jobs;
• Greater spread of regional economic activity than most other industries;
• 7% of services exports;
• Provides a substantial entrepreneurial resource as the vast majority of tourism enterprises are small and medium enterprises.
• 57,000 people employed in the hotel and guesthouse sector – largest employer in the tourism sector.
• 920 hotels with 60,000 rooms.
• 360 guesthouses with 4,300 rooms.
• Total of 64,300 hotel and guesthouse bedrooms in Ireland.
  

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

ENDS

For information:

Siobhan Molloy/Eoin Quinn Tel: 01 6760168
Weber Shandwick Mobile: 086 8175066 / 087 2332191