Sunday 6th March 2011

Irish Tourism in State of Severe Crisis as Revenues Continue to Plummet
Irish Hotels Federation’s 2010 Annual Report Reveals

Irish tourism remains in a state of severe crisis as hotels and guesthouses struggle to cope with falling visitor numbers and high overheads in a depressed market. Speaking today at the launch of the Irish Hotels Federation’s (IHF) 2010 Annual Report at its 73rd Annual Conference, Tim Fenn, Chief Executive stated that total tourism revenues have fallen by 13% to €4.6 billion in 2010 on top of a 17% collapse in 2009.  The tourism industry now faces enormous challenges if it is to return to viability in 2011 having lost 800,000 visitors and over €700 million in total revenue the previous year.

According to Mr Fenn, revenues generated by overseas visitors declined by €600 million to €3.3 billion as overseas visitors fell to 5.7 million in 2010 compared with 6.5 million in 2009 (2.2 million down from the 7.7 million peak in 2007). This represents a drop in overseas visitors of approximately one third with total foreign exchange earnings down €1.7 billion from the peak revenue year of 2007 when €4.9 billion was generated by the tourism sector.

Domestic trips fell by 4 percent in 2010 to 8 million coinciding with a reduction in domestic revenue of approximately 10% to €1.3 billion. The high dependence on the home market continued with 75% of hotel bednights now coming from Ireland. It was another disastrous year for the British market with visitors at just over 2.5 million, down 18% on 2009. Mr Fenn states that turning around the British market remains the most significant challenge facing the next Tourism Minister with the market having experienced a cumulative drop of over 1.5 million visitors (37% decline) since 2007. 

While there was a 2% recovery in hotel room occupancy to 58%, there was a further reduction in room rates of approximately 6% in 2010 following a decline of 20% in 2009. These factors resulted in a 3% reduction in revenue per available room in 2010. Notwithstanding the downturn, tourism remains Ireland’s most important indigenous industry, making a direct contribution of 4% to overall GNP in 2010 and supporting an estimated 180,000 jobs, of which 54,000 are employed in the hotels and guesthouse sector alone. Tourism expenditure now supports one in every 10 jobs in Ireland today.

Mr Fenn says, “Hotels and guesthouses are struggling to deal with decimated revenues caused by plummeting visitor numbers, low room rates and excess room capacity. While most businesses have introduced substantial cost cutting measures, they remain constrained by cost inputs which are out of their control such as labour rates and public sector determined costs.”

Commenting on the availability of credit to tourism businesses, Mr Fenn says, “Lack of access to credit and finance remains an issue with over 60 hotels now having gone into receivership or are under bank control. The worsened business environment has made it very difficult for hotels and guesthouses to obtain required levels of working capital to cope with the recession. Notwithstanding the various pledges and initiatives from Government there is little evidence of improved liquidity in the sector.”

Excess capacity
Despite the issues surrounding excess capacity, banks remain reluctant to close hotels and alternative use options are not attractive in the current market. NAMA currently has approximately 139 hotels under its control including 82 in Ireland. Bank of Scotland has somewhere in the region of 200 hotels and they are at an advanced stage in withdrawing from the Irish market, a scenario that is creating serious concerns around ongoing access to working capital. There are over 60 hotels in receivership and many more are under bank control with the issue of overhanging debt continuing to present a major threat to the survival of the sector.

Estimates contained in the Bacon Report (2009) indicate an excess capacity of 12,000-15,000 rooms in the hotels sector. Based on optimistic projections in which overseas visitor increase to 7.9 million per annum by 2015 (up 2.2 million on 2010) and annual domestic trips increase by 500,000 to 8.4 million, estimates from Fáilte Ireland indicate that there would still be an enduring excess capacity of 7,000 rooms.

Breakdown of Visitor Numbers

FOR INFORMATION:
Siobhan Molloy / Eoin Quinn                       Dublin office: 01 6760168
Weber Shandwick                                           Mobile: 086 817 5066 / 087 233 2191

HOTEL & GUESTHOUSE STATISTICS
73rd IHF ANNUAL CONFERENCE

Monday 7th & Tuesday 8th March 2011

• 5.7 million overseas visitors to Ireland in 2010, a 15% decline on 2009;
• Tourism accounted for 4% GNP in 2010;
• €3.3 billion foreign exchange earnings in 2010 compared with €3.9 billion in 2009 (peak of €4.9 billion in 2007);
• Total tourism revenue in 2010 decreased by 13% to approximately €4.6 billion;
• 883 hotels with 59,337 rooms (903 hotels with 60,199 rooms in 2009);
• 286 guesthouses with 3,444 rooms (307 guesthouses with 3,677 rooms in 2009);
• Total of over 62,781 hotel and guesthouse bedrooms in Ireland.