INTO A NEW MILLENNIUM

10 Steps to Maintain Tourism’s Momentum

– The Irish Government to under-write a minimum annual investment of £20 million in consumer marketing of Irish tourism overseas. It is critical that the State should commit now to avoid any shortfall arising from reduced EU funding of destination marketing of Ireland post-1999.

– Create incentives for increased labour force participation including a new Homemakers Tax Allowance and streamline procedures for the issue of work permits for non-EU nationals.

– Increase the access to training and focus training investment at skills needs and in areas of regional deficits.

– In addressing Ireland’s infra-structural deficit, introduce safeguards to ensure the lowest possible access costs, and that the introduction of competition be an integral part of any privatisation of state assets, including airports.

– Take steps to ensure that tourist services are maintained at the lowest rate of Value Added Tax.

– Promote and maintain the quality aspects of Ireland’s ecology and environment.

– Target and focus future support on critical strategic issues including season extension and regional distribution and expedite delivery of the National Conference Centre.

– Licence all providers of commercial accommodation.

– Ensure a balance is maintained in the review of liquor licensing laws to protect the viability of all sectors of the licensed trade.

– Accelerate the reduction of corporation tax towards 12.5%.

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A VISION FOR IRISH TOURISM

The period 1989-99 has been a major success story for the development of Irish tourism, based on a collaborative approach by the public and private sectors towards product development and promotion. The Irish Hotels Federation is determined that the momentum should be maintained, and proposes the following as a vision of the key goals and objectives to be pursued in partnership.

”Over the next decade appropriate steps must be taken to develop Irish tourism as a coherent, unified and sustainable industry which: – is Ireland’s largest, in terms of revenue and employment; – is a major source of export earnings; – transcends political boundaries; – opens new doors of opportunity for other cultural and economic sectors of the economy by increasing visitors’ positive perceptions of the island, especially for the ecology and the environment and by demonstrating the unity of the people of Ireland in common endeavour; – plays an even more valuable role in the equitable distribution of economic wealth throughout the regions of Ireland; – creates vital employment opportunities, in rural as well as urban settings, for people with a wide range of skills and varying levels of aptitude; – delivers quantifiable and worthwhile returns for everyone in Ireland on funds invested in its development, including essential investment in marketing at home and abroad; – delivers tangible financial returns to the people of Ireland for their efforts to protect their heritage and culture, thereby further stimulating efforts to respect and protect such heritage and culture for the social, cultural and economic benefit of future generations“.

The IHF is convinced that a shared vision will help the people of Ireland to achieve progress in both economic and broader social terms. The Federation is conscious that, by focusing efforts on providing an attractive environment for visitors, we also create an attractive environment for ourselves.

The tourist sector has been to the forefront in promoting increased co-operation between the North and South, and both communities benefit economically and politically from increased visitation to the island.

Furthermore, the tourist and hotel sector provides employment opportunities for people with a wide range of skills and aptitudes, complimenting the computer and literacy skills increasingly demanded by other industries today. It is, therefore, a socially inclusive industry in a society increasingly separated by a divide of academic achievement. Supporting employment throughout the country, and not just in urban areas, it also assists in the regional re-distribution of wealth.

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TOURISM IS CENTRAL TO IRELAND’S ECONOMY......

Tourism has long been one of Ireland’s most important industries and in recent years it has prospered.

• The tourist industry is the largest unsubsidised sector contributing to the Irish economy
• Over the past decade Irish earnings from tourism have grown at over 10% a year - the fastest growth recorded by any of the 15 prime European tourist destinations
• Annual overseas revenue earnings have increased in excess of 171% in the last decade and overseas visitors have more than doubled. Between 1988 and 1998 the number of tourists visiting Ireland from overseas increased from 2.43 million to 5.54 million. Overseas tourist revenues increased to £2.28 billion in 1998, including Irish carrier receipts.

• When domestic tourism and Irish carrier receipts are added, the industry in 1998 generated revenues of £3.032 billion, against £1.15 billion in 1988. In 1997, tourism revenues equalled 6.7% of Ireland's Gross National Product. Three quarters of this comes from foreign tourists.
• The Federation estimates that at least half of the total tourism earnings, some £1.5 billion, was paid to the Exchequer in direct and indirect taxes in 1998, £1.17 billion of which was generated by foreign tourists.

The extent to which Ireland's tourist industry and the general economy are mutually dependent is seldom fully appreciated. Yet, as a major source of export earnings, tourism is also an important consumer of goods and services within the Irish economy.

It is, therefore, one of the most important generators of new business opportunities.

• Every £100 spent by a tourist in an Irish hotel generates a further £48 within the Irish economy.
• In the past 10 years alone, one in every three new jobs in Ireland have resulted directly from the growth of the tourist industry.
• Between full time, part time and seasonal employment, tourism provides the equivalent of 124,000 full time jobs, equal to almost nine out of every 100 jobs in Ireland today. Hotels and guesthouses account for nearly half of these jobs. Tourism is a labour intensive industry.
• In 1998 alone, an additional £256 million of tourism revenue resulted in an increase of 4,700 people employed in the tourist industry.

To summarise, tourism has made a substantial contribution to investment, employment, regional development, exchequer receipts and the cumulative balance of payments surplus in the last decade. It can continue to do so over the next.

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......AND DELIVERS A SUPERB RETURN

• Over the past four years the Overseas Tourism Marketing Initiative (OTMI) has invested an additional £27 million in the consumer promotion of Irish tourism in Ireland’s current four key markets: US, UK, Germany and France. Of this sum, the Government and the European Union between them contributed £22 million.
• Over the same period, the additional tourist revenue from these four markets amounted to £471 million, of which the Exchequer received £267 million in additional tax revenue.
• Even if only half of this additional tax revenue resulted directly from this marketing spend (an extremely conservative estimate), that would still represent a return to the Exchequer of virtually £130 million of an investment of £22 million – a superb return which would be the envy of every business.
• It is clear, therefore, that in return for extremely modest investment by the State, Ireland’s tourist industry has made a substantial contribution to Ireland’s current economic prosperity.

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THE FUTURE POTENTIAL OF TOURISM

Stimulated by rising levels of personal income world-wide, increasing leisure time and declines in the cost of air travel, it is estimated that in 1998 the tourist industry world-wide was worth around $3,600 billion representing in excess of 11% of world output (GDP). Europe remains the largest tourist market in the world, accounting for 60% of all arrivals.

It is widely expected that this positive trend will continue for the foreseeable future. Current industry estimates suggest that world tourism is set to double in value over the next decade.

According to The Irish Tourist Industry’s Strategy for Growth Beyond 2000, tourism has the potential with the right supportive strategies to become the leading indigenous sector by 2002, generating in excess of £3 billion in foreign revenue, employing 180,000 people and accounting for 8.5% of GNP.

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THE CHALLENGES AND POSSIBLE PITFALLS

Ireland’s remote and unspoiled countryside, the absence of pollution, its culture and heritage, and the outgoing, friendly nature of its people are key attractions for many visitors. They are especially important to those who are of most value to Ireland’s economy - ”high yield“ visitors. These are of particular value because:

• Their holiday plans are significantly less affected by downturns in the global economy than other, more price sensitive tourists for whom holidays abroad represent by far the largest single discretionary element of their household budgets, for whom when times are hard, the holiday is often the first item to go.
• High yield visitors typically travel abroad at least twice a year and their spending patterns while on vacation tend to be consistent.
• They provide greater returns per unit of cost than other visitors.

They do, however, expect to enjoy high quality facilities, including accommodation and restaurants, and an overall excellence of environment throughout their stay. To the extent that we fail to protect the important attributes which make Ireland special for such visitors, therefore, we will undermine the very foundations of this important sector of the economy. If we fail to live up to customers’ expectations and destroy our image, we destroy tourism.

Like many countries before us, Ireland now faces a dilemma. Tourism success can sow the seeds of its own destruction; unless carefully managed, the greater our success in attracting visitors to our shores, the less satisfying will be their overall experience.

It is a matter of concern that the recent growth in visitor numbers has not been reflected by any significant lengthening of the tourist season. The large number of visitors arriving during the short peak summer season – nearly 40% arrive between June and August and almost 50% in the period between May and August – presents difficulties for service providers trying to maintain overall quality standards. Unless properly managed, congestion can be destructive, because it is the relative absence of other tourists which is a key attraction for quality seeking visitors.

Strategy for Growth Beyond 2000 (ITIC) predicts that the tourist numbers will approach 8 million by the year 2002. Ireland can only provide a satisfying and sustainable tourism experience for such a large number of visitors by ensuring that their visits are spread out far more evenly throughout the year and far more evenly in geographic terms throughout the island as a whole.

However, there are a number of potential challenges and threats to Ireland’s key source markets. These include:

• Competitiveness: To ensure that Irish tourism does not suffer from the loss of relative competitiveness attention must be paid to cost containment, a favourable investment climate, the maintenance of low inflation, and restrained wage agreements;
• Season Extension: To ensure that congestion does not choke our tourist sector, seasonal extension of the tourist season must be achieved to ensure growth without congestion;
• Environmental appeal: Growth strategies must be cognisant of the need to achieve tourism growth while providing for the protection of the environment, through sustainable development;
• Balanced regional distribution: A balanced regional distribution must be achieved to spread the benefit of tourism growth throughout the country and avoid congestion in our principal urban centres, to avoid damage to our most frequently visited areas and to increase the utilisation of existing tourist infrastructure and increase the profits from tourism in marginal areas;
• Infrastructural deficit: There is an infrastructural deficit throughout Ireland, in terms of adequacy of roads, rail networks, ports and support systems which must be addressed as a priority in the next National Plan;
• Marketing: Marketing investment is the life-blood of tourism, and must be maintained, both at national and enterprise level; the lessons of the past decade must be reflected in our future strategies, and the benefits of a collaborative approach enshrined in any new structures.
• Northern Ireland: The reaction to the cessation of hostilities in Northern Ireland was immediate and positive for the entire island of Ireland. A sustained and permanent peace will pay major economic dividends, most notably in tourist activity.

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PROGRESS THROUGH PARTNERSHIP

The Irish Hotels Federation, in common with other parties interested in the development of the industry, is keen that the solid achievements of the past decade should form the foundation for further profitable growth.

Our national aim must be to optimise the benefits to be derived by the island of Ireland from the anticipated growth in tourism world-wide by adopting a clear focus on maximising yield and sustainability rather than simply on visitor numbers.

This must necessarily involve seeking to remain attractive to high yielding visitors by adopting pricing strategies which limit overall numbers of visitors at peak season to sustainable levels and encourage others, including domestic tourists and lower yielding visitors from abroad, outside these periods.

Crucially, it also requires a national understanding of those characteristics which make Ireland special to such visitors and a consensus about the steps required to protect them.

The Irish Hotels Federation believes that, if we are to achieve these goals, as a nation we also need to:

• Radically change the way we think about tourism - We compete on world markets and our strategies should clearly reflect this. Many people, even within the Irish tourist industry, have little awareness of the activities of our competitors in relation to our customers and potential customers.
• Improve the way we co-ordinate both the development and the marketing of all elements of Ireland’s tourist ”product“.
• Set clear objectives and performance targets for the short, medium and long-term which will result in our stated vision being realised. Performance must be closely monitored and targets regularly modified in the light of changing patterns and trends in Irish and international tourism; static plans lead to missed opportunities.
• Change the focus of our national development and promotional strategies. As part of this we must:

– identify our key competitive advantages (e.g. friendly and spontaneous, smaller, family-owned properties)

– identify prospective ”high yielding” tourists who should then be targeted by highly focused, cost-effective marketing

– increase overall investment in marketing Ireland as a destination

– identify ways in which tourism could be developed with a particular view to increasing job opportunities for the unemployed and providing supplemental income for displaced agricultural workers

– Efforts should be made to encourage participation in the tourism industry by highlighting benefits, such as flexibility of working time, and supplemental income

– develop structures to foster the development of tourism as a coherent, unified industry for the Island of Ireland.

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IMMEDIATE STEPS TO KEEP THE INDUSTRY ON TRACK

Even as Ireland begins to develop the strategies needed to optimise the longer term value of tourism, a number of immediate actions are required to keep the industry on track now. These include:

Increase state investment in promotion of tourism in both overseas and domestic markets

Effective marketing is a continuous process which has a cumulative effect. As new competitors emerge within Europe, it is essential that Ireland maintains its expenditures to retain its share of business in key markets and invest in newly emerging markets. Ireland’s offer of a quality tourism product must be matched by supporting quality promotion.

Ireland suffered a critical loss of market share in the European tourism market in the 1970s and 1980s, a situation only properly addressed by the Government, with the support of the industry, since 1987.

The Overseas Tourism Marketing Initiative (OTMI) and Bord Failte currently have a fund of approximately £12 million per annum to be split between strategic, image building activities and tactical spending on direct consumer promotion of Ireland as a destination. At present, the Government’s contribution to this annual funding of direct consumer promotion amounts to about £4.5 million, while various EU sources contribute £5.5 million. In addition, the industry itself invests £1.2 million through the OTMI partnership. 14-

The IHF considers that all of this £12 million is required for tactical promotion aimed at securing bookings in the current year. An additional investment of £8 million a year is required to support the development of ”Tourism Brand Ireland” and to extend direct consumer marketing efforts to other markets.

This £20 million a year level of consumer marketing spend should continue, after the expiry of the Operational Programme for Tourism at the end of 1999, with the Exchequer contributing from central funds any shortfall left by the absence of Structural Funds.

The State should continue to provide at least £500,000 per annum to support the domestic Regional Tourism Marketing Initiative which promotes tourism at home. This Initiative has been matched £1 for £1 by industry and 1997 and 1998 was a major contributor to the value of this market increasing by £172 million and yielded an extra £72 million to the Exchequer.

– The Exchequer should establish a new £20 million per annum Tourism Marketing Fund;

– Double tax relief available to industry for contributions to designated national and international marketing activities and the training of marketing personnel;

– Seek to obtain European Regional Development Fund funding for marketing projects post-1999.

The principal aim of the promotional efforts should be to increase the marginal revenue from each visitor as well as the number of visitors and the achievement of seasonal and regional distribution.

Ensure that the Tourism Provisions of the Belfast Agreement are fully developed and implemented to the benefit of both North and South

As one of the areas for North-South co-operation and implementation in the Belfast Agreement, tourism should be fully developed in the areas of promotion, marketing, research, and product development to the mutual benefit of both North and South. Tourism has the precedent of existing co-operation and the potential as one of the areas of greatest mutual benefit.

It is important that no vacuum is allowed to develop and that the marketing initiative be maintained in the meantime. The IHF suggests that the OTMI model of a transparent, industry- controlled designated fund should continue on an all Ireland basis.

Create incentives to increase the labour force

The industry’s ability to provide worthwhile employment prospects, especially to the long-term unemployed, is significantly hampered by deficiencies in the tax and welfare system.

With the reduction of the numbers on the Live Register and the fact that Ireland now has negative cyclical unemployment (job vacancies exceed the number of people who can economically take up the employment), the Federation believes that initiatives must be undertaken to increase the labour pool - this could be achieved in part by having a special ’Homemakers Tax Free Allowance’ (Homemakers Revenue Job Assist) of £2,000 per annum for three years, for persons returning to the workforce, having not worked or claimed unemployment in the preceding five years.

Streamline the processing of applications for work permits for asylum seekers and non-EU nationals with appropriate skills, particularly those seeking employment in IHF Quality Employer accredited properties.

Increase the accessibility of training throughout the country

As a countrywide activity, tourism serves major social needs at local levels.

In order to meet the demand for consistent, high quality service standards it is vital that appropriate training be made accessible by being provided where it is needed. Training should be provided in key centres throughout the country during the industry’s low winter season between November and March.

The 1998 CERT Employment Survey of the Tourism Industry in Ireland found that with the unprecedented levels of expansion in the tourism and hospitality industry, there is a considerable shortage of staff in the sector. A substantial number of vacancies existed in all levels of staff from waiting and bar staff to managers and qualified or commis chefs in both the hotel and restaurant sectors. 75% of hotels and restaurants reported a skills shortage in 1998.

Considerable efforts need to be made to provide workers in the tourism sector with training in information technology and languages and the effects of globalisation and the knowledge society become ever more apparent.

The provision and guarantee of funding to support CERT'S training initiatives in the new Millennium, particularly in the locations where tourism takes place.

Efficient and Low-Cost Access

It is vital that overseas access to Ireland remain competitive and convenient If duty free shopping is lost on intra-European travel, then it will put significant upward pressure on these routes. The regional air routes need to be developed. Internal access infrastructure needs to be upgraded.

Safeguards must be put in place to ensure that, in any plans to privatise the ownership and operation of Ireland’s principle international airports, the lowest possible access costs are maintained. Inefficiencies or abuses of monopoly positions, by state or private sector ownership of such vital national access arteries to an island nation, can never be tolerated.

In order to ensure that there is a fair distribution of tourism and economic development throughout the country, there is a need for adequate road access to all regions. This road network should be supported with top international road signposting. In order to place all tourists within a two to two and a half-hour journey from an airport or ferryport, ambitious but achieveable targets need to be pursued, including:

– The creation and support of a Western Tourism Corridor;

– The upgrading and development of access infrastructure to improve access and correct the imbalance that currently exists between regions;

– The bringing of the quality of our road signposting up to the best international standard;

– The use of Public Private Partnerships to reduce Ireland’s infrastructural deficit

Take steps to ensure that tourist services are maintained at the lowest rate of Value Added Tax

It is essential that Ireland maintains the lowest possible rate of Value Added Tax on hotel and restaurant services in order to maintain a competitive position with our competitors for international tourists. At present, Value Added Tax charged on accommodation is amongst the highest in the EU at 12.5%, against 5-7% in countries where tourism is a significant activity, such as France, Spain, Portugal and the Netherlands.

The Government should maintain pressure at EU level to ensure that this reduced rate of Value Added Tax continues after the instroduction of the EU common system of Value Added Tax after 1999.

Hotel and Restaurant costs are valid and necessary expenses for many businesses, therefore Ireland should follow the example of the majority of other EU countries and allow the VAT elements of such payments as inputs by registered businesses.

Promote and Maintain the Quality of our Environment

International research has identified that a green clean environment, i addition to friendliness and spontaneity of our people is the most important factor incluencing tourists to visit Ireland.

We must have in place adequate safeguards to ensure that the quality of the tourist product meets these customer expectations.

Enforcing proper planning regulations and litter controls are the most effective means of promoting and maintaining the quality of the environment.

– The 1994 Local Government (Planning and Development) Regulation exempting the change of use, from private residence to commercial Bed and Breakfast provider, of up to four bedrooms, from the requirement to seek planning permission should be immediately repealed.

– There should be strict enforcement, at local authority and national level, of the 1997 Litter Pollution Act.

Focus future support on critical strategic issues

At present the EU is a significant contributor of investment funding for the Irish tourist industry. This support, however, is provided under the Operational Programme for Tourism which will conclude in 1999.

It is essential that the Government immediately puts in place continued funding possibly through support mechanisms provided to aid regional projects.

There should be an emphasis on continued product development and improvement to ensure the maintenance of competitive advantage.

A National Conference Centre is a critical element in the tourist infrastructure. While it is recognised that it will not be delivered in the original timeframe, the IHF seeks a formal commitment that Government through appropriate mechanisms shall ensure the development of the Centre.

Licence all providers of commercial accommodation

It is estimated that there are currently 12,000 premises providing 40,000 tourist bedrooms operating outside any statutory control on quality, environmental, health or safety standards. Regulation should be mandatory because:

– It would protect standards.

– It would protect the health and safety of customers and staff.

– It would protect the physical environment.

– It would address Ireland’s present inability to meet the EU Directive on compiling tourist statistics.

– It would prevent the supply of sub-standard or low quality accommodation currently provided on a temporary basis during peak season, which is damaging to the strategic development of the tourist industry.

It would contribute, by having a limit on the amount of tourist accommodation available at the peak season, to encouraging tourists seeking lower cost holidays to visit in the shoulder periods and thereby contribute to season extension.

A Balance in the Review of Liquor Licensing Laws

A balanced review of the licensing laws is needed to ensure that the economic viability of small hotels around the country are not adversely affected. Consideration must be given to the small rural hotels which depend on nightclubs and discos for their opening outside the tourist season. The closure of these hotels, or their reduction to seasonal status should extended bar opening hours jeopardise this vital part of their business, would have a detrimental effect on the communities within which they are based, as it would strip away another piece of the rural fabric.

Registered Guesthouses should be entitled to serve alcoholic beverages to their residents.

Ensure that there are no impediments put in the way of having a Corporation Tax rate of 12.5% by 2003.

The tourism sector is heavily taxed in comparison to other export sectors. It pays substantial VAT and excise duties. There has been clear Government commitment to ensuring a corporate tax rate of 12.5% by 2003. It is important that no impediments, at national or EU level hinder this objective. To benefit smaller businesses the lower rate of Corporation Tax should be immediately reduced to 12.5% on the first £100,000 of profit.