Irish Economy
Irish tourism had worst year in 2010 since 1998; Biggest overseas market - - Britain - - key to recovery
By Finfacts Team
Jan 11, 2011 - 1:43 PM

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Swirling clouds of blue and green lit the Atlantic Ocean west of Ireland on June 2, 2006, when the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Aqua satellite captured this image. The ocean is normally black in true-color, photo-like satellite images such as this one, but a large phytoplankton bloom lent the water its brilliant blue and green hues. Phytoplankton are microscopic plants that grow in the sunlit surface waters of the ocean. When enough of the plants grow in one place, the bloom can be seen from space.

Irish tourism experienced its toughest season in over a decade in 2010 with overseas visitor numbers falling back to 1998 levels. This stark fact underlined the key message delivered today, at Fáilte Ireland’s End of Season Review and Outlook for 2011, that while tourism should recover somewhat in 2011, the performance of our biggest overseas market - - Britain - - would be central to the timing and scale of any recovery. 

2010 Performance

Overall tourism earnings in 2010 are estimated to have fallen to €4.6bn by year-end, a drop of 13% compared to 2009, and due primarily to significant declines in numbers of overseas visitors.

Total overseas visitor numbers fell by 15% in 2010 to 5.6m and foreign exchange earnings declined by 14% to €3.3bn.  Domestic tourism trips declined by 4% (to 8m) in the same period and domestic revenue fell by 10% (to almost €1.3bn).

The estimated 1 million fewer people who holidayed in Ireland during 2010, is therefore estimated to have cost businesses €600m compared with the year before.

British visitors declining by 18% and accounting for about half of the total decline visitor numbers.  Arrivals from Mainland Europe fell by almost 17% with all of the major European markets registering double digit declines.
The news from the long haul markets was equally challenging, though the falls less steep.  Visitors from North America were down 9% while visitors from the other long-haul markets fell by a relatively modest 2%.

With regard to the home holiday market, Fáilte Ireland research suggests that domestic holidays in 2010 were more or less on a par with 2009, although spending on home holidays declined.  

Profitability fell for most accommodation providers during 2010 – including two out of three hotels, three quarters of guesthouses and four out of five B&Bs. Two thirds of tourism operators lowered their prices during 2010 with almost all the remainder holding level. Two-thirds of businesses expect to maintain their 2010 prices in 2011 but one-third are expecting even further declines.

Introducing Fáilte Ireland’s End of Season Review and Outlook, Redmond O’Donoghue, chairman of Fáilte Ireland pointed out that: “Tourism businesses walked the tightrope in 2010 – paring back prices and offering good value while ensuring that their businesses remained viable. Despite being an incredibly punishing year for tourism, most businesses survived through a mixture of innovation, experience and sacrifice. Even in the hotel sector, while revenues fell significantly, the vast majority of our hotels have renewed their registration for 2011 despite the avalanche of closures predicted during 2010. The survival of tourism businesses through a year such as that is a testimony to the resilience of the industry and to a certain ‘can do - will do’ attitude out there.

However, guts and ingenuity will only bring us so far and the key question for tourism businesses today is how do we actively tip the scales back in our favour?

The infrastructure of this country has never been so visitor-friendly, our prices are lower and we have some of the best quality accommodation on offer in Europe. There are now many more good reasons to visit this country and Fáilte Ireland will be working flat out this year with other agencies and tourism businesses to ensure everything necessary is done to grow our overseas numbers to safeguard the vital jobs and revenue which tourism provides this country.”

Prospects for 2011

Fáilte Ireland’s CEO, Shaun Quinn, today emphasised that the prospects for the tourism industry in the year ahead will hinge more than ever on the performance of our overseas markets as the home market has effectively peaked. Quinn emphasised that within the key tourism markets there are opportunities, but that exploiting them will require hard work.

He said: “The home market, probably the most important market for many businesses last year, will come under pressure generally as household incomes tighten this year. There is some potential in winning more share from the out-bound foreign holiday market, should more Irish consider holidaying at home this year, and offering good value packages will be more important than ever. Mindful of this, we will continue to invest in this market in 2011.

However, for many businesses the real game will be off shore.  Developing more business in overseas markets is not just a good strategy - it’s becoming also the only show in town when faced with what may, at best, be a static home market.

Based on recent economic outlooks, there are undoubted opportunities in Continental Europe, particularly Germany, France and the Netherlands. The US market also appears to be recovering.”

One market above all will be central to tourism performance in 2011, Quinn said: “It is in Britain, representing 45% of our overseas visitors, where we will need to turn the tide but where we face the greatest challenge.

While our performance there was poor last year there are still opportunities, particularly around London and the Southeast, where prospects in Britain are much stronger. Indeed, our research from 2010 indicates a strong attachment, goodwill towards and keen interest in Ireland amongst potential British visitors of all ages that could be tapped into further.

“There are some favourable factors now coming into play for us. Our own falling prices, the recent cut in the Air Tax, the rise in VAT in the UK and the growing strength of Sterling to the Euro all combine to make Ireland an even more attractive and accessible option for potential British visitors. Taken together, these factors should provide an additional wind in our sails as the tourism sector intensifies its efforts to target the British market and maximise all the possibilities offered by our nearest neighbour.”

Also helpful is the fact that, after a time lag, the lower prices of the last two years are starting to influence overseas perceptions of Ireland with Fáilte Ireland research finding significantly improved value for money ratings in 2010. This is a trend which is expected to continue in 2011. 

Looking ahead, most tourism enterprises are relatively optimistic regarding their business prospects for 2011, with approximately three in five expecting to maintain or grow their business levels in 2011.

However, there are some key worries within the industry. Access to working capital is a major issue for tourism enterprises going into 2011. One in five claims that they have no access to working capital, a further three in five say that they have very limited access or that working capital is available but more limited than they would like.  Only one in five respondents claims to have adequate access to working capital.

The industry continues to have significant concerns regarding local authority charges and utility costs. One in three businesses have also cited difficulties due to local competition – particularly in the accommodation sector where there are fears regarding so-called “zombie hotels” driving rates down to levels which may not be sustainable in the long term. 

The tourism body said there will be significant structural changes to the current accommodation landscape over the next few years – depending on the financial health and location of individual providers. This will however take some time, and over the next two to three years there is likely to be continuing competition for business among accommodation providers.

This underlines the importance of strengthening demand in our key overseas markets. The need for serious downsizing will be greatly minimised if the industry in general and the hotel sector in particular can grow its share of international tourism. Again, performance in existing key source markets – particularly in the British market - - is seen as the crucial margin between staying up or going down for many hotels.

Priorities for 2011

This year Fáilte Ireland will focus its investment support on:

  • Driving demand on the home holiday market – through a €4m 40-week intensive marketing campaign using a mixture of innovative marketing and an exciting mix of festivals, events and offers , Fáilte Ireland will continue to leverage all potential demand within the domestic market to create additional tourism activity, revenue and jobs;

  • Expanding its business support network (by 50%) to more tourism businesses around the country. In particular, we will invest heavily in those services which will assist tourism businesses to increase their international customer base, with a particular emphasis on the British market.

  • Investing through its capital investment programme to improve and broaden the appeal of Ireland’s portfolio of tourist attractions, activities and tourism related infrastructure. Last year, some 23 projects were approved for grant - - aid totalling almost €40m and this investment effort will be continued through 2011 to ensure that Ireland is well place to take advantage of longer-term growth.

  • Investing in significant business, sporting and cultural events which offer good prospects for tourism growth in 2011. Particular emphasis will be placed on the business meetings and conferencing market where performance has been relatively strong.

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