Why was the tourism sector ignored in the budget?

It is clear now to industry chiefs, after the budget of earlier this month, that tourism has fallen down the priority list of Government. After the VAT hike (the 9 per cent rate went back up to 13.5 per cent) imposed on the sector at the end of August, next year will see a cut in investment by the in the country’s largest indigenous industry and biggest regional employer.

The question is why?

Tourism leaders are seeking an answer to this and have asked for an urgent meeting with Minister Catherine Martin.

It would be churlish not to acknowledge the enormous support received from Government, and particularly Ms Martin, during Covid. Tourism and hospitality enterprises were the largest recipient of the State’s wage subsidy scheme and that, along with business support grants, largely kept the industry afloat.

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However, since the pandemic Government seems to have lost interest in a sector that is still, according to latest CSO figures, some way off full recovery to pre-pandemic levels.

Department of Finance hawks have estimated that the 9 per cent VAT concession was costing the State €750 million annually, so the decision to revert to a 13.5 per cent rate shifts that cost on to industry and the consumer.

Throw on top of this the fact that about 20 per cent of tourism beds nationally have been taken by the State for humanitarian reasons, which is estimated to cost the broader tourism industry as much as €1.1 billion, according to Fáilte Ireland.

Thus Irish tourism – in fragile recovery mode – is heading towards a €2 billion hit next year. And to compound it all the budget stingily cut tourism investment for next year, meaning fewer resources for Fáilte Ireland and Tourism Ireland. Lest anyone be in any doubt, state investment in tourism is set to be only €216 million in 2024, miserly when compared with the economic return of the industry.

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We go back to that question: why?

Some of those same department hawks seem to have resented the Covid supports the sector received and perhaps fail to respect an industry which, although higher in employment, is lower in value than other components of the economy. Also, the misperception of a booming industry seems to have become a prevailing narrative.

The reality is quite different. Airport traffic is inflated by Irish people travelling abroad while hotel occupancy is inflated by Government contracts for refugees and asylum seekers. The actual number of tourists in the country is well shy of where it was and where it needs to be.

To some extent the industry has not helped itself with some eye-watering hotel prices at peak demand periods that have annoyed politicians and angered the domestic market. Looking at data doesn’t support the hype of a flourishing hotel sector.

Independent statistics from benchmarking firm STR show that for the peak summer month of July the average room rate across the country was €185, up 31 per cent on the 2019 rate. Hardly surprising considering the soaring business costs and inflationary cycle with which the whole economy is wrestling.

One argument is that tourism is not within the right departmental home.

While media and culture, and the plethora of other portfolios within Ms Martin’s department, saw a budget increase, tourism is facing a budget cut.

Proof positive that tourism is not getting the proper focus it needs. Previous departmental incarnations of tourism and trade, or even transport and tourism, may not have been perfect but did mean more attention on a key indigenous sector.

If the mantra of supporting domestic industries, for fear the multinational bubble might burst one day, is to be credible, then the State needs to get serious about tourism, its importance and potential.

Government’s commitment to tourism will be tested by its approach to two big issues. Dublin Airport, the main gateway for the island of Ireland, is up against a ceiling (32 million) on the number of passengers it can process. While Cork Airport and Shannon Airport must grow, Dublin Airport too has to be allowed expand if tourism, as well as the broader economy, is to make meaningful progress.

The current planning system for Dublin Airport is not fit for purpose and must be overhauled.

Equally, hotels and guest houses contracted by the State must start returning to the tourism economy. There are many towns throughout the country without adequate tourism beds and therefore with little tourism activity. Government is over-reliant on the sector and needs to have a more balanced approach to housing refugees and asylum seekers.

The feeling of drift that tourism leaders feel is exemplified by the tortuous progress of the new national tourism policy, which has missed a series of deadlines. If the State has no policy on tourism, how can it claim to prioritise it?

The industry itself launched an ambitious roadmap last month that outlined plans for growth out to 2030 while being environmentally sustainable. However, such ambition must be matched by Government and must be enabled by pro-tourism and pro-enterprise policies.

The tourism industry’s Achilles’ heel has always been its disparate nature and its failure to coalesce and become a voting bloc to unnerve political parties. The farming lobby is looked upon with some envy in this regard. With an election looming in the next 18 months perhaps now is the time for the industry, and the hundreds of thousands of livelihoods and voters it supports, to insist that tourism issues feature prominently in party manifestos.

Eoghan O’Mara Walsh, chief executive, Irish Tourism Industry Confederation