Irish tourism in 2019: Choppy waters ahead

As the curtain fell on a record year for Irish tourism, the storm clouds were gathering like never before. While those charged with bringing visitors to this island would have been entitled to raise a glass to toast a job well done, as the new year dawned they would also have been forgiven for looking fearfully at the year ahead.

Tourism is among the most important elements of the Irish economy, employing more than 300,000 people and generating billions of euro in revenue – swelling the tax coffers by almost €2 billion each year.

Last year tourism was worth more than €6 billion, a 10 per cent increase on the previous year, while the number of visitors climbed above 11 million, a 6 per cent jump on 2017, with growth recorded from all markets.

"2018 is set to be another record year for Irish tourism, surpassing all previous records and coming on the back of a number of years of strong growth," said Niall Gibbons, Tourism Ireland chief executive, as the good news was announced in the run-up to Christmas.

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While those working in the sector are upbeat, they are fearful too. The 4.5 per cent VAT increase for the hospitality sector came into effect this week and will put pressure on all operators’ margins and drive prices higher for consumers. Legislative changes aimed at tempering the level of accommodation available via the sharing economy is coming down the tracks and could hit availability, causing prices to climb and making the island less attractive for visitors.

Wage costs are climbing, and rents are soaring.

Brexit

But the most thunderous black cloud is Brexit. Almost as soon as the electorate in the UK voted to leave the EU, the difficulties such a move would pose for the Irish tourism sector were identified. In terms of revenue, the largest market for Ireland is north America – the US and Canada – which generates almost €1.8 billion each year. Britain is bigger in volume terms and responsible for €1.45 billion in revenue compared with about €1.2 billion from mainland Europe.

The over-reliance on visitors from Britain, together with the inevitable decline in the value of sterling, is a real and present danger.

Figures published in the middle of December contained both good and bad news on the Brexit front. The number of visitors from the UK during the first nine months of the year actually climbed – albeit by a modest 1 per cent – compared with the same period in 2017. But their spending declined by 1 per cent.

Tourism is the largest employment sector in the country

The chief executive of Fáilte Ireland, Paul Kelly, is all smiles when talking about the year that's been, as he sits in his bright and airy office overlooking a somewhat dishevelled Amiens St in Dublin's north inner city.

“It is better than it has ever been,” he says simply. “When you look at all statistics – the numbers, the employment, the revenue – it is certainly having its best ever time.” Tourism is, he says, “the largest employment sector in the country and regardless of whether someone is involved in tourism or not, the taxes tourists are paying reduce everyone’s tax bill by over €1,000”.

It is not long before talk turns to Brexit. “We still don’t yet know the shape it’s going to take,” he admits. “It will pose an extra challenge because the likelihood is there will be a further devaluation of sterling, which will make us more expensive for our biggest market, the UK. But it will also make our biggest and closest competitor – the UK – cheaper for international competition from north America, from mainland Europe and from long-haul destinations. So that will certainly be a challenge.”

What troubles him most is the possibility – which once seemed remote but now looks increasingly likely – of a hard Brexit. That is, he says, a “really significant risk to the industry because our relationship with the UK is incredibly complex”.

“From a tourism point of view, as well as being one of our biggest customers and one of our toughest competitors, it is also part of our product offering because of Northern Ireland. It is a really complex relationship, and if there is a hard Brexit, it gets really challenging. That is the big cloud hanging over the industry, and it will cost us hundreds of millions in economic revenue. It will cost us tens of thousands of jobs.”

There is no trace of alarm in his voice as he says this. Kelly is merely stating facts.

The Government seems to have forgotten about tourism when planning for Brexit

There is considerably more alarm in the voice of the chief executive of the Restaurant Association of Ireland, Adrian Cummins. "Everyone I speak to is terrified that this year is going to be very difficult," he says. He fears Brexit will be "a nightmare" particularly for the northern half of the country, which is more reliant than the south on visitors from the UK.

“The Government seems to have forgotten about tourism when planning for Brexit, and all the focus is on food production and other areas of the economy,” Cummins says. “It is as if the Department of Finance sees record numbers coming into the country and think ‘everything will be grand’. But we are sleepwalking into a disaster, and come the beginning of April when the tourism season starts, things might turn desperate very quickly.”

Tourism Ireland is working to ensure things “don’t get desperate”, and it plans to increase its marketing spend by €10 million to €45 million this year as it launches its first new global advertising campaign in seven years.

The campaign – “Fill your Heart with Ireland” – starts in earnest this month in more than 20 markets around the globe as it seeks to grow tourism revenue by 6 per cent, to €6.5 billion, and visitor numbers by 4 per cent, to 11.67 million. Some people are already sold on the idea of Ireland as a destination.

‘Nice weather’

“Great value”, “nice weather” and “lovely food” are not phrases people here typically ascribe to life on this island. But on a dark and wet winter morning at the Jameson distillery in Dublin’s Smithfield, these are the words tourists (who may have had a sup of whiskey) use to describe Ireland.

Rashi and Tej Malhi from Birmingham are just finished a tour of the distillery when they speak to The Irish Times about their experience here. They are buzzing after a long weekend in Dublin "It has been amazing," Rashi says. "The people have just been so friendly, and there is so much to see and to do. We have been going non-stop. We stayed at the Marker Hotel, and that was just brilliant and we have seen all the sites. I've loved it. And the food has been great all weekend and great value too."

Craig McCarthy and his partner, Laura Morshel, from New Jersey are in Ireland with their respective mothers, Joanne McCarthy and Maureen Morshel. They are on their way into the distillery after dropping their luggage at an Airbnb in Dublin’s Liberties.

“One of our first trips away as a couple was to Ireland and that was seven years ago,” Laura says. “So this is a kind of a nostalgia trip for us. What I love about Ireland is the culture but also how relaxed people are. And the last time we were here we were just so blown away by the food, we hadn’t really expected it to be so good.”

Craig says he has been delighted by the Airbnb offering. “It has worked out really well and is giving us a much better insight into how regular people live.” He says Ireland is “excellent value for money. It certainly is compared to where we’re from. We live just outside New York city so prices are very high. I know that Ireland is not as cheap as Berlin maybe but still cheaper for a lot of things than home.”

And as for the climate, Laura Morshel describes the weather as “nice” adding that while it is “kind of cold and grey, it is not too much so. It is the type of weather that makes you want to go to a cosy pub and stay warm.”

Fionn Davenport is a travel writer and author of multiple editions of the Lonely Planet's Irish guide book. He says that in spite of Ireland's "accelerated race into modernity", its "more traditional qualities are still seen as its main tourist strengths. Landscapes, scenery, the immediacy of the Irish welcome."

We sometimes scoff at the notion of Irish friendliness as being exaggerated, but what outsiders perceive as friendliness is approachability

His view chimes with research commissioned by Fáilte Ireland that suggests the landscape, scenery and natural environment are the most frequently cited draws for visitors to Ireland.

And then, of course there is our famed friendliness. Davenport says Irish people have “a big misunderstanding” of what that means. “We sometimes scoff at the notion of Irish friendliness as being exaggerated, but what outsiders perceive as friendliness is approachability, a willingness to engage in conversation, a general disregard for stuffy conventions and that ease that we take for granted but isn’t always evident in other countries.”

He expresses the view that Ireland still does informality better than any other country on earth. “Informality puts people at their ease; it allows them to relax and not worry about upsetting some social rule they may not be aware of. That informality extends to high-end experiences too. I stayed in Ashford Castle recently and was struck by the hotel’s remarkable ability to combine excellent five-star service with a friendly, relaxed informality that was, to my mind, unique to Ireland.”

For all the talk of Brexit and VAT and rising hotel prices, Paul Kelly knows Ireland needs to look beyond the negatives and beyond the UK, and he highlights a big push to broaden the appeal of Ireland in emerging markets including India and, most notably, China, a market which has grown from virtually nothing a decade ago to close to 100,000 today.

He says tourists come here looking for “more culturally rich experiences”. “They’re looking for more authenticity. Authenticity seems to be the word that comes up again and again when you’re talking to people about what they’re looking for, and we’re really well placed to offer that.”

But what does authenticity really mean? “It means interacting with locals, having real, natural experiences that are based on real stories of history or real natural landscapes as opposed to the manufactured. Getting to feel like you are living like a local and getting to know the local, is certainly a growing zeitgeist in tourism.”

Accommodation

The supply of hotel rooms is another cloud on the horizon. “It was only a couple of years ago that it became profitable to start building hotel bedrooms again,” Kelly says. “And once that became profitable, development started, but it obviously takes about five years from when somebody says ‘I think I want to build a hotel’ to when they can open the door.”

One alternative to hotels has been Airbnb. But that is under threat after the Minister for Housing Eoghan Murphy moved to tighten the rules and force those with buy-to-let properties to get planning permission from local councils to cover short-term rentals for more than three months a year.

The Minister made the move amid growing concerns that landlords who used to offer long-term leases were choosing to let houses and apartments to tourists to maximise their returns. One aim of the proposals is to “bring homes, once available on the traditional rental market, back into typical long-term renting”.

There are 1,000-3,000 homes in the greater Dublin area that could come back into the long-term rental market as a result of the measure.

Airbnb described the measures as “a cut and paste job” from regulations in other cities” and said there was “no clear rationale for the rules being proposed”.

It has every reason to be concerned. Last year, business was booming here, with Ireland recording its busiest summer yet for Airbnb rentals. There were about 640,000 guest stays recorded over the season. The bookings brought in about €57 million to the Irish economy, with those renting out rooms and properties reaping €2,000 on average for the summer period.

Kelly says it is too early to say what the changes to the rules governing accommodation delivered via the sharing economy will have, although he stresses that it “has been a very welcome addition to the tourism offering”. In addition to addressing a shortfall in accommodation, it has met consumer demand and “spread the economic benefit of tourism through a wider range of people”.

He also says it has tempered price inflation. “In Dublin it would’ve been an awful lot worse I’m sure without Airbnb. So it’s been very welcome. We need to review what the rule changes to see what kind of impact it will have, but it would be important that we can continue to offer that type of solution so we can compete internationally.”

Competing internationally is what it is all about. While Kelly is upbeat, the Restaurant Association’s Cummins is considerably less so. He admits to being fearful that spiralling costs throughout the sector – notably insurance, local authority charges, wage costs and VAT – could quickly “kill the golden goose”. And if that goose dies, the whole island will pay the price.