Business

When a market such as tourism is broken, Government intervention is needed

Domestic tourism can never replace the earnings from overseas visitors

Aer Lingus and Ryanair have been calling for a comprehensive stimulus package to reboot aviation and stimulate new routes. Photograph: iStock

Ruth Andrews
Mon Sep 6 2021 - 05:08

Every business representative group points to the damage caused to its sector by the Covid-19 pandemic and associated restrictions. All make worthy arguments, but for Ireland’s tourism industry – so heavily dependent on international visitors – it has been nothing short of cataclysmic.

The pandemic put an all but complete halt to air and sea travel and the unfettered movement of people. It has recommenced somewhat since mid-July with the European Digital Covid Certificate but most of the traffic at airports has been Irish people travelling outbound in search of the sun. Inbound tourism numbers have been modest and are likely to remain so into next year due to a lack of connectivity with key source markets overseas.

The Irish Tourism Industry Confederation (ITIC) has quantified the cost of the pandemic to tourism and hospitality businesses since 2019 at a staggering €13.8 billion. Government supports to date – principally the wage subsidy scheme, CRSS and business continuity grants – have been vital but they pale in comparison to the scale of the damage.

More than 100,000 jobs have been lost and the road back to health will be long, steep and uneven. However, despite the trauma and mauling of Covid, Ireland’s tourism industry is of the view that recovery is achievable given a fair wind and crucially pro-tourism and pro-aviation policies. In an updated strategic plan, to be published today, ITIC will outline a number of recovery scenarios, the more positive of which points to a return to 2019 levels of inbound tourism by 2025.

READ MORE

Tourism-related taxes

To have recovered in full within a five-year period would be no mean feat. And this isn’t just an industry looking to hear the tills ringing again – it is that and much more. In pre-pandemic times tourism was Ireland’s largest indigenous industry and biggest regional employer and it aims to regain that status. Fáilte Ireland, the state agency responsible for the development of tourism, estimates that 23 cents of every euro spent by a visitor is returned directly to the exchequer in direct tourism-related taxes. The size of the prize in terms of tourism recovery is significant.

Industry will do its bit but success and recovery will only be enabled by Government policy. In that context next month’s Budget could not be more important. When a market such as travel and tourism is broken, Government intervention is needed. First up for an island nation is the urgent need to restore Ireland’s connectivity – not just for tourism but also for exports, foreign direct investment, and the broader economy.

The domestic tourism economy is important but it only represents a quarter of Ireland’s tourism economy and can never replace the earnings from overseas tourists. International visitors have been, for decades, the bedrock of tourism and hospitality enterprises up and down the country and without them the industry has real problems.

And if aviation recovery and tourism success are symbiotic, how do we resurrect the latter? Ireland’s two biggest airlines, Aer Lingus and Ryanair, along with other key aviation stakeholders such as DAA and Shannon Airport, have been calling on Government to provide a comprehensive stimulus package to reboot aviation and stimulate new routes and increased capacity. This was a key recommendation of a Government-appointed Aviation Taskforce last year, which called for Government to provide a rebate directly to airlines of all Airport charges to incentivise the rebuilding of traffic.

Such a policy decision by Government would likely cost in the region of €100 million but would immediately boost aviation and tourism, and support the hundreds of thousands of jobs that they sustain.

Bold statement

Unfortunately, the recommendation has not yet been implemented but Ministers Paschal Donohoe and Michael McGrath can right this wrong and make a bold statement of intent in next month’s Budget. Such support would need EU approval as it is indirect state aid but if Angela Merkel can get the green light for €9 billion to Lufthansa, as she did last year, it would seem that the Irish proposal would be nodded through without difficulty.

In parallel to a major stimulus package to support air and sea access, Government must support the tourism industry on the ground. This includes an extension of the wage subsidy scheme out to June, certainty on the 9 per cent VAT rate, and a step change in tourism investment including a doubling of international marketing funds.

Assistance for employers to create jobs will also be required and in this context the tourism industry is a proven winner. Back in 2011, amid the wreckage of the financial crash, Government betted big on tourism and it was repaid in multiples as the industry added tens of thousands of jobs, many in regional Ireland.

Now is the time again for Government to look at the tourism industry, and its labour-intensive nature, and introduce policies that will help business and employers create jobs.

As difficult as the Covid period for the sector has been, it has also given an opportunity to rethink tourism. We should no longer chase volume but instead, mindful of the need to act sustainably and sensibly, should focus on value.

Industry is up for the challenge and will deliver. Time for Government to engage.

Ruth Andrews is chair of the Irish Tourism Industry Confederation.

LATEST STORIES