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Sections of Irish tourism industry need to stop chasing short-term gains

Sector needs to adopt a mature attitude towards sustainable recovery, otherwise State support could dry up

The public and political mood towards Ireland’s tourism and hospitality industry risks going, in the space of a few short weeks, from sympathy to annoyance.

Blinking — bruised and battered — from the pandemic, the 20,000 businesses within the sector had been kept alive thanks to Government financial assistance and demand from the domestic market. Covid-19 had cost Irish tourism in excess of €12 billion over a two-year period as international visitors, the mainstay of the industry, were prevented from coming to our shores.

Since March, though, when restrictions were finally lifted, business has bounced back at a much quicker pace than had been expected. Pent-up demand, deferred bookings and accumulated savings have all meant that travel and tourism around the world has surged. Internationally businesses have struggled to service the demand and, with soaring cost inflation, consumer prices have risen sharply. This is very much the case in Ireland where there has been much debate and attention of late as to whether our hospitality and tourism experience remains value for money. Some eye-watering hotel prices and car hire rates have grabbed headlines and industry leaders are concerned public and political sentiment has shifted sharply.

Certainly that is what it felt like 10 days ago at the Oireachtas Committee on Tourism when industry representatives had their feet firmly held to the fire. Words such as “price gouging” and “exploitation” were used by TDs and Senators when discussing rising Dublin hotel prices. Such terms are loaded of course but who could blame them when some within the hotel sector insist on quoting excessive prices for their final rooms? The fact that these operators are a small minority of hoteliers, or indeed that some of them are owned by equity funds based abroad with no qualms about sweating their Irish assets, fell on deaf ears at the Oireachtas committee.

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Industry representatives legitimately point to a significant shortfall in tourism accommodation as a result of Government contracts for refugees, argue that hotel rates have jumped right cross Europe, and highlight the fact that the average room rate of a hotel in the capital last month was €176, putting Dublin on a par with its European peers.

Double-digit cost inflation and an acute supply shortage are driving prices up but there is still a view across the industry that Irish tourism offers value for money. This is backed up by independent data on hotel rates as well as surveys from Fáilte Ireland that track consumer sentiment. Excessive pricing by a small minority is simply not representative of the wider industry. Yet perception often trumps reality and this is the problem tourism leaders are wrestling with.

The value argument is of critical importance to both the immediate and long-term future of Irish tourism. Back in 2006 — at the height of the Celtic Tiger — Ireland’s value-for-money ratings dropped alarmingly. When the global financial crash happened two years later the sector worldwide suffered and, due to its weak value proposition in advance of the crash, Irish tourism took much longer to recover than international competitors.

The majority of hospitality and tourism companies that operate in Ireland are SMEs with modest profit margins and labour-intensive businesses. The spotlight is firmly on Dublin, highlighted again recently by a critical Lonely Planet view of the capital, yet 69 per cent of industry employment is outside of Dublin so tourism is important for regional economic balance. The key now is for the sector to stay united and avoid fragmentation of argument or priority. The industry was well-served during the dark pandemic days by coalescing round certain key asks. Now, when demand has surged posing entirely different problems, is not the time for division.

Undoubtedly, there has been an erosion in value as prices have risen but 2022 cannot be seen as a normal year for a multitude of reasons. Next year is likely to be far softer — that pent-up demand, those deferred booking and the aforementioned accumulated savings that are giving such a strong boost this year simply won’t be there again. The clock returns to zero and, arguably, with interest rates rising and inflation embedded, the environment will be far less buoyant.

At the National Economic Dialogue last week the tourism industry, alongside business groups, trade unions and the not-for-profit sector, pitched for finite Government resources. If Ministers are to continue their support of Ireland’s tourism sector then the industry must avoid chasing short-term gains and firmly adopt a mature attitude towards sustainable recovery.

Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation