Economics: Given all the wailing and caterwauling from tourism interests over the past few years, one would be forgiven for thinking that the industry is in deep recession, writes Jim O'Leary.

It is true that there are areas of tourism that have not been doing so well. The B&B sector, for example, has seen a 20 per cent decline in bednights since 2000. Campsites and the like are doing about two-thirds of the business they were doing five years ago, and some parts of the country have reported a marked decline in visitor numbers.

But, for all the evidence of specific areas of weakness, the available data clearly demonstrate that the sector as a whole is not in recession or anything like it. Take the data on visitors to Ireland. Yes, they show that 2001 was a bad year - the total number of visitors fell by 5 per cent - but they also show that there has been reasonable growth in every year since then. Numbers in 2005 look like being about 14 per cent above their 2001 trough and 9 per cent above their previous peak of 2000. The expenditure figures paint a similar picture. Total expenditure by visitors rose by more than 5 per cent a year between 2000 and 2004 and will post a similar increase this year.

One of the reasons for the flow of gloomy news from the tourism sector is that those doing poorly attract more attention than those doing well.

But another reason may be that the expectations, against which performance has been measured in recent years, are those that were shaped by the rapid growth of tourism in the 1990s. During that period, especially the second half of the decade, the sector grew so strongly - numbers up by 8-9 per cent per annum and expenditure by visitors up by 11 per cent per annum - that the perfectly respectable performance registered since, seems like stagnation.

This brings me to an important question, one that I think is central to any rational strategy for the future development of tourism in Ireland, namely the question of sustainability. How long could the kind of growth rates achieved during the 1990s be sustained? Bear in mind that 8-9 per cent annual growth in visitor numbers implies a doubling every eight to nine years.

Is it reasonable to suppose that growth at, or close to, this pace could have been maintained much beyond the turn of the century, given conditions in the Irish economy at that point, even if the external environment had remained benign?

To answer these questions, at least three sets of considerations must be taken on board. One is the absorptive capacity of the country in terms of airports and ports, transport networks and accommodation infrastructure. We're well ahead of the market - to the point of significant excess capacity - on the accommodation front. But as far as transport infrastructure is concerned, the rapid growth of visitor numbers and economic activity in the 1990s has left us with a huge deficit and with serious congestion problems.

The second consideration is related to the first. It is this: tourism cannot be insulated from the shocks to which the rest of the economy is exposed.

It has to compete for resources with other industries, reflecting the fact that the economy has been booming for more than a decade. Those resources - especially labour and land - have become scarcer and more expensive.

As a result, the cost structure now facing tourism is very different to that which faced the sector 10 or 15 years ago. Given this higher and escalating cost structure, Irish tourism must do what the other internationally-trading sectors of the economy have long been urged to do - move up the value chain.

What this means is that the tourist industry must increasingly develop offerings to attract visitors that are more discerning, have more disposable income and are less price-conscious. The third consideration has to do with the risk of cannibalising the product. A large and important part of Ireland's traditional tourism offering was bound up with the attractions of peace and quiet, slow pace of life, unspoilt landscape, humour and conversation.

Rapid growth in tourism numbers, especially when accompanied by rapid growth in economic activity generally, must at some stage erode the basis for this sort of offering.

Ireland has not yet become a loud, frantic, polluted, dour and humourless place, but it is moving in that direction and will move that way all the more quickly if policy towards tourism is dominated by a desire for rapid expansion of visitor numbers.

When one considers how congested this country has become; how much costs have risen, how much the traditional image of the country has become misaligned with the post-Celtic Tiger reality.

When one considers, in addition to all of that, how many more competitors have arrived on the scene over the past decade or more - think of former Soviet satellites in eastern Europe - the wonder is that Irish tourism has survived as a viable industry at all. But, in fact, it has done a lot more than survive.

Despite the headwinds, Ireland's market share appears to have held steady since 2000. World Tourism Organisation data show that Ireland's share of total visitor arrivals in European countries has remained broadly unchanged at 1.6 per cent over the past five years, while its share of total European tourism receipts has edged up slightly.

Overall, one is left with the impression of a country that is still punching above its weight in tourism terms, against all the odds. On the face of it, this is highly encouraging. But there is also a very sobering inference that can be drawn from this state of affairs, namely that the downside potential is considerable.

Those involved in the sector need to work hard and think intelligently if that downside potential is not to be realised.

Jim O'Leary currently lectures in economics at NUI-Maynooth. He can be contacted at jim.oleary@nuim.ie