Tourism thrives but warning on staying competitive is timely

Fáilte Ireland notes price gouging and international factors could undermine revenue base

 

Almost eight million tourist visitors spent more than €4 billion in Ireland last year, an 11 per cent increase on 2014 and a record number. Despite the strong performance, however, there is no room for complacency as Fáilte Ireland chairman Michael Cawley has made clear.

He warned that 2016 presents some difficult challenges. The hotel sector is approaching full capacity in Dublin but remains below capacity elsewhere while price rises have begun to erode overall competitiveness. The threat of external shocks – terrorism related incidents that have depressed tourism numbers in Paris and Brussels in recent weeks – also create some uncertainty about the rate of growth of international tourism.

The record number of visitors to Ireland last year was helped by a number of favourable factors: a weak euro made the country a cheap and attractive destination for British and American visitors and the low (nine per cent) VAT rate on hospitality and the zero-rated travel tax helped ensure cost competitiveness. But for visitors to Ireland from euro zone countries, value for money was much less evident as Mr Cawley has acknowledged in a stern warning to the industry against “price gouging”.

The strong recovery in Irish tourism owes much to the special treatment that it has received courtesy of the taxpayer. The lower VAT rate, introduced as a temporary tax incentive in 2011 and financed by the private sector pension levy, has helped to increase investment in the sector, raise employment and attract more visitors.

As a former deputy chief executive of Ryanair, no one better appreciates the importance of competitiveness than Mr Cawley. A record performance of the tourism industry in 2015 owes much to temporary external economic factors. A loss of cost competitiveness versus other euro area countries, where Ireland fails to keep tourism prices broadly in line with those in France and Germany, is a matter over which we can – and should – exercise control. Not all tourists are price sensitive but, for many, value for money is an essential ingredient of the compelling visitor experience.

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