It has long been the belief of tourism chiefs that a whole-of-Government approach needs be taken in relation to the sector. This, after all, according to consistent Central Statistics Office data, is the country’s largest indigenous industry and biggest regional employer. If the impact on tourism isn’t considered with each Government policy then the industry – made up of 20,000 mostly SMEs with modest profit margins – is fated to suffer from unintended consequences.
This has regrettably come to pass. Three separate Government departments – Integration, Housing and Finance – are all actively pursuing policies that are likely to damage tourism. The Department of Integration, tasked with the job of accommodating an unprecedented number of refugees and asylum seekers, has become so over-reliant on hotels and guest houses that in regional Ireland one in every three bedrooms is now no longer available to the tourism economy.
Meanwhile, the Department of Housing, in pursuit of more long-term properties to ease the rental crisis, risks strangling the availability of short-term tourist rentals all over Ireland, and not just the urban hotspots full of trendy Airbnbs. And all this while the Department of Finance holds a sword of Damocles over the head of tourism and hospitality businesses, sticking rigidly to its intention of increasing the 9 per cent VAT rate at the end of this month.
Tourism Minister Catherine Martin has done a good job in difficult circumstances since her appointment in battling for the sector’s interests, but this array of problems will require her to do a lot of Cabinet table-thumping in the coming weeks.
The unintended consequences will hit regional Ireland hardest. Large swatches of the western seaboard from Malin to Mizen are dependent on tourism, with few other economic forces for regional balance.
Take Kerry, for example, long considered the home of Irish tourism, where 36 per cent of tourism beds are currently contracted by Government, or 40 per cent in Clare and 54 per cent in Donegal
The most immediate concern for business is the thorny issue of VAT, which is scheduled to increase from 9 per cent to 13.5 per cent in a little over three weeks’ time. A recent report by economist Jim Power makes a strong case for an extension of the 9 per cent rate. Power’s report argues that tourism and hospitality enterprises are battling with escalating costs on every front and, due to thin margins, a VAT increase will have to be passed on to the consumer. Prices will therefore rise, damaging demand and ultimately bringing in less revenue than forecast for the exchequer.
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More worryingly, the report goes on to state that a VAT increase, combined with weak economies in key tourism source markets, mean that as many as 24,000 jobs in the sector will be put at risk.
The public seem to be ahead of the politicians on this one. A recent Red C poll revealed that two-thirds of people want the Government to extend the duration of the lower VAT rate. Industry leaders hope that new Minister for Finance Michael McGrath can give clarity and certainty soon.
Stark impact
It is the acute shortage of accommodation supply, brought about solely by Government policy, that arguably presents a greater challenge to Irish tourism. While hotels and guest houses are part of the solution to accommodating refugees, they cannot be the primary solution. Latest departmental figures show the stark impact on popular locations – take Kerry, for example, long considered the home of Irish tourism, where 36 per cent of tourism beds are currently contracted by Government, or 40 per cent in Clare and, indeed, 54 per cent in Donegal. That is a lot of displaced American, continental European and British visitors and a critical loss of export earnings to local economies.
Potentially onerous planning regulations risk denuding rural and coastal Ireland of self-catering cottages just when additional tourism supply is most needed
While accommodation providers will receive a rate from Government for contracts, it is the downstream tourism businesses such as shops, attractions, pubs, restaurants, cultural experiences and inbound tour operators that will really suffer. Fáilte Ireland data clearly shows that for every €1 a tourist spends on accommodation, €2.50 is spent on ancillary tourism services.
A more balanced two-year plan as to how refugees and asylum seekers are to be housed is urgently needed. The pressure on everything from services to accommodation is only likely to get worse and such is the seriousness of the issue – to both the welfare of refugees and the health of the tourism economy – that a new approach is needed, led by the Department of the Taoiseach.
Furthermore, the proposed clampdown on short-term tourism lettings by the Department of Housing is another cause of significant disquiet. The Government is understandably trying to increase the supply of long-term rentals but potentially onerous planning regulations risk denuding rural and coastal Ireland of self-catering cottages just when additional tourism supply is most needed.
Such restrictions on supply will undoubtedly mean Irish tourism’s value proposition will be further weakened in the coming months. Demand will be frustrated as valuable overseas visitors are lost to competitor markets.
Last week, sombre industry representatives met the Tourism Minister and new Minister for Enterprise Simon Coveney to express concerns about the year ahead. Ministers were left in no doubt that tourism is at a critical juncture if post-pandemic recovery is to be maintained. Pro-tourism policies are needed now more than ever.
Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation
