Mr. Paul Gallagher:

I thank the Chairman and members of the committee for giving the Irish Tourist Industry Confederation, ITIC, the opportunity to discuss opportunities and challenges for tourism in Ireland. The ITIC is the representative group for tourism business interests in the country. Our members include airlines, airports, hotels, attractions and tour operators, as well as the two State tourism agencies, Fáilte Ireland and Tourism Ireland.

Without dwelling too long on the past, 2016 will mark the third consecutive year of record visitor numbers from abroad - almost 9 million, with record revenues generated of circa€8 billion and, critically, employment numbers in the industry now in excess of 230,000. This means that over 45,000 new jobs were created in the tourism sector since 2011, 72% of which were created outside Dublin. No other industry can match that performance, either in absolute numbers or the regional dispersal of jobs. I take the opportunity to acknowledge the support the tourism sector has received from the Government, particularly the suspension of the airport departure tax and the introduction of the 9% VAT rate in 2011. These were key factors in the recovery of tourism from the collapse in the years 2008 through 2011. The VAT rate, in particular, reduced costs and allowed the sector to become much more competitive, the benefits of which are clear to see in new jobs growth and the Exchequer returns. There has been a level of debate about the 9% VAT rate, but it is important to highlight that it puts Ireland on a level playing field with its European neighbours. As 17 of the 19 eurozone countries have a VAT rate of 10% or less, the rate in Ireland is of the right size and appropriate.

We have been active in driving more hotel capacity in Dublin and we are strong advocates for a new brand identity for the Shannon corridor to maximise tourism in that area. The Irish Tourist Industry Confederation, ITIC, has worked very well and closely with Fáilte Ireland and Tourism Ireland and that collaborative approach has worked well for Ireland.

As an industry, however, we remain disappointed by the State’s lack of investment in tourism with regard to destination marketing funds and product investment funds. Destination marketing budgets for the promotion of Ireland to overseas markets are down 40% since 2008, while the current five-year capital plan - which is valued at €27 billion - only allocates €106 million to tourism investment. These two areas need to be addressed as a matter of urgency as otherwise, Irish tourism will not be able to realise its potential. ITIC is also of the view that the State’s ten year strategy, People, Place and Policy - Growing Tourism to 2025 is unambitious and needs to be overhauled. Only two years into that plan, its targets have nearly been met already so clearly the plan was far too conservative.

Tourism is a cyclical business and frequently subject to external factors over which it has no control such as political unrest, recession or slow growth in key source markets, terrorism or unfavourable exchange rate movements. The most pressing external factor at the moment which presents a major challenge to Irish tourism is Brexit. While the tourism sector is performing strongly, analysis carried out by the tourism industry shows that the implications of Brexit could be far-reaching for Irish tourism. Brexit, as the most pressing external factor, presents big and immediate challenges. The most obvious challenge from the UK vote to leave the EU has been the sharp weakening of sterling against the euro and the dollar. Consequently, Ireland’s competitiveness has been severely hurt. We must remember that the UK remains Ireland’s largest source market with a 40% volume share. Never before has the industry or the State needed to remain competitive and lean to protect its market share and to sustain growth. There is also a strong case to be made for a Brexit fund for Irish tourism to ensure that market diversification can be achieved and that the British market is sustained. Sterling has weakened by nearly 20% since 23 June.

In the medium to longer term it is critical that the needs of Irish tourism are recognised in any new EU-UK deal. ITIC has identified four key areas to protect tourism in Ireland that need to be addressed within EU-UK negotiations, namely, the common travel area, aviation access, regulatory regimes and cross-Border co-operation. We argue that the common travel area must be maintained and should any border controls be imposed to allow the UK to manage migration, these should be on the British mainland and not on the island of Ireland. A hard border that limits the movement of people would be unequivocally damaging to Irish tourism. Likewise, the preservation of the current aviation regulatory regime of open market access for airlines between Ireland and the UK is critical for tourism to prosper. With regard to the regulatory environment that is negotiated as part of any new EU-UK deal in the wake of Brexit, the Government must be conscious of not disadvantaging tourism businesses in the Republic of Ireland to the benefit of those in Northern Ireland. Cross-Border co-operation is vital to be maintained particularly in light of all-island agencies such as Tourism Ireland. Tourism has been well served by an all-island approach to its marketing and promotion and there needs to be a strong commitment to this going forward in any new deal, with appropriate resources allocated.

Tourism has shown its resilience. It has recovered strongly and has delivered jobs right across the State. There is much more growth to realise. Given a fair wind and continued support from Government it can continue to grow. As an indigenous sector, tourism is Ireland’s biggest and there is simply no other Irish industry with greater further potential. Tourism industry assets can never be offshored and there will never be equal alternatives to our unique attractions, from the friendly welcome of the people to the brilliant product, and of course the fabulous beauty of our land and seascapes. Once Ireland remains competitive, pursues the right policies and investment strategies, and counters Brexit as best it can, Irish tourism will continue to prosper and grow.