We need a tourism tsar. Are you right there, Michael, are you right?

By Ivan Yates

Thursday, February 04, 2010

BUSINESS strategy has three fundamentals: grow revenue, maintain margins and cut costs. Ireland Inc is now reducing its cost base with unprecedented deflation of 5% over the past year. The public finances trade at a monthly loss of €2bn and the first budgetary steps were taken to arrest this fiscal deficit.

Fixing the fractured balance sheets of the banks is pivotal to our economic solvency and growth prospects. This "batten down the hatches" retrenchment has been criticised as excessively negative and narrow. Where’s the job creation strategy?

Politicians and pundits who call on governments to create jobs misunderstand why employers hire workers. Employment is a byproduct of profitable investment. Without viable commercial enterprises, job creation is irrelevant. State employment, whether through public services or basic community employment schemes, has to be funded by tax revenues from real businesses. Unemployment is a symptom and consequence of recession rather than a cause.

Let’s seek the sectoral opportunities for Ireland Inc to grow our international market share, GNP and overseas revenues. The construction and property sectors are a busted flush. There is no need to build more residential accommodation or commercial property for the foreseeable future.

The development of manufacturing industry is increasingly dependent on mobile foreign direct investment. The IDA markets our low corporation tax rate, skilled labour force, network of advanced factories and generous grant incentives.

Little more can be done other than improving our overall competitiveness. Our natural resources of agriculture and fisheries are subject to production limits under the EU Common Agricultural Policy.

Best hopes for growth and foreign earnings lie within the holiday market. Tourism revenue last year was €5.2bn. This represented a five-year low, with an annual 17% decline. Employment in the hospitality sector contracted from 250,000 to 200,000. We had a million fewer visitors (minus12%) than in 2008. The biggest reduction occurred among British visitors. 2009 was an annus horribilis for our hospitality sector.

Just because we can’t control the bad summer weather, airline and airport security and the global credit crunch doesn’t mean we can’t make a significant impact by developing a national tourism plan. Currently the tourism portfolio is adjoined to the Department of Arts and Sport. This makes no sense. It should be merged with the Department of Transport as access to our island is fundamental to attracting visitors. Transport and tourism are disconnected in government. Airport charges to airlines have hindered route enhancement.

The €10 air passenger departure tax generates €10m a month in revenue. It has contributed to airlines downgrading us as a destination. This regressive measure probably reduces overall tax revenues by deterring foreign visitors. It has not stopped Irish holidaymakers going abroad. For a quarter in 2009 there was a net outflow of tourism expenditure of €691m. Various currency fluctuations – the strength of the dollar and sterling relative to the euro – do not explain our decline.

Fáilte Ireland is the primary state agency charged with responsibility for the tourism sector. It oversees capital investment, promotion, training and standards. There is a plethora of regional and county-based tourism bodies with an additional mandate. Are we getting the best bang for our buck? The principal focus of our state support should be international marketing. Perhaps, if we dismantled the bureaucracy and the bureaucrats and spent most of the money on Google search advertising, we could achieve a better return on our investment. Online marketing is the key to linking product to punter.

The old reliance on our green scenery and plausible people isn’t enough to attract a younger, cosmopolitan generation who are barely aware of the difference between Iceland and Ireland. When they surf online for their preferred activity or adventure travel plan, we must have focused packages to meet their needs.

We can’t rely on returning emotional emigrants to fill our coffers. Our 2,000 under-employed travel agents could put together localised features to provide the perfect short break in each region and market in a reverse direction. When visiting Sligo or Dundalk, we should offer the visitor every last ounce of value on what’s available in the area.

Holidaymakers with a special interest in walking tours, walled gardens, golf, surfing, racing, language, heritage or even stag/hen madness must be facilitated by our product offering in an accessible and integrated way. The energy, enthusiasm and professionalism of these providers are not being properly connected with our potential visitor market. Individual events such as the Volvo Ocean Race highlight what can be achieved through the Galway stopover generating €56m in revenue.

The Guinness Storehouse is able to attract 330 million impressions in five years. Targeted marketing and brand experience are the keys to success.

With 60,000 jobs in the accommodation sector, the wellbeing of our hotel industry is vital. The explosion of extra hotel rooms over the past 15 years created a crisis of overcapacity. The increase from 26,000 to 61,000 units was facilitated by tax incentives to property developers.

This was extended up to 2007 despite warnings about the devastating implications. Builders knew how to construct hotels at the lowest cost but were clueless about subsequent successful operations. Glamorous golf courses and elaborate spa/leisure centres are losing a fortune each month. These zombie facilities are now to be kept on life support by NAMA. This is unsustainable. It’s time to bite the bullet on an orderly reduction of capacity.

ACROSS the hospitality sector, there are a number of longstanding agreements for pay and conditions. These are organised through joint labour committees (JLCs). Their deliberations copperfasten workers’ entitlements such as double pay on a Sunday. It has been claimed the minimum wage of €8.60 per hour and other employee conditions have resulted in unviability and business closures.

Trade unions have argued that employers, who can’t afford these basic entitlements, don’t deserve to succeed. The proof of the pudding is in the eating. We could deregulate the labour market in the hospitality sector for a finite period of one year and then assess the veracity of all arguments. This would prove if employers really want to pass on cost reductions and ensure competitiveness or merely want to profiteer.

Irish tourism is fragmented at every level. There is a disconnect between public and private, product provider and transport carrier, event organisers and accommodation sources, market opportunities and online advertising.

It is extremely doubtful whether any Government inter-departmental committee or ministerial pronouncement can effectively deliver on our revenue and jobs opportunity. Our natural resources and entrepreneurial creativity provide a massive opportunity for Ireland Inc to become a significant global tourism destination. The Dubai World concept represents a fascinating global tourism model. What’s needed is a tourism tsar to make it happen. Michael O’Leary may retire from Ryanair soon. Let’s hire him.

This appeared in the printed version of the Irish Examiner Thursday, February 04, 2010