I am anxious again to emphasise the main thrust of the budget, the need for national recovery of our economy. Specific areas have been identified by the Government as having the potential required to help us towards national recovery. The budget has given a boost to the economy and created an awareness in the minds of the people that we are on the correct road to recovery. The budget has been accepted in a most extraordinary manner as being what the country requires. Within the area of my responsibility as Minister of State the formation of a new Department of Tourism and Transport clearly demonstrates the importance the Government attach to the tourism industry. There has been a failure over the years to identify this sector as one of immense potential. We have had to cope with descriptions such as the Department of Industry, Trade, Commerce with Tourism tagged on at the end or Forestry and Fisheries with Tourism added as an afterthought. Now we have the Department of Tourism and Transport with tourism identified as an area of immense potential. The integration of transport policy in the new Department is of major significance given the pivotal role of an efficient and competitive transport system in the development of tourism.
The new Department will identify the areas of activity of Government Departments and State agencies that can be incorporated to produce attractive packages for tourism. The regional tourism organisations need not be abolished, as somebody else had in mind but their needs should be clearly defined. There should be no duplication or overlapping of functions or activities with Bord Fáilte and the RTOs. However, there is a clear need for closer co-operation between all bodies to ensure that their contribution in their respective fields is understood and seen to be part of a coherent plan for the tourism sector.
The enormous loss to our economy of our market share relative to our main competitors is something we are addressing immediately. One matter of importance was access transport costs which remains one of the main factors in the loss to the Irish economy. Proof of a change, if it was needed, is evident in the upsurge in air passenger traffic between Dublin and London following the lowering of fares on that route in response to competition from a new carrier. A considerable increase was recorded compared with the static traffic volumes on the route between 1980 and 1985. However, we are not fully satisfied and we intend to pursue economy in fares for access transport to Ireland. Because of our location as an island nation on the periphery of Europe, we think that emphasis must be directed to the lowering of access costs for visitors.
The Government's Programme for National Recovery gave a firm commitment to achieving export growth and, in particular, to substantially increasing our share in the world tourism market. The policy document, “Putting Growth Back into Tourism”, also states that revitalising tourism must be a top priority. We are honouring that commitment and we will continue to do so. I have returned from Brussels where I attended a two day conference on tourism. It was a stimulating experience for me to find that the emphasis we have placed on tourism and the direction we are taking in the expansion of the industry are seen by our colleagues in the EC as the direction they also wish to take, realising the huge potential there is in tourism and the creation of employment from its development. In 1986, 337,000 tourists came here from mainland Europe and spent £88 million. German visitors totalled 100,000, French 90,000 and Dutch 33,000. Given the premier ranking of Germany in world tourism our performance in this market is extremely disappointing. There were also 71,000 visitors from other areas in 1986, over half of whom were Australian, realising revenue of £26.2 million. Many of these visitors were of ethnic groups, and while access transport is a major factor influencing the non-ethnic traffic, the level of domestic cost is equally important. The potential of tourism will be developed vigorously by this Government.
The current budget allocation for Bord Fáilte is in excess of £24 million. The previous Government proposed a reduction to £20 million which the current Government reluctantly endorsed in view of the necessary curbs which had to be introduced on public spending. Bord Fáilte will implement this saving by engaging in a more carefully targeted promotional campaign. In the past the board have concentrated on what is known as destination advertising where fairly large sums of money were spent on generalised media advertising campaigns. This approach to marketing may have been appropriate in the past but this Government have directed that Bord Fáilte should now utilise a more targeted strategy. It is not expected that there will be any fall-off in tourism either in revenue or in visitor number terms in the coming year. Indeed, it is expected that there will be a satisfactory increase in tourism in 1987.
The budget, while it indicated a saving need as I have outlined, allowed for an increase in capital grants. An amount of £2 million was granted in 1986 for the hotel and guest house reconstruction and development scheme which has been continued because, first, it is intended to operate for only one year and, secondly, the Government want to evaluate very carefully the impact of the scheme to see whether a grant scheme of this sort is as effective as possible in generating investment in the accommodation sector. All other capital grant schemes administered by Bord Fáilte have been continued.
In the budget also we included an extension of the business expansion scheme to tourism. That scheme offers a tax incentive to potential investors by enabling them to obtain tax concessions in respect of £25,000 per annum of their investment in approved companies. For far too long the lack of incentive to invest in this industry has had a detrimental effect on the industry. We have taken this decision conscious of the need for investment in the industry from people not directly involved in the industry who see it as an area worthy of investment. For many years the tourism sector have been pressing for an extension of this scheme which up to now was confined to manufacturing industry. We accept that substantial investment in tourism accommodation, amenities and facilities would help enormously in the necessary development and operation of the tourism product.
Finally, if I may be permitted to become a little parochial possibly in regard to the area of the country from which I come, let me say that the entire region of the south west accounts for about 30 per cent of tourist activity in this country. In that regard regional tourism organisations have a vital role to play in helping the tourist industry to develop and realise its full potential. These organisations are working on the ground and are in a unique position to assess tourism's strengths and weaknesses. If we are to achieve a sustainable level of growth the industry needs to expand into specialist markets and to package and organise the products which these segments of the market require. The concept of specialist holidays presents new opportunities for the expansion of the tourist industry. To expand on that we tend to emphasise the weather factor. Our climate is not of its nature to be concentrated on for holidays, but we have other strengths if that is a weakness and we ought to diversify into those strengths to expand our industry. At the moment a firm of consultants are examining this aspect of the industry, the cost effectiveness of State expenditure on tourism and the potential market for the various specialised products. Their findings should help us to determine areas of development which deserve priority attention. It is hoped that this examination will be concluded by the middle of next month and on receipt of the consultants' views we will have the further information that is so urgently required to point the direction for industry in future decades and also to ensure that our strengths are utilised for this year, even though we are four months into the year. We intend in all our actions to develop the industry. The Government can point the direction and give leadership, Bord Fáilte can stimulate and coordinate development but the success of the strategies adopted will depend on the response and support of those directly involved in the industry as well as those indirectly involved who benefit from tourist spending. In this regard I hope that the business expansion scheme will attract finance from those who benefit indirectly.
It is surprising that in an industry with the potential of the tourist industry we have missed our opportunity through lack of commitment and leadership but that opportunity will not continue to be missed. We will be totally committed to this industry as a means of creating jobs which in turn will boost the economy.
We often associate tourist spending only with hotels and transport, but at least 60 per cent of tourist spending goes elsewhere. The range of businesses who make their money from tourism have an obligation to invest some of it in tourism development. We appeal to the sectors who indirectly benefit from tourism, although they would not see themselves as part of the industry, to invest in tourism development. I already mentioned the RTOs who have a ready structure through which local energies can be harvested to develop tourism. We acknowledge the commitment and support already given by many businesses in the commercial sector but we want more firms in the commercial sector to get involved. We can sell more to the tourists, if we produce, stock and display the products they want.
The development of tourism is not only about selling goods and keeping the environment clean although the environment is something on which we should concentrate. As this is the year of the environment we should use the opportunity to create an awareness among people of the need for a clean environment for our wellbeing as well as to encourage visitors. First impressions are lasting impressions.
About 80,000 jobs depend directly or indirectly on tourism. There is great potential for increasing that number of jobs in the future. If we are more courteous in serving our visitors in relation to accommodation and shopping requirements, they will be encouraged to return and to spend more which means more jobs and not just in the sectors directly identified with tourism.
In relation to access transport I must express my appreciation of the efforts of the local authorities in the south west region and also the West Glamorgan County Council not to mention the commitment of the previous Government. Despite the budgetary constraints on us we intend to support by means of the start up grant, the UK link between Cork and Swansea. I had the privilege of formally launching that link recently. For an area like the south west the potential is tremendous. As a result of this link the number of visitors will increase enormously during the coming years. The commitment given by local authorities to set up this company is fully acknowledged, and I wish it well. It may be considered that the fares for access transport may not yet be at the level we would hope for, but never before have the fares by air and sea been so attractive and never before was there such a choice of ways to travel between the UK and Ireland.
The ferry link, in addition to its value to the people who use it, to the tourist industry and to the commercial life of the south west, has provided a morale boost to the people of the region. Goodness knows, the area needed the sort of morale boost that the reintroduction of the link provided for them.
It will be recalled, and it is on the record of this House, that in a plea to have that ferry service restored I made the longest contribution in any single debate in the last Dáil extending over one and a half hours. I am more than pleased that the service has been restored. Indeed to raise the morale in the area, as a Government, we have a few more things to do for the tourist industry. Despite the budgetary constraints on us I am confident that the proposals to upgrade the airport in Cork will be proceeded with as soon as possible.
I have already touched on the subject of the environment. Bearing in mind that this is the year of the environment there are a number of other matters in this area of vital importance to the tourist industry. Litter is one. I suppose I would be correct in describing its abolition as our first priority. We must create an awareness in people's minds of the damage being done to our environment by the indiscriminate dumping of litter on our streets and in our countryside generally. We must make it known that it is not acceptable to ourselves.
Planning is also very relevant in the sphere of the environment, as is water and sea pollution. Indeed marine wreckage and conservation needs fall under this heading also. As a nation we have learned what it means to have a wreck such as the Kowloon Bridge sited off our coast with its potential dangers. The action taken and continuing to be taken by this Government since assuming office must be acknowledged. There is also the tremendous work being done by the relevant local authority in ensuring that the surrounding beaches do not suffer any ill effects. While on the subject of our environment I would request that local authorities and the Departments of the Environment and of the Marine would grapple with the situation obtaining in such matters. My Department will be taking an active interest in developments in relation to all of these issues. As a further indication on this Government's commitment to tourism I might reiterate that there will now be an interdepartmental committee whose task will be the co-ordination of all efforts in regard to tourism. We hope to strengthen the hand of this committee, raising its profile, which decision will be announced shortly.
The awards of excellence, giving recognition to local authority efforts, are worthwhile. These awards are presented annually and include those nationally for tidy districts, commercial streets, tidy beaches and so on. These afford an opportunity to extend an awareness of our environment about which I have spoken.
Signposting is a matter requiring immediate attention. Last year Bord Fáilte held a three day seminar, in association with An Foras Forbartha for planning officers throughout the country. We shall implement the positive recommendations emanating from those discussions so that Bord Fáilte will continue to play a forceful role in the activities of the environmental awareness bureau by way of representation on the management committee. There are reports prepared on water pollution and a draft policy document has now been prepared.
We shall also encourage the preservation of heritage houses, the cost of maintaining which has become prohibitive in many cases and constitutes a heavy financial burden on their owners. In turn that leads to their deterioration which must be remedied. The social employment scheme has been identified as a means by which their maintenance may be assisted. I hope the provisions of that scheme will be used extensively in ensuing years.
The European year of the environment has as its overall objective the organisation and promotion of a programme of events and activities aimed at raising public awareness with regard to improving and protecting the environment. The environment awareness bureau acts as the national committee for Ireland. They have now formulated a number of flagship projects. Plans are afoot to secure sponsorship of the programme from a number of sectors.
Increasing the range and facility of the various local authority services is another primary task of the Government and my Department. In order to achieve higher growth levels our tourism industry needs to expand into specialist markets, marketing the project and amenities those markets require. It must be remembered that the modern tourist is more activity conscious than his predecessor. Bearing in mind that our weather is not something we can sell easily we must concentrate on holiday activities. In order to acquire a more significant share of that growing market it is important that we identify the activities we can offer by way of augmenting the holiday enjoyment of potential tourists. It has already been proven that there is an appreciable market for many of our amenities, amenities that are almost too numerous to outline. Some examples are golfing and inland fishing. The Department of the Marine will no doubt pay attention to our deep sea and off shore fishing and will encourage its development from a tourism point of view. Other amenities are boating, orienteering and hill climbling. Then we have our culture, our heritage and our Irish language. We can hone in on all these activities to attract visitors to our country.
Latest research shows there are other markets for special interest products such as agri-tourism and scientific tourism. The list can be added to almost daily. We intend to spur on the identification of these areas of activity and provide for the tourists the information and the direction they need in order to partake in these activities. I am aware that the consultancy team have almost finalised their study of the effectiveness of State spending on tourism. This analysis, when submitted, will provide the basis for Bord Fáilte in determining priorities when setting about the tasks of expanding and diversifying the range of products available. We must also identify areas to assist the provision of extra facilities in resorts and other locations. They have been unsuccessful in expanding these facilities, We must generate an extension of the holiday season and encourage longer stays by visitors by way of improving facilities and expanding the range of activities. In this context we need more all-weather facilities as a primary consideration.
In the internal market for tourism we must provide and encourage the provision of adequate playgrounds, adventure playgrounds, for our own children as well as for the children of visitors. A small fee could be charged for admission because when such a fee is payable, it is usually the case that more respect is shown for facilities like the ones I have mentioned. The income from the fee could be used to provide entertainment in those playgrounds and also to ensure the safety and wellbeing of the children. In that way it would also create employment.
Apart from resort and holiday centre facilities, Bord Fáilte continue to fund and support individual projects in locations where there is a demonstrated tourism content. That is as it should be. We cannot of course continue to expect the Exchequer to fund all the activities. That is why, on a number of occasions, I have mentioned the need for investment from the commercial sector and from everybody who can play a part in extending this industry.
It is generally accepted — this projection is based on current trends and on discussions and meetings I had in the past few weeks — that the demand for centres offering multi-activity holidays will increase significantly during the coming years. It is therefore essential to encourage further improvements in those centres so that we can attain the standard of their counterparts in Europe. There is a range of activities, some of which I have already outlined. As I said already, the list is endless. Many of these activities are organised worldwide with affiliated international bodies. This assists greatly in identifying the size of the potential market. It enables direct marketing to the people involved. I contend that we have not done sufficient up to now in selling the strengths of our tourist industry but that is now behind us. We have set the direction in Government and we intend to pursue it. Everybody involved realises that the direction we are taking is the correct one.
I have already mentioned the RTOs. I would like to see more recognition, by way of funding, of the RTOs by the business community. The regional tourism organisations have a crucial role to play in the development of tourism. They have an abundance of local knowledge and ideas to assist the development process. Having been given encouragement, they can encourage local involvement in the development of tourism. They are ideally positioned to develop and exploit the tourism potential of their respective regions. Fifty five per cent of the budget of the RTOs is provided by Bord Fáilte. Their contribution amounted to over £2.3 million in 1986. The balance of the budget of the RTOs is provided by local authorities, about 13 per cent; membership subscriptions, about 7 per cent and commercial activities undertaken by the RTO's about 25 per cent. There is an obvious need for greater financial involvement by the local communities in the running of the RTOs. The commercial sector contributed only 7 per cent to the cost of their local RTOs, yet 60 per cent of tourist revenue is spent on items other than hotel accommodation and transport.
Value for money is an area which has been, and still is, causing some concern. The main factors which caused high prices for tourists in Ireland were the high rate of inflation in the early eighties, the high rates of VAT on essential elements of the tourism product like accommodation, car and boat hire, meals, drinks and petrol, high access costs partly attributable to the fact that we are an island and there is no road or rail access for our major markets and lower labour and other costs, particularly in the Mediterranean, and the long haul destinations.
It is acknowledged that inflation is now down to 3 per cent. VAT has been reduced to 10 per cent for accommodation, car and boat hire and meals. There has been increased competition — and this is the crucial one — leading to lower prices initially on air access routes. On the Dublin-London route there was a fairly substantial reduction and on the United States-Ireland route the prices were very competitive compared with the United States and other European city rates. It is hoped that this more competitive régime can be extended to routes other than the cross-Channel routes in order to maximise access possibility and price competitiveness.
A balance needs to be struck between low prices for the tourists and a reasonable level of profitability for the tourist operators. The hotel industry have had particularly low profitability for the past five or six years, and this inhibits not only re-investment but also an increase in employment. In this context the recent commitment by the Irish Hotels Federation in their policy document to maintain price levels is very welcome and I want to acknowledge that.
Value for money is a concept which must be kept in perspective. Good standards and quality must not be sacrificed merely to bring about low costs. At the same time it is conceded that tourists have been ripped off. This is hard to control. Community pressures and an appreciation that this attitude is unproductive in the long run will be the only way in which value for money for tourists can be ensured.
Import substitution forms part of the direction we intend to follow in the future. The sharp decline in the performance of the domestic market in recent years is a matter of serious concern. The poor summers of the past two years and the decline in the level of discretionary income has not helped, but a more forceful marketing approach by the industry and Bord Fáilte highlighting the attractions of Ireland and putting together holiday offers at competitive prices, particularly activity related holiday packages, should restore growth in the home market.
Previous Governments reduced VAT on a range of tourism related products. This, coupled with this Government's efforts to contain inflation, will make Ireland a more attractively priced holiday destination.
