I welcome the opportunity to address the House on current conditions in the Irish tourism industry. It is particularly appropriate to review this as we come to the end of this year's tourist season and take stock of developments during the first five months of the Government's term of office. Since taking up my appointment in early June in the newly constituted portfolio of Arts, Sport and Tourism, I have had extensive consultations with tourism interest groups and reviewed developments with staff in my Department and the principal tourism State agencies. Our general strategy to sustain the medium and long-term growth of the sector is set out in An Agreed Programme for Government and I will be energetically pursuing the individual actions set out in it.
Given the difficult challenges facing the tourism sector over the past two years, my initial work has been focused on a range of issues including freeing up over the summer €3 million for additional front-line marketing activities to generate extra business this year; exhorting the industry to provide better value for money and to improve competitiveness in the light of public criticism this year of pricing and quality levels; supporting Tourism Ireland Limited – the new all island tourism marketing company established under the Good Friday Agreement – in autumn promotional campaigns in the United States and Britain; progressing the preparation of legislation to establish a new national tourism development authority bringing together the functions currently carried out by Bord Fáilte and CERT and putting in place arrangements for a major review of tourism policy.
The tourism industry has now achieved a scale and status as a major player in the Irish economy, generating €4 billion in annual foreign revenue earnings and €1.2 billion in domestic expenditure. Employment in the industry is estimated at 150,000. Visitor numbers, at six million in 2001, have doubled over the past 11 years and foreign revenue earnings have increased threefold over the same period generating estimated annual tax receipts of at least €1.2 billion. The recent ITIC report on the impact of tourism on the Irish economy estimated that capital spending of the order of €4.3 billion at current prices took place during the 1990s with the support of EU and Exchequer funds. This has widened the tourist product base, added an extensive range of public and private attractions and upgraded our access transport infrastructure.
After ten successive years of uninterrupted growth up to 2000, the industry faced its first major setback in many years with the double blow of the foot and mouth crisis in the spring of 2001 and the aftermath of the tragic events of 11 September 2001 in the United States. Although there were varying fortunes within and between different sectors and regions, the hard evidence is that we coped well. This was due to a combination of resolute actions at industry and Government levels. While official CSO figures for 2001 show that the number of overseas visitors to Ireland fell by 5% in comparison with 2000, they were still at a very healthy level of six million. Total foreign revenue earnings from all overseas visits actually increased by 8% to €3.96 billion. In addition, domestic holiday business remained buoyant last year, with expenditure rising by 16% according to Bord Fáilte figures. Our performance in terms of tourism receipts was ahead of the world and European average.
While evidence from CERT employment surveys shows there was a marginal reduction in permanent employment in Irish tourism in 2001, recruitment of skilled staff remained a challenge for the sector, with evidence of a continuing interest in recruiting labour from third countries. There was little hard evidence of major permanent job losses or closures in 2001, although margins were undoubtedly under pressure in many businesses.
The year 2002 has been a difficult one for Irish tourism. It has been characterised by a marked shortening in the booking period for holidays. This has made it difficult for operators to predict levels of business from month to month. That, in turn, led to a high and understandable level of uncertainty in the trade. The latest available official tourism and travel statistics from the CSO relate to the first quarter of 2002. These show an increase in the total number of overseas visitors of 10.3% on the same period last year with foreign revenue earnings up 5.8%. These are good figures but should be treated with a degree of caution given that first quarter business generally accounts for less than 20% of total annual visitor numbers. I understand that figures for the second quarter are scheduled to be published by the CSO by the end of this month. These may be expected to show a certain softening of demand, due to a number of factors – the so-called World Cup effect, political instability internationally, economic uncertainty in Germany and the USA and a marked reduction in airline capacity on American routes. The poor weather over the summer months also had a negative impact on the British and domestic markets.
The market intelligence available from the industry and tourism agencies indicates that the peak season produced mixed results. The good news is that the British market, traditionally our biggest market, has held up well with estimates of up to 6% growth in visitor numbers. This confirms the wisdom in the recovery strategy of targeting Britain as a market that could yield immediate and significant results this year. On the downside, visitor numbers from the United States have fallen and this has had a negative impact in those sectors and areas which depend heavily on this market. Estimates for mainland Europe show mixed results; Germany remains weak with some good results from the southern European countries. Overall, I believe that the outturn for this year will be better than originally expected with current forecasts suggesting a small percentage increase in visitor numbers which could bring us back to close to year 2000 performance.
This year has seen the largest ever budget being deployed for the international marketing of the island of Ireland. Tourism Ireland Limited, which was successfully launched towards the end of last year, has a total budget of €50 million this year, of which €27 million represents direct programme spend. This is supplemented by substantial budgets for regional and product marketing by Bord Fáilte, of the order of €25 million. Shortly after my appointment as Minister for Arts, Sport and Tourism and following consultations with the industry and tourism agencies, I decided to reallocate a further €3 million in funding for front-line marketing activity. With the help of that funding, Tourism Ireland extended its marketing activities in those markets with the best prospects for generating visitors and revenue in the short term, targeting in particular Great Britain, closely followed by Europe and North America.
Coming from Kerry I am conscious that the North American market is particularly important for many sectors of the tourism industry. There were difficulties increasing our marketing returns in this market during the peak season because of reductions in direct air capacity. In view of the high load factors and pricing on the American routes, I did not favour putting extra resources into the US market during the peak period. However, I did consider that it would be worth pursuing some of the traditional autumn business. In order to support that campaign and to help kick-start the 2003 campaign, I travelled to the United States in October on a promotional visit to Chicago and New York where I met key players in the tourism trade there and carried out a number of media promotions in order to add whatever political weight I could to Tourism Ireland's efforts to reverse the downturn in this vital market.
In the programme for Government, we have set the target of increasing our share of the continental European market. Our performance in the German market, in particular, has been disappointing over the past few years and I believe strongly that we need to look again at our approach to it. Tourism Ireland has conducted a major review of the German market and I hope to see the fruits of this work next year.
One good news story emerging through this difficult period for tourism has been the ongoing strength of the home tourism market. The most recent figures available show that hotel bed night sales from the home market have actually risen this year by 15%. This volume of growth does not happen by accident and is a tribute to the trade and the tourism agencies which have delivered this performance through the introduction of innovative special offers and strong promotional campaigns.
Based on soundings from the industry and our tourism agencies we should see some further improvement next year. The medium to long-term outlook for the tourism sector remains bright. As long as we can maintain our international competitiveness in terms of pricing, access and the quality of our product, the sector should overcome its present difficulties. Tourism Ireland and Bord Fáilte are working in close consultation with the industry, North and South, on their marketing programmes for 2003. This close interface with the industry will ensure that the programmes are soundly based and target the available resources where they can deliver the greatest dividends. I look forward to launching the new 2003 programmes in December.
I am convinced from my recent visits abroad that we need to sustain strong marketing campaigns to ensure that Ireland remains in the minds of potential visitors and to meet the more intense international competition that has emerged recently. My objective during the recent discussions on the departmental Estimates for 2003 was to ensure sufficient funding would be available within the tourism budget to mount robust marketing campaigns in our key target markets next year.
I cannot talk about next year without mentioning that the largest international sports event in the world in 2003 takes place in Ireland from 21-29 June. I refer to the Special Olympics World Summer Games, when Ireland will play host to an estimated 7,000 athletes, 3,000 coaches and delegates with 28,000 relatives and friends. Delegations from more than 160 countries will participate in 22 different sports at various venues in the greater Dublin area and Belfast. This will be the first time the games will be held outside the United States and I understand from the organisers that preparations for the event are well advanced and on schedule. Fundraising is also on target. Senators will be aware the Government has taken the initiative in this regard by agreeing to provide €10 million. The remainder of the money is being raised through contributions from the corporate sector, private donors, fundraising activities, the European Union and Northern Ireland.
Other tasks being undertaken as part of this truly great task include preparation of a host town programme, which will see 170 delegations stay in cities, towns and villages throughout the island of Ireland for four days prior to the games; securing accommodation at games time for the majority of the athletes and officials taking part; recruiting 30,000 volunteers, 15,000 of whom have already been recruited, and organising volunteer training programmes; and arranging to provide services during the games in 52 different languages. All those involved in the organisation and backing of this great project deserve the congratulations and support of this House.
While marketing is a key element of Government policy for the tourism sector, I am convinced a much broader strategy is needed to underpin the medium and longer-term growth of the sector and get us back on track to achieve the 5% average annual growth rate set under the national development plan. An Agreed Programme for Government outlines the principal actions proposed which include a broadening of our source markets and, in particular, seeking to increase our share of the continental European market; fostering expansion and competition on air and sea routes; support for the work of Tourism Ireland Limited in promoting the whole island of Ireland as a tourist destination; completing the task of creating a new national tourism development authority bringing together the functions currently carried out by Bord Fáilte and CERT; examining the case for the construction of a national conference centre and the active promotion of conference business; putting the maintenance of standards and service at the top of the tourism agenda, a hugely important issue; encouraging small accommodation providers and year round tourism activities; and ensuring local authorities take account of the infrastructural needs of tourism and the promotion of sensitive development of tourism areas and environmental best practice.
I am convinced that the maintenance of competitive access links by air and sea to Ireland is critical to future success in tourism. While we are well served as regards access by sea, I will work closely with my colleague, the Minister for Transport, to encourage the opening up of new air routes and the introduction of enhanced competition in the operation of our airports. I welcome, in particular, the recent decision by Aer Lingus to reinstate the Baltimore-Washington route and hope it may be possible to open up further US routes to help restore the 20% reduction in seat capacity which we lost last year.
I am also following developments closely at Dublin Airport in regard to the provision, at the earliest date, of expanded rapid turnaround facilities to meet the specific needs of carriers operating at the lower fares end of the market. I welcome the recent announcement of new continental European routes by Aer Lingus and look forward to additional continental services in the future. I have also asked Tourism Ireland to work closely with the air carriers and Aer Rianta to ensure greater co-operation in marketing activities associated with new route development.
Following high level consultations with Bord Fáilte and CERT, the Government decided in principle this time last year to create a new national tourism development authority bringing the two bodies together to promote the development of sustainable tourist facilities and services, including the promotion of training, human resources and marketing skills. On taking office, I moved quickly to establish an interim board to accelerate the preparatory work, including arrangements for the appointment of an interim chief executive, in order that the authority could be up and running in time for the 2003 season.
The draft legislation to give effect to the new authority has been finalised and I will seek Government approval over the coming weeks to have the Bill published and introduced at the earliest date. The new authority will be ideally positioned to help the industry to address the new set of challenges facing tourism as we go into the 21st century, including issues such as value for money, competitiveness and quality, which were subject to much public debate this year.
There has not been a major review of tourism policy since the current boom began and much has changed in the meantime. After the successful decade of the 1990s, the industry is operating in a more turbulent environment and has experienced recent major external shocks. However, these adverse developments should not mask growing concerns about the price and quality of the product that we offer to our customers. The industry needs to sharpen its competitive edge to capitalise on the massive investment of €4.3 billion in the sector over the past decade.
I have initiated a major review of tourism policy with a view to identifying the key determinants of both an industry and Government-led strategy for the future sustainable development of tourism in Ireland in order that we have an updated and dynamic policy orientation for our work. This review will be led by my Department, with the help of external specialist consultancy advice, and in consultation with the tourism industry. The Irish Tourist Industry Confederation recently produced its own assessment of the potential of the sector which will be of help in undertaking the review.
I have set out my assessment of our recent tourism performance, outlined my views on this year's season and indicated the broad policy objectives which will guide my work as Minister in line with the Government's agreed programme. I intend consulting widely with the industry, the tourism agencies and other experts to guide me further in my work.
While the industry faces genuine difficulties and both this tourism season and last season have been challenging, the industry has the resilience and the potential to overcome current obstacles and return to sustained growth. Tourism is a sector of enormous economic performance, with a wide regional impact, and I pledge, as Minister, to do my utmost to support and develop the industry during my period in office. I look forward to listening to the contributions of Senators and, once again, thank you, a Chathaoirligh, for the opportunity to address the House on this important subject.
