I thank the Minister for Arts, Sport and Tourism for coming into the House this morning and I thank also the Minister of State, Deputy Michael Ahern.
I welcome this debate on tourism, the importance of which to this country should never be underestimated. It is not always given the weight it deserves but there are strong facts to justify the Government's putting such a strong emphasis on building and expanding our tourism industry. According to the latest statistics from the Department of Arts, Sport and Tourism, the industry generates €4 billion in annual foreign earnings and another €1.2 billion in domestic expenditure. Approximately 150,000 people are employed in the tourism industry. Six million people visited this country in 2001, a figure which has doubled over the past ten years. Those six million visitors, along with the many Irish people who choose to spend their holidays here, contributed an estimated €1.2 billion in income tax receipts. In this time of belt-tightening, that figure should not be dismissed lightly.
When all these factors are considered, it should be obvious that the way forward is to develop and expand the tourism industry, but unfortunately the opposite is more likely to happen in the short term. Tourism is currently on the decline. Hopefully, this development is only a temporary blip on our fine record of growth in this sector but we need to examine the cause of the blip.
It will not come as any surprise that the aftermath of 11 September and foot and mouth disease have played a large part in the reversal of our fortunes in the tourism industry but, as the Minister will no doubt testify, a number of other issues have hurt the industry also. With the advent of the euro it has become far easier for visitors to this country to compare prices with other destinations and, as matters stand, we are not coming off too well under that comparison. There needs to be an increased emphasis on delivering value for money, competitiveness, a high quality of service and a unique experience for the international visitor.
Off all those factors, the issue of competitiveness is probably the most important as we need to show tourists that they are not being charged more here than they would be for a similar service in an alternative destination. The recent Irish Tourist Industry Confederation report, The Need for a Future Development Strategy, points out that as tourism grows, it generates an expansion in employment and an increase in spending and taxes. The report also points out that tourism is an important element in regional development.
I mention the report because it stresses the damage a loss of competitiveness will inflict on the industry. The Minister reiterated that fact and pointed out on a number of occasions the importance of keeping down costs. Many steps must be taken to achieve competitiveness. Irish businesses in the industry must economise and learn to get the maximum output from the services they provide without diminishing their quality. They must also push down prices.
There is a large block, however, on the road to businesses in the tourism industry lowering their prices, that is, insurance cover. Insurance is not an optional extra for people who operate in tourism. They cannot open a business without it and while it goes without saying that insurance costs are not the only reason for our relative lack of competitiveness, it appears clear that the price of premiums is a significant factor. All sectors of the industry are concerned about the cost of insurance and the level of concern appears to be increasing with each passing year. The problem is not helped by the fact that in a large proportion of cases the increase in premiums has not appeared warranted.
Tourism has developed rapidly over the past ten years. We had a thriving industry in the 1960s and 1970s as the tourism market was accommodation led, but the industry fell on difficult times and became stagnant. The problem had become so severe that research carried out abroad indicated that Ireland was looked upon as a green desert, in other words, a country with beautiful green scenery but in which there was very little to do. For this reason, the tourism market decided to change tack and opt for a more activity driven approach. More facilities were developed to provide a whole range of activities for tourists. As more of these facilities opened, tourists began to flow back into the country, with the industry subsequently experiencing ten years of unprecedented growth.
When one takes that fact into consideration, it is clear that the expansion into leisure and other activities is vitally important to tourism, yet these businesses are being hit hardest by the increase in insurance costs. I am aware of one adventure centre in County Louth whose insurance costs increased by 243% last year. That resulted in a premium of €50,000 for a centre that is by no means large and which does not have any significant claim.
Another centre nearby was quoted an annual premium of €274,000. This centre would need to earn that sum before it even began to pay the rest of its expenses, let alone make a profit. Is it any wonder we have difficulty in being competitive? The centre eventually managed to negotiate the insurance company down to a premium of €100,000 and a loading of €25,000 for every additional claim. There can be little economic sense in having insurance when every claim will cost the centre approximately €25,000. It might be claimed that insurance costs were always that high, but only two years ago the same centre was paying the equivalent of €65,000 per annum. That increase in cost indicates the damage being done to the level of competitiveness in the tourism industry.
It is not just the more energetic aspects of the industry that are being affected by spiralling insurance costs. This year alone, the cost of insurance for bed and breakfast establishments rose by one-third. In a number of cases where minor expansion work was carried out, the increase was as much as 70%. I am aware of an establishment in Kerry whose premium increased by 130%. The effect of these increases is that bed and breakfast establishments in rural settings with three to five bedrooms are now paying premiums of €1,500 to €2,000 per year. That is an imposition on these establishments when we consider their relatively isolated location, the small markets available to them and, in some cases, the limited tourist season in which they have to operate. Such a figure is a large amount of their annual turnover and is clearly an inhibiting factor that results in preventing a more balanced spread of tourism.
I urge the Minister to instruct the Department to examine the issue of insurance cover in the tourism industry. It is not beyond his means to have the Department or a statutory body under his control carry out an investigation into the effect of insurance costs on the industry and the means we can take to reverse the detrimental trend of increased prices. I know the Minister will take this suggestion on board and I thank him for that.