Dáil Éireann díospóireacht -
Thursday, 23 Jul 1970

Vol. 248 No. 12

Committee on Finance. - Transport Act, 1950 (Additional Powers) Order, 1969: Motion.

Minister for Transport and Power (Mr. B. Lenihan)

I move:

That Dáil Éireann hereby confirms the Transport Act, 1950 (Additional Powers) Order, 1969.

The purpose of this motion is to confirm the Transport Act, 1950 (Additional Powers) Order, 1969 which was made by me with the consent of the Minister for Finance under section 14 of the Transport Act, 1950. The order will enable CIE to operate a subsidiary company in New York to handle its coach tour promotional activities in North America. The objects of the proposed company which will be known as "C.I.E. Tours International Inc." will be principally to promote, sell or act as agent for CIE in promoting and selling, contracts for rail, sea, air or coach tours provided by CIE either alone or in conjunction with other transport companies.

CIE opened a coach tours office in New York in 1966 and another in Los Angeles in 1968. An office was opened this year in Chicago and there is a sales office in Toronto. CIE experience has shown that the availability to the tourist trade of on-the-spot booking facilities, with consequential saving of time to travel agents, brings an immediate increase in business and the opening of these offices has resulted in rapid development of this side of the company's activities.

The offices promote and sell the full range of CIE coach tour holidays and the 1970 programme was backed by 1,000,000 brochures. Limousine and self-drive tours are also sold, there is a hotel reservation service and an information service for individual customers.

CIE estimate that gross income from North American activities increased from £800,000 in 1966-67 to £2.2 million in 1969-70, a level which, despite current difficulties, they hope will be equalled this year as a result of a special sales campaign initiated in April. The board has a target of £4 million a year in gross income by the mid-seventies. Between 1967 and 1968 passengers from America on CIE tours and tours handled by CIE increased by about 1,700 to 51,000 but the bednights sold rose from 162,000 to 201,000. Last year's figures were up again: 55,000 passengers and 227,000 bed-nights. With the intensive additional campaign begun in April of this year the 1969 results should be at least equalled.

The establishment of a separate subsidiary would strengthen CIE's trading identity in relation to the travel trade abroad and present a new image of its activity as well as offering incidental advantages such as facilitating the employment of locally recruited staff. The board have assured me that the objective of developing coach tour business originating in North America cannot be achived other than by the establishment of a subsidiary company there.

The setting up of a more effective CIE operation in North American will be in line with the growing importance of the North American market for Irish tourism. The indications are that last year over 218,000 visitors came here from North America and their estimated spending at £19.7 million was about three times the 1960 level. Tourist traffic from North America is not as highly peaked as that from some other areas and consequently it has a particular value in the campaign for the extension of the season which is now a major objective of tourist policy. In recent years, this country has made a significant breakthrough into the off-season North American market and this is attributable, among other things, to the availability of extended coach tours.

The new subsidiary will be established under the business corporation law of the State of New York but its powers will not be any wider than the powers already being exercised by CIE in relation to coach tour business. The new company will be subject to official control in the same way as the two other CIE subsidiaries, the establishment of which also had to be ratified by Motions of each House of the Oireachtas, namely Óstlanna Iompair Éireann, the hotels subsidiary set up in 1961 and Aerlód Teoranta, the air freight subsidiary set up in 1964.

Section 17 of the Transport Act, 1963, applies, to Óstlanna Iompair Éireann, the provisions of sections 16 and 34 of the 1950 Act which, respectively, deal with the furnishing of information to me and the preparation, audit and presentation to the Oireachtas of the accounts of CIE. The Transport Act, 1963, also prevents alteration in the memorandum or Articles of Association of OIE without my approval. I propose to apply these provisions to Aerlód Teoranta and, subject to the approval of this Motion, to regulate similarly the affairs of the new American subsidiary in a Transport Bill which I shall be introducing to deal with the proposed takeover by CIE of the County Donegal Railways Joint Committee and other miscellaneous matters. Apart from these statutory controls, the original Memorandum and Articles of Association, the appointment and remuneration of directors and borrowing by the company will be subject to my approval in consultation with my colleague the Minister for Finance.

The share capital of the new company will be little more than nominal in character, that is to say 200 shares all of which will be taken up by CIE at $100 each. The members of the board will be whole-time senior executives of CIE. The directors, including the chairman, will not be paid any extra remuneration for their services by the subsidiary. The salaries of all other officers and agents of the subsidiary will be fixed by the board of directors.

A total of 17 staff are employed full-time in the American offices and this figure is supplemented during the high season by the employment of temporary staff. Any CIE staff working in North America will remain in the employment of the parent company, retaining any rights to which they are entitled by virtue of that employment, so that establishment of the new subsidiary will not cause any displacement or redundancy among CIE staff. Staff locally recruited by the subsidiary company will, of course, be governed by social security regulations in force in the US.

I am convinced of the necessity for and of the advantages of creating this new subsidiary and I strongly recommend that the House should give its approval to the motion confirming this order.

Mr. T. O'Donnell

I did not realise that item No. 8 on the Order Paper was so extensive a matter as we now find it to be. I am rather interested in the fact that the Minister should come into the Dáil at this stage to move this Motion in the light of the rather disappointing results in our tourist traffic this year. This proposal to set up a subsidiary CIE company in North America is a logical development. I have heard that CIE ran into considerable difficulties during the year in their promotion work in the USA. I understand that the Irish sales manager, Mr. Murphy, had to visit North America and had to take certain corrective action there. One of the jobs he had to do was to sack the sales manager for North America. I am glad to know now that as a result of Mr. Murphy's trip the volume of coach traffic has shown a welcome improvement. I hope that this trend will continue and, in view of the magnitude of the North American continent, that this subsidiary will prove to be a great success. Obviously a sales organisation of this kind is definitely necessary there. Indeed, this is an original idea in the sense that Bord Fáilte, Aer Lingus and so on, all operate branch offices but the establishment of a subsidiary company which will have charge of marketing and promotion in North America is a completely new idea.

I have had personal experience in Britain of the work done there by CIE representatives and I often said that wished that Bord Fáilte and some of our other State companies involved in tourist promotion would learn a lesson from the manner in which CIE have approached their work. They are the hardest working people I have ever met. The only thing that worries me about this is that I understand that the reduction in the volume of coach traffic this year is due to certain factors which are totally outside the factors which we outlined in a previous debate. It is the older type of people who tend to come on coach tours and because of the economic recession in the States and the Vietnam and Cambodian troubles they are not inclined to travel far abroad.

Mr. B. Lenihan

That is right.

Mr. T. O'Donnell

I understand that this situation is rectifying itself. I look forward to seeing how this idea works out in the States. If this subsidiary is a success we may have to do the same in Britain and on the Continent and we may have to approach the B & I, Aer Lingus and other bodies to adopt somewhat the same procedure.

There is one other point which I should like to deal with. There is a Bord Fáilte office in New York; there is an Aer Lingus office there and we are now going to have a CIE office. Earlier the Minister was lauding Bord Fáilte and the contribution they have made to the development of the tourist industry. I pointed out that it is impossible to measure the exact contributions that the Bord Fáilte sales offices abroad make to the actual flow of traffic here. I would go so far as to say that Aer Lingus, particularly in North America, have been responsible for generating a considerable proportion of the total volume of traffic coming in. CIE through their coach tours and by their hard selling—and I have seen their men in Britain going out into the field and working hard there, there was no sitting down in an office answering correspondence, and at night they were showing films to interested groups— have also been responsible for attracting a great proportion of our visitors. I wonder if the Bord Fáilte offices abroad might be commercialised to some degree so that we could measure their contribution to the flow of traffic here. I am convinced that Aer Lingus are generating the greater proportion of traffic through their sales agents and CIE are also generating a considerable volume of business. Having regard to the great amount of work which these companies are doing, I would be very interested to know what is left that can be attributed to the work done by Bord Fáilte in America.

I have the highest respect for the work done by CIE in regard to coach tour traffic. Their most recent development, some two years ago, was the 21-day British Isles tour which some people laughed at but which has become a very great success. I wish CIE every success and I hope that this subsidiary will achieve the results we expect and which I am confident it will.

Dr. O'Donovan

As usual, I am less well documented than Deputy O'Donnell, but I have some information on this subject. CIE deserve great credit for the way in which they have developed these coach tours. Some American friends, my wife and I went on one of these tours some years ago and the Americans were extremely pleased. I have picked up on the wind that coach tours are out. Some years ago they were the "in" thing; now they are the "out" thing. That is the information I have. It is not just here; it is also the evolution in North America, Europe and elsewhere. That seemed to be borne out when one saw CIE coaches going around with five or six people in them. That has happened this year. I am not in any way critical of this method, but it is no harm to enter that caveat in relation to it.

This is called CIE Tours International Inc. I understand from Deputy O'Donnell's last remarks that there has been a recovery in the last month or so because of certain internal action in CIE but, if they are "out", then the figures the Minister has given us are not a great deal of use. One does not really know how to assess the effect. I suppose, as a former Minister for Finance said on one occasion when I complained about the new methods of advertising civil service posts, what everybody else does we must do. We have a product to sell and I agree with this idea about off-season tourist traffic. This suits us because of our climate; it is more generous than Continental climates at that time of year and there is an opportunity of getting Americans to come here on holiday in the off-season. A staff of 17 seems quite reasonable. Apparently CIE are making an effort to improve our balance of payments.

Mr. Donegan

I am a modern private enterprise individual and I accept the responsibility of private enterprise to provide money for social welfare benefits, modernisation and everything else in the management of business. I wonder is it right that a State company like CIE should now be in America organising their own coach tours, which will go to specified hotels, owned no doubt by CIE, or perhaps to hotels belonging to Ryan Holdings in which the capital of a State company is involved. There is a conflict of interests. There are companies which run coach tours without any assistance except that of Bord Fáilte in fishing for them in the remunerative waters of the American tourist traffic. There is something wrong. We are tending to intrude Government agencies and Government money and semi-State companies too much into this industry. I personally believe Bord Fáilte should do this job as the agency for both CIE and private coach tours, those private coach tours being in a position to make their own arrangements with the hotels of their choice, State hotels if they so desire. This is the basis of our economy and there is a conflict of interests here.

An Ceann Comhairle

We are not dealing with Bord Fáilte. We are dealing with CIE who have a subsidiary company in the USA to deal with passenger traffic.

Mr. Donegan

This order should not have been made. This work should be done by Bord Fáilte, not only for CIE but also for private enterprise.

Mr. B. Lenihan

My view accords more with the view of Deputy O'Donnell than it does with that of Deputy Donegan. I agree with Deputy O'Donnell that the specific product hard selling done by CIE and by Aer Lingus/Aerlínte in the US market, in the British market and in other markets has been of tremendous advantage to the Irish tourist industry. Deputy Donegan is under a misapprehension as to the role of Bord Fáilte. Its primary role is to sell Ireland. This is very essential. It is also essential to have operators, be they State, semi-State or private, under the umbrella of Bord Fáilte, pushing their specific products.

I want to pay tribute, as Deputy O'Donnell did, to the work done by CIE and Aer Lingus/Aer Línte in attracting tourists from these markets, selling the whole package product, involving carrier facilities, bedroom facilities, and so on. The type of tourism is becoming very popular. CIE and Aer Lingus/Aerlínte have played a very prominent part through their general publicity and their hard selling at grassroots level in developing this aspect of tourism. This motion is designed to facilitate this operation. As Deputy O'Donnell stated, there was a slight difficulty in April and May of this year but that has been rectified; business is up again and it is contemplated it will increase.

The purpose of this operation is to facilitate the functioning of the selling organisation in the States as a separate subsidiary of its own with legal rights and acting according to American law, being able to enter into contracts and commitments in accordance with the American law. It will enable the business organisation to have a subsidiary incorporated in America as an American company.

Lest the impression might be given as a result of what Deputy Donegan said let me say that CIE coach tours are not confined to Óstlanna Iompair Éireann hotels. They are in hotels of a particular category.

Mr. Donegan

Surely it is a preference club?

Mr. B. Lenihan

It is a tremendous advantage that, as carrier operators, they have X number of hotel bedrooms available to them by reason of the subsidiary activities. The two dovetail. This is the most profitable aspect of the activities of CIE—the coach tour activity dovetailing with bedroom accommodation. Very few carriers in the world have this link-up. The whole success has been built on that foundation. It is a real success story from the financial point of view. These tours do a substantial business outside the CIE hotels. Where there is an OIE hotel in the area, the accommodation is provided there. Where accommodation is required, over and above that available through OIE in the area, that accommodation goes elsewhere. Therefore, this operation spills over to the benefit of the hotel industry in general and to the benefit of the tourist industry in general outside CIE and OIE.

Question put and agreed to.