Vol. 574 No. 4
83 Mr. Deenihan asked the Minister for Arts, Sport and Tourism the measures he intends to put in place to improve the competitiveness of Irish tourism, following the recent publication by the tourism policy review group of the report, New Horizons for Irish Tourism; and if he will make a statement on the matter. [27387/03]
I have already expressed my determination to ensure that the excellent work of the tourism policy review group is capitalised upon and the momentum generated by the in-depth focus on the tourism industry continues apace in the development of the tourism sector over the coming decade.
The review group emphasised the need for an agenda for action, highlighting some 70 concrete actions that should be pursued within the first two year rolling plan. Its recommendations are directed not only to my Department, the tourism State agencies and other Departments but also, perhaps more importantly, to representatives of the tourism industry and individual tourism enterprises. Restoring competitiveness is regarded as the major challenge facing the industry in the years ahead.
The report recognises that competitiveness is not just about pricing but that it must be a function of the overall Irish tourism experience for customers relative to other locations, beginning with their initial inquiries about visiting Ireland through to their travelling here, where they go when they arrive, where they stay, who they meet, what they do, what they see, and their perceptions about price and quality.
One of the key messages of the report is that an increasingly high proportion of visitors have expressed concerns about competitiveness, and the industry should recognise that it has primary responsibility for offering better value to its customers if it is to maximise the opportunities for future growth.
There is no immediate, single or easy solution. Having identified competitiveness and value for money as one of the key strategic drivers of success for Irish tourism, the review group listed some ten specific actions to deliver the strategy. These require responses from both the private and public sectors, and they include proposals on taking responsibility for restoring competitiveness, inflation, benchmarking, customer relations, management capability, high standards for competitive advantage and training.
None of the ten specific recommendations on competitiveness listed in the report is directed to me or my Department. However, my primary role is to ensure that a coherent action plan is implemented quickly and effectively. To this end, and on receiving the report from the chairman of the review group, I have made a commitment to establish a small high level implementation group to drive forward and monitor the action plan. Earlier this month, I received the considered response of the key industry representative group, the Irish Tourist Industry Confederation, to the report and, more recently, its views on the shape of the implementation group. I am considering these and hope to be in a position shortly to announce the membership of the group.
The Minister will agree that the competitiveness of the tourism industry has been decimated. We are now the second most expensive of the 15 European Union member states, whereas we were the fifth least expensive country in 1999. The main reason for this change has been increased Government taxation. Our hotel VAT rate, at 13.5%, is the second highest in the eurozone. The equivalent rates in France, Spain and Portugal are 5.5%, 7% and 5%, respectively. We also have the highest wine tax, second highest beer tax and third highest tax on spirits in Europe, while our insurance premiums have increased six times faster than other European countries. All these increases have been influenced by the Government. Will the Minister give the House a commitment that the problem of Government taxes will be addressed in the budget, which offers a real opportunity to restore the competitiveness of the tourism industry? What plans does the Minister for Finance have to restore competitiveness in the budget? I noted that the Minister, in an interview with a national newspaper, recommended that VAT rates be frozen this year.
Given his considerable experience as a Member of the House, Deputy Deenihan will not expect me to read the Minister for Finance's budget speech on a Tuesday afternoon in November. I can, however, address in a provisional manner some of the questions he raised. Since becoming Minister, I have repeatedly addressed the question of competitiveness, which we need to improve. One only had to attend the World Travel Market 2003 in London last week to see the number of new competitors which have entered the marketplace. We are under no illusions in this regard. Tourism is a tough environment and competitiveness is the key to attracting a greater number of visitors.
The fall in inflation to 2.3% is welcome. We must avoid talking ourselves into a crisis or depression, particularly in light of the fact that tourism numbers, against a difficult backdrop, look like they will increase by more than 3% this year, which is a great tribute to the resilience of the industry and testament to the value of the 20% increase in marketing funding made available to Tourism Ireland and Bord Fáilte.
As Deputy Deenihan correctly pointed out, insurance is a serious problem for the industry and must be addressed. The issue is targeted by the review group and Fáilte Ireland is working as a priority to find ways to help businesses reduce their cost base and make them more competitive and profitable. As a first step, Fáilte Ireland has commissioned risk and insurance specialists to gather, with the assistance of the representative groups, all data on premiums and claims experienced across the sector, from bed and breakfast providers to restaurants and hotels. Drilling down into this data will give the organisation the information it requires to engage in informed dialogue with insurers to address the massive hikes in premiums since 2000. It has been estimated that this approach could deliver savings of up to one third for tourism enterprises in time for the 2004 season.
The industry is also becoming increasingly price conscious in terms of delivering value for money for visitors. Although the industry has listened to me, Opposition spokespersons, other Deputies and others, it is difficult for it to deliver the kind of value of money to which we all aspire when it is faced with rising costs in areas such as insurance. I expect the first phase of Fáilte Ireland's project to be completed by December and I hope it will be successful in its efforts to reduce insurance premiums for the sector.
Our inflation rate is still twice the European Union average. We must also take into account the recent appreciation of the euro by 18.9% against the dollar and 11.7% against sterling, which reduces the competitiveness of holidays here in our two main markets.
On the issue of local authority charges, it is obvious that local authorities will have to increase charges twofold or more to pay the cost of benchmarking. This will impose a major burden on the tourism industry which pays most of the rates and charges levied in rural counties. There is a case for the Government to provide funding to cover the costs of benchmarking incurred by local authorities. Failure to do so would force up local authority charges and increase costs for the tourism industry.
It has been confirmed that those involved in the tourism sector are making less profit now than five years ago. Significant discounting is taking place across the industry in an effort to maintain cashflow. Despite an increase in visitors, revenue will decrease this year, by a substantial amount in some cases. Various local authorities will soon strike new rates, refuse charges and water charges. Increases are inevitable to cover the cost of the benchmarking payment. On behalf of the tourism industry, I ask the Minister to make a special case to the Cabinet that central funds be used to cover some of this cost, which the Government imposed on local authorities.
As the Estimates have been published, there is no point in revisiting them. Moreover, issues related to local authorities are a matter for the Minister for the Environment, Heritage and Local Government. The tourism review group's excellent report makes more than 70 recommendations. I will ensure that the group's proposals, in so far as they affect my Department and the agencies within its remit, will be implemented. In addition, we are pursuing the active implementation of the other recommendations through a high level implementation group which will be formed in the coming weeks. It is the intention of the implementation group to report within six months and to hold a forum one year after submitting its report to identify progress in implementing the expert group's report. This is a two year rolling plan and I anticipate that the review group's report will be largely implemented and will make a substantial contribution to the development of tourism.
Ancillary matters such as charges are, unfortunately, a matter for other Ministers. I am conscious, however, of the need to keep charges as low as possible. The Deputy should note that in an attitude of visitors survey carried out in 2002, only 4% of those questioned were not satisfied with their holiday experience here, which speaks volumes for the industry and the product.
