JOINT COMMITTEE ON TOURISM, CULTURE, SPORT, COMMUNITY, EQUALITY AND GAELTACHT AFFAIRS díospóireacht -
Wednesday, 29 Sep 2010

Tourism Issues: Discussion

Chairman

I warmly welcome the delegation from Bed and Breakfast Ireland, Ms Helena Healy, chief executive officer, and Mr. Vincent Gorman, director. I also warmly welcome the delegation from the Irish Self Catering Federation, Mr. John O'Connell, chairman, and Mr. Stephen Corrigan, director. We will discuss how we can encourage Irish people to holiday in Ireland, reviewing the 2010 season and planning for the 2011 season.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give to the joint committee. If they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person or persons or entity by name or in such a way as to make him, her or it identifiable. Members of the committee have absolute privilege. However, they are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

We all agree that tourism is one of our biggest hopes in overcoming this recession and in creating and sustaining jobs in rural Ireland. I welcome the fact that the Taoiseach and Ministers have been reiterating this message in the past two days. The representative bodies, Bed and Breakfast Ireland and the Irish Self Catering Federation, are crucial to this industry because they bring tourists to local communities the length and breadth of the country. The tourists in effect become part of the community for the week or two weeks they reside there. The tourists shop in the local shops, fill their petrol tanks in the local garages and eat and drink in the pubs. That is why these sectors are so important to Irish tourism and the reason we have invited them to address the committee. We will discuss the home market and how to get the Irish people, particularly those living in large urban areas, such as Dublin, Belfast and Cork to consider holidaying in Ireland as being as attractive as going abroad. Everybody likes to travel to foreign countries but our aim is to encourage Irish people to holiday in Ireland as often as they go abroad, or at the very least to encourage the majority of people to holiday at home on every second occasion. Many members have wonderful experiences of holidaying in Ireland. This agenda has cross-party support and is being pushed very vigorously in the Dáil and Seanad.

We would like the delegates to outline their views on the situation and how we should plan to meet the challenges ahead. As Chairman, I am committed to working with the representative bodies to ensure we get the best possible advantage from the industries they represent.

I ask the delegates to address the committee and then members will have the opportunity to put questions to them.

Ms Helena Healy

Chairman and members, Bed and Breakfast Ireland is very pleased to be given the opportunity to address the joint committee. Bed and Breakfast Ireland is the largest national organisation representing and promoting the bed and breakfast sector. It is an all Ireland body with 1,000 members across the Thirty-two Counties, representing approximately 50% of the registered bed and breakfast accommodation sector. We are based in Ballyshannon, County Donegal, and employ 12 people, who market, represent and run the organisation on behalf of its members. The organisation generates €7 million directly from its marketing and promotional work annually. The majority of the revenue comes from the overseas market. It is estimated that a further €20 million is generated indirectly to members from other marketing activities the association undertakes. The work of the company includes development and implementation of marketing and promotional campaigns for the bed and breakfast sector on line, attendance at overseas and domestic trade promotions, working with overseas tour operators, Fáilte Ireland and Tourism Ireland, providing on-line and web based booking systems for members, for the trade and travel agents, to facilitate e-commerce, maintaining and developing a healthy bed and breakfast sector and promoting a rich different experience for visitors to this country through marketing and promotional activities. We also engage in the provision of training for members in business and operational skills, developing new products and services for members so as to enhance their appeal offering diversity to the Irish tourism product as well as representing the views of sectors at all levels.

Let me give members an overview of the markets, particularly from a bed and breakfast perspective. The year 2009 was very challenging for tourism with a decline of visitor numbers from all the main overseas markets. The number of domestic visitors remained similar to 2008, helping the overall tourism industry but the spend was reduced by 10% in 2008. This poor performance impacted on the performance and viability of the bed and breakfast sector. The year 2010 has turned out to be a much tougher year economically for the entire sector, however, this has been more pronounced in the bed and breakfast sector than in any other part of the industry. This is evident from the some statistics. The Fáilte Ireland January to June estimates of overseas visitors compare 2010 and 2009 and show the following decline in Ireland's major markets: the numbers from the UK were down 23%, from mainland Europe were down 25%, and from North America were down 11%, giving an average total of minus 19%. According to Fáilte Ireland accommodation statistics January to June 2010, varied results were recorded for occupancy levels. Occupancy for the bed and breakfast sector suffered the largest drop, dropping from 28% to 23%, impacted by the decline in the number of overseas visitors, which are the main stay of the sector and heavy competition from price discounting hotels. This is in addition to a decline in the overall bed night capacity in the sector since 2009. Hotel room occupancy rates have increased by 3% from 51% to 54%, due in part to a modest decline in capacity, an increase in demand and heavy discounting of rates. The Fáilte Ireland tourism barometer of June 2010 provides an indication of tourism performance for the year to date. As well as the prospects for the remainder of the season, it found that the majority of accommodation providers report a fall in demand over 2009 with bed and breakfasts having been hit particularly hard due mainly to the fall in numbers of overseas visitors, particularly from the main markets of the US and Great Britain. The outcome for the remainder of the season remains pessimistic with 78% of bed and breakfast operators expecting overall volume of overseas bed nights to further decline from July to December 2010. Continued economic uncertainty will continue to have a negative impact on the travel decisions of consumers. The competitive price situation with the hotels, overcapacity of hotel rooms and the aggressive marketing is severely impacting on the performance of the bed and breakfast sector which is unable to compete due to the lack of economies of scale and individual properties.

Above all we must focus on the needs of the visitor and on providing a range of experiences and services that distinguish Ireland as a premier travel destination with lots of things to do and see. The search for savings, bargains and value will continue with consumers likely to spend cautiously. Stiff competition will remain among accommodation and amenity providers. The trend of people travelling closer to home and taking holidays in Ireland is expected to continue. The focus on quality experiences is more important than ever. If a consumer is to spend money on a holiday, the experience must be worth it. In this competitive environment, retaining competitiveness, while at the same time allowing operators to make enough money to offer a new and value for money experience is essential to attract not only the domestic holiday maker but also the overseas holiday maker.

The bed and breakfast sector is an unique Irish product and recognised worldwide as a genuine authentic Irish experience. It is often copied but never equalled. While traditionally it was a key accommodation for domestic holiday makers this has changed in recent years with a rise in the number of low cost hotel rooms. However, it remains popular with overseas visitors, especially those from the US, UK and mainland Europe. Bed and breakfast premises have much to offer the domestic holidaymaker and have a key role to play in attracting people to holiday at home. However, there are a number of key competitive factors mitigating against them. I will hand over to my colleague, Mr. Vincent Gorman, who will take us through three of the main issues we wish to highlight today.

Mr. Vincent Gorman

I will deal first with commercial rates. Part 2 of the report of the Commission on Taxation in 2009 stated:

Bed and Breakfast and Guesthouse accommodation should be brought within the commercial rate base where there are four or more bedrooms in a dwelling house provided on an ongoing basis for guest accommodation. Self-catering apartments and holiday homes provided by tourism operators should also be brought within the rate base.

Bed and Breakfast Ireland fully appreciates the need for new sources of revenue, but feels that the overall effect of this proposal on the national finances would be significantly negative. Bed and breakfast providers are currently exempt from commercial rates. They operate from family homes. They operate on very low profit margins and, in the majority of cases, supplement low family incomes.

Based on feedback from bed and breakfast operators, the introduction of commercial rates will result in the closure of a significant number of properties due to the impact on profits, removing seasonal employment and reducing the opportunity for tourists to stay in rural Ireland. That will create a significant deficit in earnings and economic activity in those areas. Implementing such a system in its present form will facilitate a move of registered and approved bed and breakfast operators into the unapproved sector, thus lowering the potential revenue generation base of properties from rates and income tax. Furthermore, this will impact on the quality of service offered from the sector from an increased number of unregistered premises.

We believe that the costs involved in properly administering such a scheme would ensure would be prohibitive and outstrip the revenue earned. Due to the age profile of many of our members, this would send a very negative message and force them to leave the business earlier than planned. Self catering sector members are already paying the €200 residential tax on second homes and further rates would be seen as double taxation on these premises.

The continued exemption from rates on these properties is essential if a vibrant bed and breakfast sector in Ireland is to be retained and developed to meet the demands of more than 1 million overseas visitors, who choose to stay in such properties each year and to maintain the critical network of bed and breakfast properties necessary in Ireland. Over the last ten years, the number of approved bed and breakfast properties has fallen by 50%. Furthermore, the resultant decline in both revenue and the number of overseas visitors to rural Ireland, outside of the main tourism hot spots, is contrary to national policies for balanced regional development and regional tourism dispersal, as set out in the national spatial strategy, and the strategies of Fáilte Ireland and Tourism Ireland.

There is no mandatory licensing of bed and breakfast premises in the Republic of Ireland. Anyone can open and operate a bed and breakfast premises without notification and without registering with Fáilte Ireland. A voluntary registration and approval system operates to which 2,300 bed and breakfasts have registered this year. The minimum requirements for approved Irish homes — town houses, country houses, farmhouses — published by Fáilte Ireland, clearly states that the "premises shall comply and operate in accordance with all statutory requirements of local and other authorities and to the use thereto in relation to planning, fire precautions, health, water supply, sewage disposal and general safety."

The unapproved bed and breakfast sector causes difficulty for the approved sector in several ways and also has the potential to damage the reputation and work done by the approved sector in building the international reputation of bed and breakfast premises in Ireland. Approved bed and breakfast properties contribute to the marketing and development of the sector through their approval fees and membership fees of Bed and Breakfast Ireland. The unapproved sector benefits from the work done by Fáilte Ireland, Tourism Ireland and Bed and Breakfast Ireland without any contribution. Unapproved and unregistered bed and breakfast premises continue to open and operate without any sanction or regulation. Estimates place the number of unapproved bed and breakfast premises at between 3,000 and 5,000. Many operate outside the tax and revenue systems.

Reliable information about the entire bed and breakfast sector would enable regulatory agencies to plan service delivery more accurately. Without a requirement for mandatory licensing and a central register of bed and breakfast premises, there is no single point of reference that the various statutory agencies can use to plan and co-ordinate their activities.

Oversupply of hotel beds in Ireland is estimated to be 25% of the total. This is having a grave effect on the bed and breakfast sector, by driving the bed and breakfast room rate down by 15% to 25% over the last two years. This issue and the reduction in visitor numbers to Ireland are responsible for a reduction in business to the bed and breakfast sector of around 30% to 50% over the last two years. Bed and breakfast operators are closing their businesses or going unapproved as they are no longer able to make a living from the business.

A report prepared in 2009 by Dr. Peter Bacon for the Irish Hotels Federation stated, "A quarter of Irish hotel rooms need to be closed down, while the sector taken as a whole is insolvent." The global recession has resulted in a significant decline in demand for hotel rooms, leading to the heavy discounting of room rates. The fundamental issue for the hotel sector is one of oversupply. The report also highlights the damage being caused to the hotel sector as a whole by financial institutions and banks supporting non-viable and insolvent enterprises and the necessity for hotels to remain open to allow investors realise capital allowances. This has impacted in many cases on the quality of service and facilities available from hotels.

In the Fáilte Ireland strategy statement for 2008-2010, the need for universal quality in Irish tourism is articulated when it is stated that "international competitiveness is also determined by the perceived quality of the product or service on offer". Tourism enterprises therefore need to work continuously to improve the quality of their service. All improvements in quality must be fully focused on the needs and preferences of consumers. To meet these criteria of quality, value for money and competitiveness from the bed and breakfast perspective, the restoration of a competitive and equitable playing field must be put in place to allow it to fulfil its potential to be the uniquely Irish product that it is.

We must remember that this is a seasonal business. Action is required for the following reasons: to ensure that commercial rates are not levied on registered bed and breakfast properties, while at the same time allowing the unregistered and unapproved sector to continue operating unchecked; to implement a system of registration for all bed and breakfast properties to ensure proper application of quality standards, health and safety legislation and other regulations in order to maintain high quality standards and the genuine quality home experience that is the bed and breakfast; to provide support to the approved bed and breakfast sector in the rollout of plans and projects that will help them meet the requirements of the modern tourist, including projects that were piloted successfully by Bed and Breakfast Ireland, such as a scheme to develop specialist themed bed and breakfast premises that cater for particular tourists, such as angling, walking and cycling, and which could come from programmes such as Leader, which has a large rural focus, as does the bed and breakfast sector; and to restore balance to the overall accommodation sector through dealing with the surplus of hotel rooms that are in many cases driving down standards and having a detrimental effect on traditional bed and breakfast operators and other rural tourism operators.

Mr. John O’Connell

The Irish Self Catering Federation is pleased to have the opportunity to address the committee on the topic of encouraging Irish people to holiday in Ireland and reviewing the 2010 season and planning for the 2011 season. The Irish Self Catering Federation is the national body recognised by Fáilte Ireland to promote the interests of the self catering sector in Ireland. The federation has a national council representing all types of operators in the different regions. It is a not-for-profit organisation and all representatives are volunteers. At its last AGM, the federation had in excess of 250 members, operating almost 2,000 self-catering units nationwide. We represent and lobby on behalf of members at national level in matters of tourism policy and with organisations such as Fáilte Ireland, Tourism Ireland and Government Departments.

The membership of the federation is diverse, which is also a reflection of the self-catering sector as a whole. We represent all the following categories within the sector, namely, registered holiday cottage group schemes consisting of eight or more units, registered holiday apartments with eight or more units, listed and approved holiday homes and apartments of fewer than eight units, and campus accommodation available for tourist lettings in the summer season. Our federation is a relatively new organisation that is approximately eight years old and has until now served solely as a representative body. However, in response to the ever-changing demands of the marketplace and our members, a new consumer on-line reservations service is in the final stages of completion and will be launched in spring 2011.

The self-catering sector is of particular benefit to Ireland's tourism industry as many of the properties are located in rural and costal communities, many of which would have difficulty sustaining a hotel and which have few alternatives for industry other than tourism.

As already mentioned by the Chairman, self-catering customers typically take longer breaks and spend more money in the local economy in restaurants, pubs, shops and visitor attractions. Therefore, an important linkage exists between those businesses and our customers and their service, prices and availability have direct effects on the self-catering holiday experience.

The 2010 year to date saw most self-catering operators and marketing organisations place even greater importance on attracting Irish customers than before as 2009 saw worrying declines in the numbers of inward visitors from Great Britain, which traditionally is our most important market. The currency differential coupled with a major drive to promote holidays at home in Great Britain were major contributors. This trend was expected to continue during 2010 and the visitor numbers have actually fallen further. The French and German markets also saw declines and the United States market has never been of large relevance to our sector. The effects of the volcanic ash cloud in conjunction with a dynamic home holidays marketing campaign saw additional interest from Irish customers during the early season. However, the trend of very late bookings, in common with other sectors, as consumers watch weather forecasts and shop around for discounts, has been very prevalent this year.

Self-catering operators located in areas which are traditional holiday destinations or have ready access to activities or cultural pursuits, reported high occupancy levels during June, July and August. Others, located in destinations where their incarnation owed most to their proximity to yet another new hotel development fared less well, despite offering very low prices. Outside the peak summer season, business has been disastrous.

The Irish Self Catering Federation, supported by Fáilte Ireland, has encouraged and facilitated members this year to become involved on a co-operative basis with local activity and amenity providers and to develop imaginative packages combining cultural, adventure or historical pursuits with their accommodation. This has proven successful as tourists have appreciated both the added value and ease of access to the activities and 2011 will see further development of these types of breaks, combining self-catering accommodation with, for example, admission to local historical sites, angling facilities or tickets for a music festival. It is vital for 2011 that continued resources are available to run and promote events, festivals and activities because it has been demonstrated clearly that these are the major drivers in attracting Irish people to take breaks at home.

There are great challenges facing the self-catering sector. Similar to the hotel industry, the construction boom of the past ten years, particularly from 2006 to 2008, has left a legacy of oversupply of self-catering units in a declining market. I point out that while there is no oversupply of approved units, such an oversupply exists in respect of an approved properties of which there may be an excess of 10,000. This oversupply, coupled with intense price competition from the hotel sector, is contributing to major problems with profitability for the majority of self-catering operators. In addition, the rental prices of self-catering accommodation in competing Mediterranean countries like Spain and Portugal have fallen dramatically in 2009 and 2010. In addition, a major problem exists with holiday homes which are not approved or registered with Fáilte Ireland, whereby they are being rented by owners who are making no financial contribution to the maintenance of standards or marketing for their area. Their cost base is lower and this is enhanced by the fact that they will neither pay local authority water charges as private dwellings nor need to invest to comply with standards and quality control. Unrealistic prices are being offered and this has also had a knock-on effect on revenues for our sector.

The self-catering sector needs the assistance of national and local government to survive the current climate and to be able to retain some level of profitability for re-investment. Successive years of losses will result in deterioration of property standards and the quality offering for tourists will be seriously diminished. Business levels in the rest of the year outside summer school holidays are dreadful at present.

The following are issues which this joint committee can consider and its influence could be critical in assisting the self-catering sector to survive in the present and medium-term future. First, I refer to working capital credit for viable self-catering businesses from the banks. Most self-catering businesses at best are operating at a break-even level and owners' reserves are already depleted after poor 2008 and 2009 seasons. However, there appears to be a general policy among the main banks that tourism-related businesses are not worth supporting at present and this must be changed urgently.

The second issue pertains to local authority charges. Water charges for our members have increased by between 150% and 400% in many counties over the past number of years. Due to very low occupancy rates for four to five months of the year, we request that local authorities waive the standing charge on meters for periods when water consumption levels are zero or negligible. Additionally, we call on local authorities to become much more active in seeking out unapproved self-catering accommodation to share the burden of revenue generation in this area. This also may be of assistance in the area of pricing of accommodation rental.

The third issue concerns improved and extended quality broadband access. Many of the peripheral rural and costal areas in which our members' properties are located have poor or no broadband availability. This is crucial not only for visitors wishing to use laptops, etc., on holiday, but especially for our members who need access to conduct important e-commerce activity. This programme must be speeded up and become less expensive to access, where available.

Fourth, I refer to the new non-principal private residence, NPPR, charge. This newly introduced €200 charge is almost certainly a misnomer when it relates to Fáilte Ireland registered and approved self-catering units as they certainly are not private residences. However, since its introduction in late 2009 and the subsequent early paydate again in 2010, payment compliance levels have surprised the local authorities. Self-catering providers accept that this is their effective rates contribution. However, it is not acceptable that this charge, unlike all other local authority charges, is not allowable as a business expense for those self-catering operators who categorise their accommodation sales as rental income. This means that the charge is much more than €200 when the property owner must first deduct VAT, if registered, and income tax to produce it.

Representations by our federation to the Minister for Finance have resulted in a reply that states "there is no provision currently for allowing this charge as being a deductible expense from Rental Income". We urge this joint committee to ask the Department of Finance and the Revenue Commissioners to add the NPPR charge to the list of items allowable as expenses from rental income. This element has created much more resentment than the charge itself. We also propose that this allowance be limited only to properties that are registered or approved by Fáilte Ireland as recognition of its ongoing contribution to tourism promotion and standards. This may also potentially help incentivise some unapproved operators to embrace the approval process.

The fifth issue pertains to television licences. Much concern exists in the self-catering sector about the cost of television licence charges for registered group schemes in particular. Why is this the case? The provision of televisions is a mandatory requirement for the approval and registration process for self-catering units. Many units are unoccupied for up to six months per year. At present, An Post is enforcing a policy of one television licence per self-catering unit, even though it has been a long-time practice that one licence per self-catering group scheme was acceptable. This is where all units are located on the same site and managed by the same entity. This is in comparison to hotels, for example, which, regardless of their size, be it ten or 450 bedrooms, only require one licence. This also is the case for guesthouses and bed and breakfasts. This is an obvious inequality as registered self-catering group schemes with eight units or more are registered under the same Tourist Traffic Acts as hotels and guesthouses. This is common practice in the United Kingdom and most other western European Union states and it prices the licence on a sliding scale.

We request that the joint committee consider this situation and intervene with the Minister for Communications, Energy and Natural Resources to find a resolution to this issue, which is currently supporting an inequality and is a considerable financial burden our members cannot afford.

Sixth, the State tourism bodies, namely, Fáilte Ireland and Tourism Ireland have been very supportive of the self-catering sector over the last few years. This has not always been the case but both agencies have worked very hard to allow self-catering to share an equal promotional platform with other accommodation sectors. In turn, we must now respond with new and innovative initiatives to grow our attraction to Irish and overseas holidaymakers. Fáilte Ireland also has been doing excellent work in the training and development of our members' skills. Our federation strongly supports current industry calls to ensure that funding levels for both agencies are increased or at worst are not reduced. Large numbers of jobs are being lost or are under threat in our sector at present and the support of both agencies will be crucial in the year ahead in our efforts to reverse these trends and survive.

Chairman

I again thank Mr. O'Connell. We now have heard from Bed and Breakfast Ireland and the Irish Self Catering Federation. The witnesses have put forward some highly practical proposals and members appreciate the pressures under which they operate. Some of the key points raised by Bed and Breakfast Ireland related to commercial rates and mandatory registration. In addition, some important issues have just been raised by Mr. O'Connell with regard to the non-principal private residence, broadband access and working capital from the banks. Moreover, an issue that really sticks out is the comparative cost of television licences for hotels and the self-catering sector. While I will park that matter for the present, members certainly will be as helpful as possible in this regard. The tradition of the joint committee is to start with contributions from Fine Gael's representative, Deputy Deenihan, to be followed by the representatives from the Labour Party and Fianna Fáil, in that order.

Deputy Jimmy Deenihan

I welcome the representatives of both organisations, who gave good presentations, before the joint committee. First, I will ask Ms Healy a few questions about the bed and breakfast sector. I come from County Kerry, which has a very significant number of bed and breakfast businesses, both approved and unapproved. As a general observation, I note the age profile of those who operate bed and breakfasts is becoming rather old. Is Bed and Breakfast Ireland addressing this challenge by trying to encourage people with a younger age profile, such daughters or daughters-in-law, to take over from their mothers or whoever in the future? Is this issue of concern to Ms Healy's organisation? When bed and breakfasts took off in a major way in the 1960s and 1970s, those involved had a young age profile.

I note Bed and Breakfast Ireland now is the single representative body and represents 1,100 bed and breakfast operators. How many operators, who in many cases run upmarket establishments, remain outside of that body? Does the body represent approximately half of the existing bed and breakfast operators? What is Bed and Breakfast Ireland doing to encourage the other half to join the representative body? It has the incentive of being marketed abroad by Tourism Ireland and the unregistered operators obviously are excluded. However, other marketing agencies in Ireland, be they local or otherwise and which probably are in receipt of State funding, are marketing unregistered operators. Ms Healy might respond as to whether this is a problem.

I understand Bed and Breakfast Ireland intends to operate under a new brand, An Irish Home B&B, Get Closer. However, I do not believe Ms Healy referred to it in her presentation. What hopes does Bed and Breakfast Ireland have for this brand? Is "Get Closer" a good description for it? Ms Healy should outline her views on the brand to members because I understand that it took much consultation and so on to come up with it. She should provide members with some background as to its origins and the reason the phrase, "Get Closer" was used.

Bed and Breakfast Ireland represents 1,100 bed and breakfast operators but I understand that only 400 are branded under the new classification scheme at present. Why is this? Is the bar being set very high? Why are all 1,100 of the body's members not classified? I suggest the probable reason is that insufficient people are available to carry out the classification. Is it desirable to have everyone classified as soon as possible?

It is welcome that the bed and breakfast sector is working closely with the Leader programme, which I understand can now provide funding to bed and breakfasts to upgrade their product. This is a welcome departure because the local Leader development companies could not do so for a number of years. Ms Healy might confirm this now is the case because Fáilte Ireland has given the impression that they could.

I completely agree with Ms Healy that there is vast potential in Ireland for walking guides, angling and cycling. Unfortunately, however, although we sell our country as a walking destination, people come here and find there is a serious lack of proper walking guides. Consequently, people who come here are sent out on walks and frequently become lost. While many walks may be marked out at the start of the year, by year's end much of the signage may be removed for various reasons. In the case of a bad summer, it can even happen that bridges are removed by flash floods and so forth. Although Ireland is sold as a walking destination, we have a long way to go to reach the standards that obtain in, for example, the Tyrolean region of Austria, where people supervise the walks every evening and signs are replaced if they fall down, are pointing in the wrong direction or whatever.

I agree that bed and breakfast establishments could really capitalise on Ireland's vast potential for walking. However, while I do not claim to be an expert on walking, people here frequently have never gone walking themselves and do not understand what it is like to go out on a long walk in the absence of proper directions, signage and so forth. People who come from America and elsewhere expect to experience a high level of professionalism if Ireland is being sold as a walking destination.. While this is provided in some cases, in general we have some distance to go. We have some good walking companies that do a good job but this is not universal and Bed and Breakfast Ireland certainly could ensure that its members are well versed on advising people on local walks and so on.

In respect of cycling, our roads certainly are highly dangerous. I cycle myself and I believe signposts should be placed on some roads advising motorists that they could be used by cyclists. There probably should be a greater number of cycling routes throughout the country that would be more or less defined as being suitable for cycling and where motorists would beware of cyclists. In particular, overgrown hedgerows can be very dangerous for cyclists.

As for the unapproved sector and the maintenance of standards, everyone should be approved if that is possible. However, I refer to festivals, such as the recent Fleadh Cheoil in Cavan, at which people opened their houses for a few weeks to accommodate visitors. There would not really be an incentive for such people to get a licence. Is there a case to be made for a temporary licence or how should one deal with this issue? For example, during the recent Listowel Races, many people wanted to stay around Listowel town. Accommodation organisers there appealed to people who were not involved in the bed and breakfast sector to keep race goers. How do our guests get around this issue?

Under the Fáilte Ireland quality and standard programmes, I understand there are approximately 5,700 self-catering group schemes and units. This seems to be many people, but it is only a fraction of those providing self-catering accommodation. What can the delegations or the Government do to get more people registered and what kind of incentive can be provided?

I will allow in at least two more contributors before I ask our guests to respond.

Deputy Mary Upton

I thank the delegations for their presentations. I will try not to repeat many of Deputy Deenihan's questions, although we might be able to revert to some of them.

Both delegations raised an issue relating to hotels. What can or should be done? What we call zombie hotels are being propped up and have depressed prices everywhere, which has had a significant impact on other hotels and each of the delegations' industries. If a hotel gives what appears to be good value for money, why would someone go to a bed and breakfast or self-catering unit when he or she could have the hotel's facilities? This is an important issue, so I would be interested in the delegations' opinions on how to address it and whether anything can be done to rebalance the scales.

I would also be interested in the delegates' opinions on access to credit. We are aware of the concerns that have been expressed by many small industries, including those of our guests, in light of their turnover and so on. Someone mentioned problems in this regard. How is the matter impacting on these industries and how should it be addressed? We are aware of the limitations in accessing credit from banks despite the promises given. For people like our guests, this problem must be significant.

I sympathise with our guests on other matters, those being, rates, television licences and water charges. This business operates at certain times of the year, not throughout the full calendar year. The delegates have made a valid case in respect of rates. Will they expand on the issue? They are paying rates for a time when they are not using or providing the facilities in question. This matter should and could be examined. For many of those involved, it is a considerable imposition in terms of meeting end-of-year financial requirements.

I will need someone to explain the issue of the television licence, as I am intrigued by it. Am I right in believing that, if one has fewer than eight units, one must pay for a licence for each unit and that, if one has more than eight units, one can get a group licence? Maybe it is not as simple as this.

Mr. John O’Connell

No. Regardless of how many units an operator has, An Post insists on a licence for every unit.

Deputy Mary Upton

Which brings us back to the comparison to a hotel with 400 rooms where one licence is adequate. Given the cost of each licence, this seems like an unfair burden. We should take this matter up on the delegates' behalf.

I am interested in the classification system and the question of registration. What are the impacts of non-registration? Deputy Deenihan has raised this important question. People are operating without being required to meet quality assurance, quality control and other requirements. What are our guests' opinions on the classification system?

When discussing tourism, we often mention our key markets, the main one being the UK. Is there value in promoting major marketing initiatives outside the traditional markets of the UK, western Europe and America? An entire eastern European market has not been tapped into. There is also the Asian market. Since I do not know how important those markets would be to the bed and breakfast sector, perhaps our guests would like to comment on the issue. We are a little behind in this work and could be doing a bit more.

Much of our guests' business comes from outside Ireland. Something that has had an impact on tourism into Ireland across the board is the air travel tax. I would be interested in our guests' opinions in this regard.

Chairman

Senator Mooney is next, then Deputy O'Mahony.

Senator Paschal Mooney

I welcome the representatives and thank them for their detailed presentations. Deputies Deenihan and Upton have touched on elements, so I will not elaborate on them overly, but we should consider framing a motion to adopt measures on the key areas on which we seem to have a consensus. For example, the issue of the television licence is an anomaly and needs to be addressed. Perhaps our guests will elaborate on this point a little, given the comment to the effect that considerable correspondence has been exchanged between the federation and the Minister. They did not detail exactly what resulted from the correspondence and I am unsure from the comment what the Minister's position is. Obviously it is "No", but I would like to know why. There is no question but that it would be within the Minister's gift.

There is an overlap between the bed and breakfast and self-catering areas and they complement each other to a large degree. Regarding part 4, sections A, B and C of Ms Healy's presentation, how does she propose to address the matter raised in A, namely, the proposed imposition of commercial rates on bed and breakfast properties, given the economic difficulties facing the country and the fact that every Department and local authority is scrambling for money? She is calling for the non-imposition of commercial rates on bed and breakfast properties. Will she outline how the issue will be addressed without a straightforward elimination, which will not occur in the real world? Local authorities that are strapped for cash will not facilitate her in this regard, although I agree with the sentiment.

The issue of unregistered bed and breakfasts has been around since God was a boy and we are all aware of it. I come from County Leitrim, which is a tourism area like County Kerry and the north west. It is scandalous that no attempt seems to have been made to prevent the issue of unregistered bed and breakfasts from arising. I gather that one of the causes was the expense of registering. One needed to go through an inspection process that set benchmarks to which proposed operators needed to adhere, which meant going to the extra cost of adapting rooms and facilities and so on. I will not criticise these benchmarks, as they have enhanced the sector considerably, but some people did not want to spend money on their accommodation. I also understand that the cost of registration is high. What is the position under the new classification regime? The cost is one of the reasons people set up unapproved bed and breakfasts. The main reason is that they can get away with it.

Administratively speaking, the €200 non-principal private residence charge seems to be operating smoothly under a national body. Would that agency have a role in ensuring that all bed and breakfasts would be registered with it? When I asked whether each local authority was accruing the income levels from the second residence charge that they should have been, they told me they were relying initially on voluntary registration and would compare that information to their house registrations to determine whether there was a difference. It seems the system is working reasonably well and will become more efficient because local authorities have the basic number of second homes registered and we could reach 100% compliance in the next year or two. Do the witnesses see the agency operating for unapproved bed and breakfast accommodation? Should there be mandatory registration and should that mandatory registration process be done through this agency, which would ensure better compliance?

I understand a number of bed and breakfast establishments in areas such as Clare and Limerick have grouped together under a country house theme and are marketing very successfully on-line. I am curious to know, in light of the active support Fáilte Ireland has given the sector in recent years, whether the witnesses believe bed and breakfast accommodation operators need to increase their technological skills? I understand they are traditional and have not, in the main, harnessed the Internet or on-line marketing facilities to the same extent as hotels have done and are lagging behind in this regard.

I understand Fáilte Ireland has initiated a number of schemes which are helpful to the bed and breakfast accommodation sector, for example, full business support and training programmes to assist them in strengthening their offerings. It also provides assistance for business-oriented programmes such as financial planning and marketing. Will the witnesses comment on whether this is working? Fáilte Ireland is collaborating with Teagasc on the development of a farm-stay programme specifically for those properties offering a farm experience.

Everyone, on all sides of the House, has been approached constantly by small businesses complaining bitterly about the banks not releasing money. Rather interestingly, a report published by the Irish Small and Medium Enterprise association, ISME, which is a very vocal lobby group, stated that the amount of loans approved increased this year from 42% to 58%. The report also stated that only 41% of ISME members are aware of the Credit Review Group, which I find astonishing. Will the witnesses comment on this? There is some criticism of the group's lack of marketing of its existence. This is the body chaired by John Trethowan which reviews refusals by banks of credit requested by small and medium-sized enterprises. It has overturned a number of initial bank decisions.

Will the witnesses comment on the agreement between Fáilte Ireland and the local development companies which deliver the Leader programme? Opportunities have been identified for bed and breakfast establishments to avail of funding towards the development of their properties in line with the new Fáilte Ireland Irish home bed and breakfast accommodation strategy. Is this working? Have the witnesses had an input into it? Does it address some of the concerns raised about lack of credit lines?

The existence of surplus hotel rooms and price-driven marketing has impacted on occupancy levels, and we all appreciate that this is a major issue. The witnesses might be interested to know that at a recent briefing, NAMA stated that 35 impaired Irish hotels are in the agency at present. NAMA is aware of the sensitivities surrounding this issue. The question is whether they are shut down with the resultant fall-out that may arise from this, or shut down as hotels with the owners or others encouraged to make alternative use of them. I understand that NAMA will decide on how it will deal with these hotels over the next six months and this should be of some help to the sector.

The single biggest hit the sector has had in the past five years has been the fact that hotel prices have reduced. Perhaps the witnesses will not agree with this. There was a time when bed and breakfast accommodation rates were €30 to €40 and one could not get a hotel bed in most tourist areas for less than €100, but this cost has now reduced significantly. This is problematic and comes back to what I asked earlier about how this can be addressed in real terms. We agree it is an issue but should we just shut them down? Jobs are provided through these hotels as we speak.

This is a very complex area and is not quite as simple as it looks on the outside. In tourism, the bed and breakfast and self-catering accommodation sectors are the two areas which suffer even more grievously than hotels. I am speaking about people in my part of the country, which is peripheral but also a traditional tourism area, who are suffering financially because such accommodation is their main source of income. This is an exceptionally serious issue. For some families, it is a matter of putting bread on the table. The committee needs to be acutely aware that we need to give hope to the organisations that have appeared before it today, and to try to influence policy changes such as the witnesses have outlined. I fully support the specific proposals outlined in both presentations. The committee should do likewise in the context of a motion and follow up on it.

Deputy John O’Mahony

The witnesses are seeking, for the services they offer, the same support that is being sought by small businesses on a wider scale. Their proposals mention rates, credit flows and broadband. It is similar for small industries and businesses.

A recent report stated the average price of a hotel room is €69. Will the witnesses indicate how they have responded to this? Has there been a decrease in bed and breakfast accommodation prices? What percentage drop has there been in recent years? Themed angling and walking was mentioned. Are rural bed and breakfast and self-catering establishments more affected and coming under more pressure than those in urban areas?

What does it cost to register with Bed and Breakfast Ireland and what services and benefits are offered as a result of membership? I have met one or two people who were members but did not continue membership because they felt they did not receive a service.

With regard to self-catering accommodation, Mr. O'Connell stated that business has been disastrous outside the summer season. Will he articulate what "disastrous" means?

Chairman

I thank the Deputy for being so succinct. Witnesses can see the level of interest and personal experience Deputies have had in their own constituencies. They are interested in dealing with the challenge we all face to provide support for the tourism industry and the sectors it represents.

There has been a proposal to support the delegation's submission and I am happy to do so. We should single out one or two issues and I would like to single out the television licence matter. It is obvious that we must support the industry in that regard. The self-catering group could provide details of a group licence to help ease the pain of financial pressure in this area as it is at a significant disadvantage compared with hotels. The witnesses can take it that we will support the submission in its totality but I would highlight that point. We will ask the delegation to address the points raised and if there is anything that should be raised, it should be done now.

Ms Helena Healy

I will address some of the issues and hand over to Mr. Gorman if that is acceptable. Deputy Deenihan spoke about membership and age profiles. Bed and Breakfast Ireland has 50% of the bed and breakfast sector as part of its membership, so there are 1,100 or 1,200 outside our membership. There are a number of reasons all of the sector is not within Bed and Breakfast Ireland, some of which involve location. Some bed and breakfast premises are in locations where they do not need to affiliate themselves to a marketing organisation. Some of them are with another smaller marketing organisation and have found their services provided by that organisation as well. It is their choice.

Members come to us for different reasons, with some seeking the representational side and most coming for the business side. The age profile is a big issue within the sector. The Deputy correctly stated that in the 1960s, when the bed and breakfast movement was born in Ireland, it was the young generation of the time that opened their homes to tourists because there were not enough hotels in Ireland at the time. As we moved into the Celtic tiger and hotels sprouted all over the place, that business has gone from the bed and breakfast sector into the hotel sector for all the reasons we spoke about today.

The Celtic tiger kept people out of the bed and breakfast business because there was plenty of employment. Passing the business from mother to daughter, father to son, etc., was perhaps not as attractive as it might be now or in the near future, where there is less employment outside the home. As an organisation, we are speaking with Fáilte Ireland about this in trying to put measures in place to support people coming into the sector. Currently, of the 2,300 approved bed and breakfast operators, a high proportion are in their late 50s, 60s and even early 70s. That is a concern for us and we want to see more people joining the sector.

Classification was also mentioned. There are about 400 classification visits done within the approved sector, which means there are 1,900 still to do. Whereas Bed and Breakfast Ireland supports classification — it campaigned for it and was part of a working group with Fáilte Ireland to develop it — it has had a mixed reception from the bed and breakfast sector for a number of reasons. One is the current economic climate. When we embarked on this road we were in better times and the current climate is difficult for operators. For some bed and breakfast operators a financial injection is needed to achieve a three or four star rating, or whatever star rating the operator believes is deserved. There is a financial impact, which relates to the credit issue mentioned by some members.

Members are reporting to us that credit is very difficult to get. On the Leader programme in terms of funding for classification, Fáilte Ireland has indicated that funding is available but when members seek it they do not receive it. The Leader companies are saying they know nothing about it and are not supporting bed and breakfast operators because the money is not there. There is certainly a big issue in that respect and perhaps some support from this committee would help. It may be that communication needs to be clarified but currently our feedback is that the money is not there.

Members mentioned walking guides, cycling, etc. With bed and breakfast products, 80% of business would traditionally come from the overseas market. Many of the European markets in particular come to Ireland for those types of activities, including walking, cycling and angling. Much work has been done with the facilities in Ireland but much more needs to be done. Signage, etc., has been mentioned and we fully support the view that work needs to be done in that area.

The unapproved sector was raised by quite a number of committee members. It is a particular issue for the bed and breakfast sector because approved operators feel hard done by in that they comply with all the financial liabilities under the Revenue Commissioners, including VAT, income tax and water or commercial rates, as well as the corresponding expenses. The perception in the approved sector is that the operators in the unapproved sector do not comply in this way. Water rates have been introduced by a number of local authorities in the past number of years and the approved sector has been targeted in this respect. Unapproved neighbours, meanwhile, do not pay water rates. That is just one example.

The cost of approval by Fáilte Ireland for the approved sector is €240 which includes classification and categorisation. It pays Bed and Breakfast Ireland in the region of €500 to €700 depending on the size of the property. Taxes, etc., are also paid. The operators feel they are making a substantial contribution towards the visitors brought in from overseas market and Fáilte Ireland's domestic campaigns. Unapproved neighbours, while they do not contribute to the figures I just described, will benefit from the work done on behalf of the sector.

Somebody mentioned an operator who might open specifically for a festival, for example, over the course of three days, a week or a month, and if a temporary licence would work. It would be beneficial and to be honest, our campaign is not about the person who opens up for a festival lasting a weekend or a week. We are more concerned about full-time bed and breakfast premises operating, in some cases, 12 months in the year without complying with the financial or health and safety aspects of the business, including insurance. If a licensing system is introduced, the business opening specifically for a festival would need to be looked after.

Chairman

Does Mr. Gorman wish to add to that?

Mr. Vincent Gorman

Specialised trails for walking and cycling have been mentioned. Designated trails have emerged in the past number of years and are working quite successfully. At Bed and Breakfast Ireland we have put groups together to deal with customers who wish to go walking. Cycling is more of an issue because of the road structure and a lack of cycle lanes in some cities or the countryside. It is a problem but there is potential in the area nevertheless. People from the Dutch market tend to do much cycling and some overseas visitors like an adventure holiday where they can cycle, walk and go angling.

Such activities have suffered in the past number of years, particularly during the Celtic tiger. Ireland was a big angling destination, for example, but it has slipped in that regard, particularly for our nearest neighbours in Britain. Ten or 15 years ago rivers became polluted and tourists went elsewhere. Our waters are now well controlled and the quality of fishing in Ireland is probably as high as it has ever been.

Deputy Jimmy Deenihan

The move from drift-net fishing has helped.

Mr. Vincent Gorman

Yes. The rates issue is significant for anybody operating a small business like a bed and breakfast premises. Any rates that will be imposed will be on the basis of footage or square footage of the premises. The fact is there will be three or four rooms in a business, which will be seasonal. Most bed and breakfast businesses start operating around the middle of March, after St. Patrick's Day, and run until now, the end of September. If rates are imposed on those premises — if one calls them commercial — even with the four or five rooms in operation they are idle six months of the year. The business runs during the other six months. The profit margin does not exist to pay rates. People pay income tax on their profits at the end of the year, like any business. They will buy more groceries in their local area and employ local people. They reinvest the money locally. We believe that if rates are imposed, it will have a negative effect, in particular on bed and breakfast businesses. Again, this comes back to the age profile of the members. They believe that if they have to start paying rates on top of what they are doing it will not be worth their while. The bed and breakfast product has been the backbone of tourism. It has built up the tourism product over the years. The businesses are in rural areas, small towns and villages and the money involved is reinvested in those areas. If any improvements are made, the local builder gets the work and materials are bought locally.

Deputy Upton made a point about zombie hotels and what can be done about them. I believe there are 35 of these in NAMA and they are doing huge damage to the bed and breakfast product for the simple reason that they discount room rates below even those of bed and breakfast businesses. The point was made that hotel room rates have dropped to €50 or €60 per night. Bed and breakfast businesses have dropped their rates by 20%. On average they would have charged about €35 for one night's bed and breakfast. Most people now operate for about €30 but there is no money in it if one goes below that. It has got to that stage. Although the charge for accommodation was always low, it suited the tourist who wanted that type of accommodation. The standard was always superb and excellent and hospitality was given along with it. The take was not substantial. The price was not at €80, dropping back to €30. The money taken in the bed and breakfast business was quite modest for what was given in return. Like any business, hotels can be very impersonal but bed and breakfast businesses take tourists on board, bring them into their house, into a family situation and give them the best of both worlds. They act as a tourist office, advise people where to go and what to do and help them organise the rest of their holiday. From that point of view, the loss of the bed and breakfast sector will have a detrimental effect on the entire Irish tourism industry. It is a gem and unique. We sell our Irishness and what we have to offer. Most of the advertising Tourism Ireland does is based on rural Ireland and the small enterprise, the small bed and breakfast establishment or self-catering business. It is about getting in touch with one's roots and keeping in touch with Irish people who, at their best, are characters. The tradition they offer of an Irish background cannot be equalled.

The Internet is a major problem for many people because broadband is not available in most rural areas. Operators have embraced technology in so far as all members now have a website, e-mail addresses and all that. That is something they have had to come to terms with in recent years. Traditionally, people of that age group, 60-plus, would not have been brought up with computers, as members will appreciate. Working with Fáilte Ireland, they have been trained to deal with the Internet and e-mails and that is where much of the business comes about now. Broadband is an issue because most people who come on holidays now like to stay in touch with their business through e-mail and if they cannot access the Internet, it is a negative point for them.

Points were made about registration and the cost of service. It goes back to what Ms Healy said at the beginning. The reason some people do not want to be part of the bed and breakfast association is to do with location. If they are in a good location where they have business and can pick it up from the local hotel or if they are in a good tourist destination, they do not see the need to be part of a marketing organisation. For many of our members, however, it is essential to be involved and they appreciate it.

Chairman

I appreciate that reply. Many questions were raised. I call on either Mr. O'Connell or Mr. Corrigan to respond.

Mr. John O’Connell

There has been much crossover on issues so I will not replicate anything that was said already. I will answer the questions from members that are specific to self-catering and will add one or two points to what Ms Healy and Mr. Gorman have said. I shall take Deputy Deenihan's point first. With walking and other activities such as cycling, fishing, surfing and activity sports, the plan as far as Fáilte Ireland and the trade are concerned is to develop specialist hubs throughout the country that will be centres of excellence for these activities. It is not possible for every town and village in the country to have excellent walking or cycling routes and so on. The plan is that the designated hubs will be put in place and the accommodation facilities, whether bed and breakfast or self-catering or such like, will be encouraged from a marketing point of view and by the opportunity to access Leader funding. The Leader funding referred to for bed and breakfast businesses is available also for self-catering businesses in the coming year. The idea is that people will put in place facilities in conjunction with their accommodation, for example, wet rooms for drying angling gear or keeping surf boards or bicycles.

We have not discussed another area, that of facilities for disabled people. There is a big drive there. There are more than 5 million registered disabled people in the European Union alone and there is a huge opportunity there for Irish tourism in terms of providing facilities for the disabled. Self-catering does that particularly well.

On the issue of temporary accommodation for festivals and so on, again with self catering that is not necessarily the issue. We should make it clear to the people coming, especially people from abroad, that this is neither a bed and breakfast business nor registered self-catering but a private house that is accommodating tourists. Those places should not be allowed to put a sign outside in the same way a registered place can do.

Deputy Upton asked about incentives we might give to unapproved units to join. From a self-catering perspective, there is an excellent marketing opportunity for people to get involved in the Discover Ireland home holidays campaigns and the overseas marketing campaigns conducted by Tourism Ireland. They have the opportunity to provide excellent quality assurance for their customers in that they can advertise that they are approved and have the standard expected. As was mentioned, Fáilte Ireland provides excellent skills, training and development opportunities for their members to upskill in e-marketing and other sorts of business development opportunities. In terms of what was discussed in regard to the development of hubs, there are great business development opportunities where people can network with activity providers, marketing companies and all sorts of people who can help them develop packages for their businesses. They can also access schemes such as Leader funding, by registration or being approved.

Deputy Jimmy Deenihan

According to Ms Healy there appears to some confusion about the availability of Leader funding. Has Mr. O'Connell got clarification on that?

Mr. John O’Connell

We have clarification that it is available, although not necessarily in every county. On a national basis, however, the commitment from Leader is there. It will support us. We have developed five or six specific categories which will be included. They will include, for example, walking, angling, farm stays, eco-friendly, adventure seekers, golf and food lovers. These can be added to, depending on the situation. That is a national policy of Leader. There may be some variations county by county depending on the availability of funding because the budgets are administered on that basis.

Deputy Jimmy Deenihan

It is a very positive move but it should be made clear to all Leader companies that it is available. I know from experience that when even a registered person wants to develop his or her bed and breakfast business and goes to Leader, he or she may be offered an apology and told that Leader does not support accommodation because there is surplus accommodation in the territory.

Mr. John O’Connell

Some individual counties have said that they have questions about it.

Chairman

I thank all the speakers. It is the first day of the new session and obviously a busy day. The clock is ticking with regard to the Chamber. We invited the delegates specifically because we wanted to hear the voices of their organisations. We heard the Irish Hotels Federation, tourism bodies such as Tourism Ireland and Bord Fáilte. It is important we should hear what the delegates have to say. We have had a very detailed discussion.

I propose, if my colleagues agree, that we support the numerous submissions made by the delegates. I refer to a few, namely, the non-principal private residence charge, broadband and television licences. Rather than single out any one, we as a committee which is very interested in the subject shall simply support all the submissions as best we can. I thank the witnesses for their attendance. I know I am speaking on behalf of all of my colleagues. We will try to work with them in the months and year ahead and wish them well in their endeavours.

The joint committee adjourned at 4 p.m. sine die.