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07 June 2016

Brexit and the Irish Tourism Sector

Posted By: AIB Business
brexit-tourism-245x245

With the UK referendum fast approaching, there is much speculation about the potential implications for the Irish Tourism sector. As our largest neighbour and trade partner, if the UK decides to exit the Eurozone, it would undoubtedly have a significant effect on the Irish economy, writes Naoise Cosgrove from Crowe Horwath.

Nobody knows exactly how much a Brexit scenario would impact Ireland’s tourism sector. It would largely depend on the level of open trade and travel agreements that the UK would have with its Irish and European neighbours. However, there are a number of areas in relation to the Irish tourism industry where we can speculate.

At present, the UK is Ireland’s biggest inbound tourist market, with over 3.5 million visitors in 2015 – representing 41% of total visitors to Ireland1. UK tourism comprises both business and leisure travel. If this geographic market segment declines due to increased border controls, a slowing in the UK economy and a reduction in both business and leisure travel to Ireland, it would have an impact on the hotel and tourism industry in Ireland.  

 

Shifting Focus to Other Markets
The “Other Europe” market accounted for 35% of overall visitors to Ireland in 2015 or just over 3 million visitors. Any decrease in one market segment would require Ireland to focus on others, and the rest of Europe, while growing by 24% (2013-2015), would have to become a more significant market for us. These markets will also be impacted by the UK exit and will undoubtedly be focusing on domestic tourism to fill any gap.

The Northern Ireland market is an important leisure market segment for the border counties, with hotels in these areas reporting strong business from Northern Ireland, particularly with the strength of Sterling over the last couple of years. The recent decline in Sterling against the Euro is being felt and a severe drop in Sterling would undoubtedly have an impact on the hotel industry, not only in the border counties but in the Irish economy in general as the Euro currency would represent less value for money.

While the UK market is important to Ireland from a tourism perspective, there has been positive growth in other market areas, which deliver a higher spend per person. For example, the average spend by a UK visitor is €2741 compared to €791 by the US visitor and €898 from the Rest of the World. In 2015 the US market contributed 1.5 million visitors compared to half a million from the Rest of the World. Given the weight of the UK market vs other segments, the higher spend – whilst being a benefit – is insufficient to offset any loss, and subsequently our marketing efforts must focus heavily on the wider market place. There is no evidence of a decline yet in UK visitors to Ireland, with year-on-year figures compared to last year showing an 18% growth in the UK. Undoubtedly this will be watched by tourism officials within Ireland and individual businesses also.

 

Border Implications
An exit from the Eurozone by the UK would undoubtedly increase passport control into the UK. One would expect that the special relationship that Ireland and Britain share would forge agreements for travelling between the two countries. The more stringent passport control between the UK and other Eurozone countries, however, could be positive for Ireland as we become a potential gateway for many US and Canadian connecting flights. 

The UK is an important access point to Ireland for many long-haul destinations such as China. If the UK votes to leave the EU, it may hamper the flow of visitors to Ireland from such countries.

 

Potential Growth in Conference Market
Ireland would become the only native English-speaking country within the Eurozone, which may have a positive effect on the conference market, with easier travel and a unified currency, particularly when attracting European conferences. The 2015 ICCA (International Conference and Convention Association) rankings place Dublin in the top 20 worldwide cities for hosting international association conferences. There is a commitment by our national tourism stakeholders to continue this trajectory and promoting Ireland as a top quality conference destination. The UK becoming a more difficult or expensive conference destination would benefit Dublin and Ireland in this very profitable tourism segment.

 

Potential Job Losses with Knock-on Effect
The tourism market within Ireland benefits not only from international tourism but also from Irish residents, who in 2015 took 7.5 million domestic trips. The domestic tourist had an average duration of 2.8 nights and accounted for 20.9 million bed nights. The domestic market is very valuable to the Irish hotel industry, with weddings and functions, mid-week and off-season short breaks and high season holidays all making significant contributions. Any loss of jobs in Ireland reduces disposable income and domestic travel by the Irish leisure tourist, which in turn, has a direct impact on the hotel, restaurant and pub market around the country. The domestic tourist was crucial to these businesses during the heavy recession and downstream impacts outside of the tourism industry would directly influence people’s spending and travel.

Should the UK vote to leave the EU, the immediate effects will most likely be on the devaluation of Sterling, which in turn will have an impact on travel to Ireland, particularly in the border counties. The two-year withdrawal period from the EU may influence consumer sentiment, both domestic and international, affecting disposable income. The trade agreements and relationship Ireland would develop with the UK, and the UK with the rest of Europe, would ultimately determine the full impact of the exit. However, these will take time. There is little doubt that an exit from the Eurozone by the UK would not only impact Ireland, but also other European countries. The implications for Ireland would therefore not just stem from the UK, but from the knock-on effect the exit would also have on other countries.

 

Written by: Naoise Cosgrove, Managing Partner, Crowe Horwath

 

1 Source: Central Statistics Office (CSO)

 

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