Tourism Sector Sentiment Softens On Brexit Concerns

Tourism Sector Sentiment Softens On Brexit Concerns

Most businesses confident but post-Brexit concern in some regions

Tourism sector sentiment remains upbeat but there is evidence of some softening which can be attributed to concerns about the British market according to the latest Fáilte Ireland Tourism Barometer Survey, published today.

While business sentiment across the tourism sector remains generally upbeat, one in four businesses (26%)  surveyed report experiencing a Brexit or Sterling exchange rate impact on their business so far this year and 30% say that Northern Ireland has underperformed while 35% have seen a fall-off in demand from Great Britain.

Tourism Business Sentiment 2008-2017 - See chart here

%     2008 2009  2010  2011  2012  2013  2014 2015  2016 2017
Up      14     15     28     39      52     46      62     61      63     55
Same  18     11     25     31      23     26      23     24      25     28
Down  68    74     47     30      25     27     15     15      12     18

Nevertheless, Fáilte Ireland’s ‘Tourism Business Sentiment Index’ (reflecting year to date performance and 2017 expectations) shows that the business sentiment for the majority of tourism businesses remains positive (55%) or neutral (28%). For most tourism businesses, the year has got off to a good start and continued confidence, which has been built over recent years, is being bolstered by a good performance over Easter particularly helped by European and American markets.

Commenting today, Minister of State for Tourism, Patrick O’Donovan said:

“I am pleased to note that there is still great confidence within the tourism sector.  However, concerns over the British market are starting to come to the fore and making an impact. The challenge facing our nearest market means that nobody in the industry can be complacent and it is vital that we keep a sharp focus on our competitiveness.”

How is 2017 shaping up?
So far this year, most (85%) hotels are reporting that their average room yield is up or on a par compared to the same period in 2016. However, 15% of hotels report that yields are down, compared to just 5% at the same point in time last year.

Looking to the rest of 2017, tourism enterprises are optimistic with 60% expecting business to be ahead of last year and a further 29% expecting it to stay the same. One in ten (11%) are expecting a downturn in their business compared to just 5% at the same time in 2016.

Speaking to the findings, Fáilte Ireland CEO Paul Kelly emphasised:

“Clearly, despite some softening in the British market, tourism operators remain upbeat – thanks in large part to business from North American and other long haul markets as well as the continued strong performance of the domestic market. The crucial focus now for every business must be on getting their market mix right. An over-reliance on one market can leave any enterprise dangerously exposed to unexpected external events such as Brexit. Diversification is the key to minimising that risk.”

How are the markets performing?

Most (85%) businesses say that business is up (41%) or the same (44%) from North America and they are bullish about this market for the coming season with more than half (53%) expecting to welcome more North American visitors than last year.  One in four (23%) businesses say that Dollar/Euro exchange rates are positive factors in their business this year.

However, Northern Ireland and mainland Britain have been relatively poor performers so far this year with 30% of tourism operators reporting that NI has underperformed and 35% have seen a fall-off in demand from Great Britain.  Almost a quarter (23%) of tourism businesses expect less business from Northern Ireland during the rest of the year and a greater number ( 34%) expect a downturn in British visitors in the coming months.

What about Brexit?

The post-referendum environment and associated currency volatility is clearly worrying some tourism businesses with one third (34%) saying that Sterling/Euro exchange rates are one of their main concerns in 2017 -  this rises to above 40% for hoteliers and restauranteurs.

However, during 2017 so far, only one in four businesses (26%) have experienced a Brexit or Sterling exchange rate impact on their business with a further 19% unable to say whether they had or not at this stage. Responses varied widely by type of business with just one in ten (10%) B&B’s reporting any influence while 44% of restauranteurs said they had experienced an impact.

From interviews with tourism operators, while there is an acceptance in the sector that the UK may not be as strong as it has been, it is widely believed that other high performing markets will make up for any drop in UK visitors.

How are the regions performing?
The North (in this case,  the North Western and border counties of Cavan, Donegal, Leitrim, Longford, Louth, Mayo, Monaghan and Sligo)  has not performed as well as the rest of the country to date this year. On balance, less Northern accommodation providers have experienced growth in the first four months of the year compared to the rest of the country. Northern enterprises are particularly reliant on traffic from their close neighbours in Northern Ireland and more businesses have seen a drop in volume from this market so far this year.

This negative performance has fed into accommodation providers’ expectation for the rest of the year.  A higher proportion of these businesses expect a decline from Northern Ireland, while the sentiment is more positive overall from businesses in the rest of the country.

The difference between the North and the rest of the country appears to be down to the impact of Brexit and the Sterling exchange rate, particularly on cross-border traffic from Northern Ireland with 62% of accommodation providers in the region citing the Sterling exchange rate as an issue of concern, compared to a much lower proportion (34%) of PSA businesses in the rest of the country. 

About half (52%) of accommodation providers in the North region say they have been affected by Brexit or the Sterling exchange rate to date. This compares to a lower proportion (29%) of accommodation providers outside the North.

Looking at the survey strictly in terms of Dublin versus the rest of the country, Brexit has had more of an impact on businesses in Dublin, especially in terms of British visitors compared to businesses beyond the capital. On balance, more Dublin PSA providers have seen a downturn from Britain compared to the rest of the country. Brexit and the Sterling exchange rate have affected half (50%) of Dublin PSA businesses to date compared to a lower proportion (30%) of all the other PSA businesses in the country.

Speaking to these regional variations, Mr Kelly said:

“The weakening of Sterling is inevitably having an impact on those regions – particularly in the north west and along the border counties – which have a greater reliance on Northern Irish visitors as well as British tourists. The key here will be for local operators to diversify their target markets and seek trade in Europe and from the US in order to reduce their exposure to Sterling’s current softness.

“In the case of Dublin, the fall in British visitors may be linked to greater price sensitivity due to Sterling’s weakness. This underscores the importance for businesses in the capital to maintain a rigorous focus on competitiveness despite the current high demand in the city.”

Other Tourism Sector Issues
While other European destinations have suffered from perceptions relating to security, 61% of Irish tourism businesses mention the perception of Ireland as a safe destination as one the most positive factors influencing business. Other positive drivers of business include repeat visitors, the domestic market and (in the west) the Wild Atlantic Way.

In terms of challenges, two in five (41%) tourism businesses said that they were concerned about an over-concentration of tourists in Dublin and other cities – using them as touring bases rather than staying locally in rural areas. Other challenges include the above mentioned Sterling exchange rates as well as business costs. Interestingly, the proportion (now 28%) citing concerns about Ireland’s value for money perception have grown since this time last year.

In interviews, some tourism operators have raised concerns over capacity levels in Dublin and other major cities, a problem which has been increasing in recent years. There is a particular worry that a lack of accommodation is driving up prices in the capital and Ireland will start to lose the competitive edge it once had.

For key more observations from today’s Barometer Report, see the Editors Note below.

Commenting particularly on the challenge posed by Brexit, Mr Kelly said:

“Fáilte Ireland has established a new Enterprise Business Unit which is currently developing a new Brexit Response Programme which will focus on building capability in the tourism industry. The programme will aim to ensure that the relevant skills and insights are available to identify and exploit existing opportunities out of Great Britain and Northern Ireland, and also identify new sales and business opportunities in continental Europe and the US. The programme will evolve and adapt, as the Brexit implications are realized over the coming years, and will provide a range of practical supports to hundreds of tourism businesses.”

You read the full version of the latest Fáilte Ireland Tourism Barometer here. 

For further information please contact:

Alex Connolly
Head of Communications –
086 7966320/01 8847884


Fáilte Ireland

Fáilte Ireland, the national tourism development authority, was established in 2003 to guide and promote tourism as a leading indigenous component of the Irish economy.

The tourism and hospitality industry employs an estimated 220,000 people and generates an estimated €5.7 billion in revenue a year.

Key Observations from today’s Barometer Report

Restaurants and hotels the most affected sectors by Brexit and Sterling           
A quarter (26%) of businesses says they have seen a Brexit or Sterling exchange rate impact on their business so far this year, whereas more (55%) say they have not. The remainder (19%) do not know.
The highest proportions of businesses affected are found among restaurants (44% are affected) and hotels (36% are affected).

Ireland safe haven
Many (61%) businesses say that the perception of Ireland as a safe destination is a positive for their business this year. This is the second most frequently stated positive factor after ‘repeat visitors’ (73% of businesses).

Local businesses missing out on tourism custom       
Two in five (41%) businesses nationwide say their main concern is ‘more tourists using Dublin and other cities as a touring base rather than staying locally’. This is the most frequently stated of all concerns. If Dublin-based businesses are excluded, the proportion stating this concern rises to 48%. This finding is not just limited to accommodation providers, but is consistent across all industry sectors.

Hotels contribute strongly to overall Paid Service Accommodation (PSA) performance   
The PSA sector has enjoyed a good start to 2017, with over half (54%) of businesses increasing their visitors and a further quarter (25%) achieving the same level.

Hotels have started the year on a positive note, with well over half (58%) reporting increased visitor volumes compared to the same period last year. Profitability is very healthy – the majority (60%) of hotels have increased their profitability, compared to only a minority (16%) reporting to be down.

Guesthouses have experienced a reasonable start to the year, with about a third (35%) of businesses up on visitors and two in five (41%) maintaining the same level. However, profitability is down on balance: one in five (21%) have increased profitability this year, but two in five (41%) are down.

B&Bs have had a mixed start to the year, with 27% increasing their visitor volumes, but about the same proportion (28%) have experienced a decrease. However, expectations for the remainder of the year are positive, with 43% expecting an increase in visitors and a similar proportion (40%) expecting the same level. 

Self-catering boosted by visitors from further afield
The self catering sector has also experienced a mixed start to the year, with a third (33%) increasing their visitor levels, but a similar proportion (32%) experiencing a decrease.

Markets closest to home – Republic of Ireland, Northern Ireland and Britain – are all down. However, the North American market (up for 33% of businesses) and the French market (up for 32% of businesses) are performing relatively well.

Germans taking up the beds in hostels 
Hostels have been busy so far this year, with 42% increasing their visitors and 43% receiving the same level.

Germans have been getting to the beds first. Over half (54%) of hostels have welcomed more German visitors compared to the same period last year.

Let’s go camping    
The caravan and camping sector has enjoyed a significant boost from Irish holidaymakers staying in Ireland. 44% of caravan & campsites say the domestic market is up. About three in four (76%) caravan & campsites state ‘Irish people holidaying in Ireland’ as a positive factor affecting their business this year.

Very high footfall at attractions 
Attractions are enjoying an excellent year so far, with 70% of businesses receiving more visitors. This success is expected to continue, with an even higher proportion (77%) of attractions expecting growth during the remainder of the year.

Restaurants hindered by exchange rates        
Tourist custom to restaurants appears to be doing well in domestic, North American and Eurozone markets, but not Sterling (£) markets (Britain and Northern Ireland). Two in five (41%) restaurants state the Sterling/Euro exchange rate as an issue of concern this year. A third (33%) say that visitors are spending less – the highest proportion stating this concern of any industry sector.

On a positive note, tourism custom is expected to pick up. The majority (62%) of restaurants expect to be up on tourist visitors during the remainder of the year.

Golf clubs finding the fairway     
44% of golf clubs have hosted more tourist customers to date this year, and a similar proportion (41%) have received the same level. Many (71%) cite ‘own marketing’ as a positive factor – the highest of any industry sector.

Golf clubs are also the only sector apart from attractions to maintain their level of British customers.

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