Analyse of the sector 29/11/2010
Ireland hit hard by global recession

The Irish travel and tourism industry was hit hard by the global recession, with all areas declining during 2009 and deteriorating in comparison with the previous year. Inbound and outbound tourism flows both saw double-digit decreases, while domestic tourism flows was also down. These decreases had a trickle-down effect on all tourism service providers as overall demand fell. Reductions in demand were reflected in a number of ways: people took fewer trips, with especially pronounced drops in second and third additional trips, and duration was also shorter. Furthermore, travellers reduced their spending, while the decline in industry output generally led to a severe drop in business travel – both incoming and domestic – that exceeded the overall decline.

 

Price competition intensifies

 

In addition to reduced tourism flows, falling unit prices across all areas were the second major characteristic of travel and tourism in Ireland during 2009. While increased price consciousness is hardly a new feature, the share of services sold at a discount was reported to have increased considerably year on year. Thus, average hotel rates and average airline fares declined at double-digit rates, while an even faster decline within travel retail was prevented first and foremost by discounted packages and a surge in last-minute bookings. A second source of pressure on prices was the ongoing shift towards making purchases on-line, again across all areas, with consumers becoming increasingly adept at finding the best bargains, and comparison and aggregator sites making price comparison easier than ever before.

 

Ireland pays high price for reliance on UK and US tourists

 

The blow to Ireland from the recession was magnified by the fact that its incoming tourism relies heavily on the UK and the US, two countries disproportionately affected by the financial crisis and ensuing recession. In addition to the fall in visitor numbers, this also negatively affected incoming tourist receipts and was aggravated by the fact that spending by both UK and US tourists was impacted by unfavourable exchange rates. In particular, the drop in spending by UK tourists, by far the largest group overall, significantly exceeded the already steep double-digit decline in visitor numbers.

 

Competitive landscape changes in travel retail and car rental

 

The recession especially took its toll within travel retail, where falling demand combined with overoptimistic planning at the beginning of the year forced two leading Irish tour operators and travel retailers to cease trading. Budget Travel Ltd, hitherto Ireland’s largest tour operator and travel retail chain, finally threw in the towel at the end of November 2009, having already closed nearly half of its outlets two months previously. For different reasons, the competitive structure also changed within car rental, as Murrays Europcar Ltd lost the Europcar franchise after 35 years to rival operator Irish Car Rentals Ltd.

 

Recovery anticipated to be slow

 

Recovery is predicted to be slow, as GDP in Ireland is expected to see a further decline during 2010. Although the global economy is showing some signs of improvement, the overall sentiment remains one of uncertainty, and there are fears of a w-shaped recession, ie a limited recovery followed by yet another plunge. Furthermore, Ireland’s two main countries of origin for tourism flows inbound – the US and the UK – are still struggling with the fallout of the financial crisis and are not expected to regain their previous strength in the short term. Although the Irish Tourism Marketing Agency set a target of moderate visitor growth for 2010, most trade sources are more cautious and expect merely a lesser decline that year, with no return to growth until 2011.