Tourism
outlook for 2016
The national target of 5% increase in overseas visitor revenue
in 2016 is realistic, if perhaps a little conservative, given the
state of source market economies, the increase in access capacity
into Ireland and anticipated strength of the US dollar, and the
current year’s trends in demand from all the major source
markets. Of course the geo-political scenario is far from certain
and the continued threat of terrorist attacks around the world will
inevitably impact on demand for travel. So, while the balance of
indicators is positive, continued growth is not guaranteed.
Economic outlook across Ireland's
main source markets
Tourism performance is heavily dependent on the wider global economic
environment, which happily is poised for growth comparable to recent
years’ performance although with textural shifts and caveats.
The outlook for Ireland’s key source markets for tourism is
broadly positive, with the Eurozone expected to improve a little,
while the US is forecast to perform much the same as last year,
with the economic outlook for Asia uncertain due to doubts about
the Chinese economy. The International Monetary Fund’s latest
World Economic Outlook expects the world overall to expand in 2016
by 3.6%, up on the 2015 estimated growth of 3.1%. With the falling
price for natural resources several economies will slow, while the
consumer in developed economies will benefit from lower prices.
The reduced cost of oil, currently at a 7 year low, will make the
cost of travel more attractive to increasing numbers of people.
Eurozone economies look set to grow
in 2016
The Eurozone economy’s continued growth, supported by strong
dynamics in domestic demand, is likely to continue into 2016 although
moderated mainly due to headwinds from a deepening deceleration
in emerging economies. Household consumption continues to be propelled
by low inflation and an expansionary monetary policy, as well as
by a gradual improvement in the labor market. GDP growth is projected
to rise to almost 2% in 2016 and 2017, although some stark differences
across countries within the euro area will persist.
Continued growth in US economy and demand
for travel
The US economy will be entering its seventh year of expansion
after the global financial crisis of 2008-09, with most forecasters
expecting modest growth of between 2 and 2.5% in 2016. The outlook
for jobs and the housing market is good, underpinned by the expectation
of a rise in interest rates reaching a still-low rate of just over
1.1% by the end 2016. Most predictions are positive for continued
growth in outbound travel, with the US dollar expected to strengthen
further against the euro, barring a major terrorist incident or
specific threats to Americans travelling abroad.
UK growth forecast on the back of
consumer spending
Britain’s economy is now expected to grow by up to 2.5% in
2016, despite weak manufacturing and trade performance. Consumer
spending and the services sector have spearheaded a recovery in
Britain which saw its economy outperform those of other advanced
nations in 2015 with employment and pay levels rising. The British
pound has been in decline against the euro since the summer due
to uncertainty concerning the timing of UK interest rate rises based
on subdued inflation. The threat of ‘Brexit’ weighs
on Sterling, while most forecasters do not now expect an interest
rate hike during 2016.
Ireland's economy growing at its
fastest pace in 15 years
With GDP showing volume growth of 7% in 2015, it is forecast to
grow by another 4.3% next year. Consumer confidence is at its highest
since the start of 2006. Job and personal finances optimism has
risen after the Government’s latest announcement of easing
of austerity measures and the introduction of tax cuts. Recent upwards
trends in retail and travel sales are expected to continue through
into 2016, which should see a further upswing in demand for short
breaks.
Another year of growth in airline capacity
in 2016
The good news is that more seats will be available on air services,
a primary driver of tourism demand. Capacity on air services in
the peak months of 2016 will be at least 10% ahead of last summer.
The principal additions to air service routes and frequency, compared
to summer 2015, which will benefit inbound tourism include:
From the US
- Aer Lingus is relaunching
a service from Los Angeles to Dublin (effective May 4th), while
adding new services from Newark (effective September 1st) and
Hartford (effective September 28th), as well as increasing frequency
from Chicago to Dublin.
- Delta Airlines is
upgrading to larger aircraft on its services to Ireland from May
2nd.
- Norwegian proposed flight from Cork to Boston May 2016 (TBC)
From Canada
- Air Canada Rouge is
launching a new service from Vancouver to Dublin, effective June
10th to October 8th.
From Germany
- Aer Lingus is launching
a new Dusseldorf-Cork service from March 27th.
From France
- Aer Lingus is launching
a Montpellier-Dublin service.
- CityJet will operate
new services from Nantes and La Rochelle to Cork from June 18th
to end August.
From Spain
- Iberia Express will
operate a new service from Madrid to Cork, effective June 18th
to end August.
- Norwegian Cork to Barcelona
May 2016 (TBC)
From The Netherlands
- Ryanair has commenced
service from Amsterdam to Dublin.
From Greece
- Ryanair and Aegean
will each start service from Athens to Dublin.
From Britain
- Ryanair and Aer Lingus
are adding frequency on a number of key routes, including Manchester
and Birmingham to Dublin.
- CityJet has commenced
service between London City and Cork.
- Aer Lingus has commenced
service from Liverpool to Dublin and is increasing capacity between
London and Shannon.
- Aer Lingus Regional
is launching two new services to Cork from Southampton and Leeds
Bradford, while relaunching service between Edinburgh and Shannon
plus a new Newquay-Dublin service.
- Flybe will service
Birmingham and Edinburgh to Knock, Ireland West Airport.
In addition to the above, Ryanair and Aer
Lingus are adding services on a number of established routes;
while there will be some tweaking of frequency on other services.
Some Threats to Continued Growth
Ensuring Competitiveness:
The recovery over recent years has been driven by a marked improvement
in competitiveness in terms of price and quality of the tourism
offering. Ireland’s improving economy could pose a threat
to the competitiveness should our costs rise faster than in competitor
destinations. There is a risk that the strength of the US dollar
and Sterling could mask unfavourable price increases. It is vital
that the improved value for money rating which visitors have reported
on their experience is not allowed to slip. A loss of competitiveness
represents the single largest threat to the sector.
Capacity Constraints:
Capacity issues represent a potentially serious constraint to continued
growth. This is particularly evident in terms of a shortage of hotel
capacity in Dublin which limits the ability to attract increasing
volumes of visitors to Ireland. Dublin hotels are operating for
much of the year at close to capacity due to the city’s popularity
as a leisure and business destination. For the city to achieve its
potential additional accommodation is required.
Overall as demand increases across the country sustained growth
will become more dependent on the ability to attract greater number
of visitors outside of the peak months when access, accommodation
and other service providers have spare capacity. If filled, this
will in turn significantly boost profitability and sustain greater
levels of year round employment.
External Environment:
Uncertainty surrounding the geo-political environment and the threat
of terrorist activities on travel hang over the outlook for the
year ahead. However, demand for travel has proven to be resilient
in the face of terrorist threats and hopefully any impacts will
be minimal for Northern European destinations.
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