National Council & Management Committee Meeting17/05/2017 - 10:00am to 4:00pm
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Below you will find the summary versions of a number of recent IHF Policies:
Tourism is Ireland’s largest indigenous industry and a critical component of the export economy, accounting for €5.7 billion in spending in 2013 and represents 4% of Ireland’s GNP. The derived spend is enormous for the Government with approximately 65 cent in every euro going back by way of some form of tax or levy. Tourism provides an estimated 205,000 jobs, equivalent to 11 per cent of total employment in the country.
With more than 50,000 people directly employed by hotels and guesthouses across every town and county in Ireland, the hotels sector in particular has a critical role to play in contributing to recovery in the overall tourism sector and the wider economy. The task for our sector and the Government is to work closely together to ensure tourism achieves a sustained recovery and lives up to its potential to act as a major engine for growth and job creation. Key to harnessing this potential is restoring financial stability to the sector, controlling cost inputs, creating a business-friendly environment and committing the necessary resources to marketing Ireland more effectively abroad.
Ongoing investment in tourism marketing by the Government is critical if Ireland is to maintain its visibility and compete internationally as an attractive destination for holidaymakers and business travellers. The IHF’s position is that current levels of marketing funding for both Fáilte Ireland and Tourism Ireland must be maintained if Ireland is to increase overseas and domestic visitor numbers in the coming years.
While business levels have increased in key urban areas in 2012, performance has been poor for hotels and guesthouses across many parts of the country, resulting in a two-tier recovery in the market. Specific long-term marketing measures are required to address this imbalance and, in particular, to restore growth in tourism from the British market as outlined in a recent report by the Tourism Recovery Taskforce GB Path to Growth.
The Federation has also called on the Government to allocate a dedicated budget in 2013 aimed at giving holidaymakers new reasons to visit Ireland and supporting specific events such as the Emerald Isle Classic American football game, which saw thousands of Americans travel to Ireland in September 2012.
Through targeted measures supporting tourism, the Government has recognised the role the industry has to play in contributing to recovery in the wider economy. In particular, the decision to reduce the rate of VAT to 9% for tourism products has provided a much needed boost for the sector by allowing hotels and guesthouses retain and create jobs in an otherwise turbulent environment.
The IHF’s position is that any uncertainty around its retention beyond 2014 would become a barrier to securing sustained growth in visitor numbers as international tour operators book some 18 months in advance. The Federation has called on the Government to view the 9% tourism VAT rate as more than a short term stimulus and commit to retaining the reduction into 2015 and beyond, thereby providing greater medium term certainty on pricing of hospitality products.
The hotels sector faces serious challenges arising from unsustainable levels of indebtedness and severely restricted access to equity finance. With total outstanding hotel debt estimated at €6.7bn, the extent of overleveraging in the sector needs to be addressed as a matter of urgency in order to restore financial stability to the sector.
The IHF’s position is that decisive action must be taken by lenders to restructure the debt of otherwise viable but over-indebted hotels so that debt is brought down to sustainable levels. This would return hotels to a financial position where they can attract equity investment, allowing them to operate on a long-term sustainable basis.
The reality facing the sector is that the banks will only lend to potential domestic investors to buy or refinance viable hotels if sufficient equity capital is available. However, there is a severe lack of funds available to new and current owners, thereby preventing the repair of individual property balance sheets. The IHF’s position is that, along with debt restructuring, the Government must take decisive action to help improve access to equity finance.
Specifically, the Federation has proposed three targeted Government initiatives that would improve access to equity finance to hotels and restore financial sustainability to the sector:
- Extension of the existing Employment and Investment Incentive Scheme to include hotel and guesthouse businesses, thereby providing incentives to private investors to invest equity in restructured hotels.
- Creation of a new Hotel Restructuring Fund that would use funds from the National Pension Reserve Fund and the sale of state assets to invest in hotels that have a commercially sound prospect for profitability, growth and providing sustainable employment.
- Creation of a Qualifying Investor Fund for Hotels targeting private investors, especially from abroad, seeking to invest in Irish hotels but not wishing to own hotels directly.
Click HERE to download “Proposals to Restore Financial Sustainability to the Irish Hotel Industry”, a report by Dr Alan Ahearne, Economist, commissioned by the Irish Hotels Federation.
The Federation maintains that initiatives currently being explored to increase the availability of equity capital to the hotels sector will help put otherwise viable hotels on a more stable footing. However, the issue of excess room stock is expected to continue to have a negative impact on the hotel’s sector given the significant number of hotels that were built in areas of the country where demand failed to materialise due to dramatic changes in economic conditions. The IHF’s position is that it is not in the interests of the hotels sector or wider economy for financial institutions to support non-viable hotels and that market forces should be allowed take their course in determining which premises continue to survive, subject to appropriate levels of credit being made available to otherwise viable hotels merely facing the challenges of a deep market shock.
The worsened business environment since the economic downturn has made it difficult for hotels and guesthouses to obtain required levels of bank credit despite the various credit initiatives introduced by the Government. This is limiting the capacity of otherwise viable businesses to invest in marketing and operational quality standards – which, in turn, has major implications for the ongoing potential of tourism in Ireland.
The IHF’s position is that the Government must address these ongoing difficulties in Budget 2013 as part of a medium-term, higher growth strategy by establishing a new bank for reconstruction and development which would be directed at the SME sector.
The IHF is calling on the Government to do more to ensure financial institutions facilitate the economy by supplying much needed credit to viable businesses. This could be achieved on a risk sharing basis with banks and/or direct lending by Government using the banking system as an agent coupled with a more extensive credit guarantee scheme or equivalent.
The system of Local Authority funding is based on an antiquated taxation system of commercial rates that sees Local Authorities extract taxes relative to the size of premises without sufficient recourse to the profitability of the business operating in that property. The country’s 900 hotels make a disproportionate contribution to local authority funding, paying approximately €90 million a year in rates alone - equating to an average of €1,500 per bedroom regardless of recent trading circumstances. Hotels no longer have the earnings to pay these excessive rates.
These excessively high local authority charges are crippling hotels and guesthouses across the country. The Valuation Act 2001 was intended to review the excessive charges being demanded by local authorities and after more than 10 years only three of the 88 local authorities have had their areas re-evaluated and revised in accordance with this Act.
The IHF is seeking for the Government to enact legislation to overhaul and streamline the property revaluation process and introduce fairness into the method of valuing hotels and guesthouses, taking into account both income and expenditure. In the local authority areas that have been re-valued, hotels have received reductions in the order of 30%. Given it is 10 years since the Act has been in existence, the IHF maintains that it could take twenty years to complete the process in all local authority areas. The IHF is seeking interim provisions for a 30% reduction in Local Authority rates applicable to hotels and guesthouses until such time as properties have had their rateable valuations revised as provided for in the Valuation Act 2001.
Directly employing over 50,000 people, the Irish hotel and guesthouse sector is highly labour intensive with labour costs typically in excess of 40% of hotel turnover. Ireland has the second highest effective minimum wage rate in the EU at €8.65, representing a competitive disadvantage for tourism businesses competing internationally. The sector is therefore particularly vulnerable to upward pressures on labour costs, which have a significant impact on the ongoing viability of hotels and guesthouses.
In the current economic environment, the IHF strongly opposes any measures that could erode competitiveness, increase wage costs and ultimately jeopardise already fragile cash flow constraints within the sector. The IHF consistently urges Government to provide supportive policies that protect current jobs and incentivise employment opportunities for our sector which is one the country’s largest indigenous employers supporting jobs in every town and village in this country.
The IHF maintains that radical changes to Ireland’s economic and regulatory environment over the past century have made the Joint Labour Committee (JLC) system obsolete, particularly in light of the
National Minimum Wage Act 2000, which has provided Ireland with one of the highest gross minimum wage rates in Europe. The IHF welcomed the High Court decision in 2011 which abolished the JLC system of setting statutory minimum wages at levels higher than the National Minimum Wage.
However, the Government through its enactment of the Industrial Relations (Amendment) Act 2012, took an anti-business and anti-competitiveness action which effectively facilitates the reintroduction of this archaic and widely discredited system. The Federation is seeking the abolition of the JLC system and for all employment law to be created solely by legislation introduced by the Oireachtas alone and to be applicable to all employments. The IHF is strongly opposed to employment law being created by organisations such as the JLC or the Labour Court.
The proposed statutory sick-pay scheme is another measure that the IHF challenges as it will weaken cost competitiveness, jeopardise business sustainability and risk job retention. The IHF has called on the Government to abandon this proposal and adopt a more pro-business approach aligned with its stated commitment to job creation.
The IHF is pushing for a pro-active approach from Government to reduce all costs imposed by state owned agencies including electricity costs, water costs and licensing fees. The IHF believes that there needs to be an acceleration of the liberalisation of the electricity market and unsustainable increases in the cost of electricity and gas supplied by state-controlled companies should not be permitted in the current economic environment.
The Federation has called on the Government to review the functions of the Commission for Energy Regulation and ensure that, in reaching its decisions, priority is given to national competitiveness. Ireland’s electricity prices for industry are the fifth highest in the EU. The cost and availability of energy is a crucial issue for the Irish hotels sector, particularly in an environment where increasing operating costs are threatening competitiveness and sustaining jobs.
Regular and reliable statistics on overseas visitor numbers to Ireland are of enormous importance, allowing Ireland’s tourism industry to benchmark against previous performance, plan ahead and assess how well specific promotional initiatives in key markets have worked to date. However, overseas visitor figures are currently only provided by the Central Statistics Office (CSO) on a rolling, three month basis which is entirely inadequate in meeting the sectors needs.
The IHF’s position is that the Government must put in place the resources for timely and accurate monthly statistics to be supplied by the CSO so that promotional and marketing activities for the tourism industry can be planned effectively and in a more strategic manner. On a business level, this would also greatly assist individuals in planning orders, recruitment and marketing activity.
The IHF would be gravely concerned by any move to limit access to the Free Travel Scheme which is currently available to everyone aged 66 and over living permanently in the State. The Government has established an inter-departmental working group to examine the scheme as it currently stands - which has been available in Ireland since 1967 and benefits over 725,000 older people, carers and people with disabilities.
The IHF believes that the scheme assists senior citizens who have the time, discretionary income and inclination to travel domestically which in turn supports Ireland’s tourism industry employing over 190,000 people in every town, village and city throughout the country. The scheme provides a significant enticement to senior citizens who may be considering holidaying or taking a recreational break in Ireland. The Federation would strongly oppose any revision to this scheme which would curtail domestic tourism.
The IHF opposes any attempt to introduce mandatory labelling of calories on menus in hotels and guesthouses. The Federation believes that this issue should be dealt with on a voluntary basis. We have serious concerns about the damage a mandatory system would cause. An indiscriminate, ‘one size fits all’ scheme would be entirely inappropriate for hotels and guesthouses, many of whose menus change on a daily basis reflecting the use of locally sourced produce and seasonally available ingredients. At a time when many hoteliers are struggling to survive, this would result in an additional burden in terms of resources that would not be practical to implement.
Click HERE to download “Over Capacity in the Hotel Industry and Required Elements of a Recovery Programme”, a report by Peter Bacon, Economist.
Click HERE to download “Time to Invest: Proposals to Restore Financial Sustainability to the Irish Hotel Industry”, a report by Alan Ahearne, Economist.