Tourists Tighten the Purse Strings

This is shaping up as the worst in a series of bad years for the tourist industry - probably the most disappointing since 1972 when tourists were scared away by IRA violence. The problem is not so much the numbers of visitors, but the fact that inflation combined with world recession means that those who still take holidays will spend less money.

This trend is exacerbated by a domestic inflation rate (twice the EEC average), which ensures that Ireland is no longer the inexpensive holiday it was.

Of all the industries adversely affected by trouble in the tourist trade, the hotel business is hardest hit. For two years now half the naation's hotels have been losing money, and with occupancy down 30% in some areas, this year that figure is likely to be well over half. Almost a quarter of the nation's 700 hotels are up for sale.

The car rental business, almost entirely reliant on the tourist business, has lost some 15% of last year's market. For taxis, business is so deepressed that the companies are in danger of having to dismantle much of their operations.

CIE has picked up some of what the car rental companies and taxis have lost, and that has cushioned the blow somewhat. A spokesperson reported that the number of passsengers on buses and trains was "less than 10% down from last year". All the carrriers have been experiencing a reasonably successful year in terms of numbers of visitors brought to Ireland. The ferrries report the same number as last year, while Aer Lingus may even have a slight inncrease in passengers to Ireland (although the airline contiinues to lose money, partiicularly on the uneconomic transatlantic route).

The British tourist market, not so obviously affected by Irish inflation because of the strength of sterling, has been an unexpected disappointtment this year. Areas which normally thrive on the UK trade are reporting "no Brittish at all". Those UK tourists that do come are leaving soooner and spending less. Contrary to popular opinion, it is neither high prices nor the current anti-Irish political cliimate that is keeping them at home. It is simply the weak British economy.

Ireland has traditionally been a "second holiday" for the British; they might go to Spain or France and, with any left over money, take a second holiday in Ireland. Left over money is increassingly scarce, and many people are saving on their Irish holiday.

The numbers of European tourists remain roughly the same as last year, but innflation means that tourists have less to spend. Also, they are not travelling within Ireeland, a fact which has proved beneficial for the south-east, where most Europeans arrive. There, the overall growth is in the neigh bourhood of 10%.

With the British staying home and Europeans sticking to the south-east, the Amerrican trade is the only thing that . has saved the west of Ireland from total collapse. The American trade has been facilitated by a price war among those competing for passengers on the North Attlantic route, which means that Aer Lingus' loss on this route is acting as an effective subsidy for the tourist trade.

The decline of the strugggling hotel industry will unnfortunately further underrmine tourism. The Irish Hotel Federation is applying to the government for numerous forms of financial relief, and the government is responding sympathetically because it is obvious that the industry is in the grip of a recession from which it may be unable to recover.

During the years of growth, the hotel trade was dominatted by small hotels which, largely because of low wages, offered friendly service and an intimate atmosphere. As wages rose, these hotels could still thrive as long as the marrket continued to expand.

However, in a contracting market, the Irish hotel indusstry has suffered from its high costs. With neither the efficiency to cut back operations, nor the financial reserves to weather hard times, it is faccing disaster.

The IHF commissioned two reports on efficiency and profitability earlier this year, which came to widely diverrgent conclusions. The first advised a considerable reducction in services and greater cost-consciousness, while the second said that Ireland can no longer compete as a lowwcost vacation site and must upgrade all its tourist faciliities if it hopes to keep the trade. This plan requires immprovements in Irish roads, telephones, and services in general. A highly expensive programme, but maybe the industry's only hope. The government has made no comment on this report.

Under normal circumstannces, tourism-related industries might return to a normal growth rate, or at least stabbility, in a few years. Howwever, the hotel industry has mismanaged itself to the point of massive bankruptcy. Widespread failures would leave Ireland without enough rooms to handle large nummbers of tourists and nobble any attempt at recovery in the rest of the trade.