Taking Tourism Seriously For Future Economic Development

The Irish Economy Conference: Learning from Crisis

25th February 2015 Institute of Banking

Professor Jim Deegan University of Limerick

Presentation Outline _____________________________________________________________________________________________

1. Brief introductory remarks

2. Some data on international tourism & comment on current & projected driving forces: technology is now a key driver

3. Performance of Irish Tourism

4. Tourism in Irish Policymaking

5. Conclusion

Some General Factors to Understand

Tourism is significantly affected by

innovations in other sectors

Creative industries being

linked with tourism is

becoming ever more important across the world

The impact of artificial

intelligence will impact on

the tourism labour market but just how?

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

PERFORMANCE OF IRISH TOURISM Tourism Proves Yet Again A Good Bellwether For The Overall Economy

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

THE QUARTERLY NATIONAL HOUSEHOLD SURVEY

2008Q3

2011Q1 2012Q4 2014Q3

All NACE

Economic Sectors 2,136.4

1,841.8 1,848.9 1,926.9

Agriculture, forestry and fishing (A)

112.5 83.2 90.0 109.7

Accommodation & food service activities (I)

135.5 110.7 118.3 139.8

Person aged 15 years and over in Employment (Thousand) by Sex, NACE Rev 2 Economic Sector and Quarter

World Tourism Arrivals (Millions): 1950 to 1995 and Forecast to 2020

Forecast Made in 1995

25 55 70 110165

210287 327

458564

697

1,018

1,600

0

200

400

600

800

1000

1200

1400

1600

1800

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2010 2020

*Actual Arrivals in 2010 Were 940 million

Tourist Arrivals Market Share

1980

2012

2030

Arrivals to Europe: 1980=180m 2012=520m 2030=720m(f)

2030 Predictions Number of International Tourists (mn)

Actual 2014 arrivals 1.14billion

Central prediction for 2030 1,800 (↑ 74%)

Prediction for 2030 with slower economic growth

1,400 (↑ 35%)

Prediction for 2030 with higher costs of transport

1,660 (↑ 60%)

Prediction for 2030 with lower costs of transport

2,000 (↑ 93%)

adapted from UNWTO

Emerging Markets Will Play a Key Role In Tourism Across The World

Total Overseas Visitors to Ireland

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014*

Tou

rist

nu

mb

ers

(0

00

's)

Total Overseas Visitors to Ireland (000's)

No. of Visitors

Total Overseas Nominal/Real Revenue 1986-2013 (1986 = Base Year)

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

4,500.0

REV

ENU

E (M

ILLI

ON

S)

YEAR

Nominal

Real

Annual Percentage (%) Change in Overseas Visitors

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

11.5 15.6 15.6 10.4 -1.5 4.0 5.5 9.0 15.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

10.7 6.9 10.5 7.4 4.0 -5.5 1.4 4.4 3.3 5.9

2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Change

9.7 4.3 -3.9 -11.5 -9.6 5.0 0.8 6.3

9.5 289.3

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Vis

ito

r N

um

be

rs (

oo

o's

)

Year

Main Purpose of Visit: Britain

Holiday

VFR

Business

Other

Comments on Economic Impact

Poor representation of tourism in the national accounts left void to be filled by numerous “Panglossian” economic impact assessments - often by “hired guns”.

From 1990s more “conservative/realistic estimates” produced by Tansey in particular. Nonetheless, the “unusual” nature of the statistical make up arrested serious engagement by officials in Department of Finance - political expediency rather than strong argument led to funding of the sector.

Tourism Satellite Account - TSA(2004 - Deegan et al) pilot gave an employment estimate that was far less than that being quoted by DAST at the time-what was overlooked was the insights on what tourism accounted for in related industries.

Failure to adopt standard UN recommended methodology of a Tourism Satellite Account in Ireland is a significant failing.

Tourism industries accounted for 197,000 persons employed - 12% of all enterprises in Ireland and 11% of all employment

Affected by the downturn since 2007 but more resilient than other sectors

The regions of the North West, West and South West most dependent on tourism for economic activity

A negative pay gap of 35% in tourism compared to other sectors but most likely overestimated because of nature and structure of tourism employment

Tourism employs more females, young people and immigrants than other sectors of the economy

Delaney & McFeally 2015 – Innovative Use of Business Registers

Innovation and Performance in Irish Tourism: An Agenda For Action

Deegan (Forthcoming 2015)

Between 2008-11/12 it was found that 53% of tourism firms introduced one of the 4 measured elements defined as innovation-Product, Process, Marketing or Organisational Innovation(s)

47% of firms open declare no innovation over the period

Study finds very different rates of innovation by sub sector of tourism for the main areas measured in tourism innovation studies

The barriers to innovation similar to Irish industry in general and some particular problems

The “ecosystem” to stimulate tourism innovation is weak

Category of Innovation

(n=395)

n %

Product 183 46

Process 142 36

Organisational 162 28

Marketing 112 41

Any Innovation 211 53

Type of Innovation Introduced By Tourism Enterprises 2008 to 2012

Detailed Innovation Activity Rates By Enterprise Sector,

2008 – 2012 Sector Product Process Organisational Marketing All

enterprises

Hotel/Guesthouse 60 48 47 55 65

B&B 31 24 8 25 33

Self-Catered 32 21 9 14 36

Restaurant/Licensed

Trade

59 47 34 44 69

Tourist Attraction 50 40 35 50 60

Transport Company* 83 67 67 100 100

Festival

Management

42 42 42 42 50

ITO/DMC/PCO 44 29 24 44 53

Total 46 36 28 41 53

Detailed Type of Innovation Activity By Company Size,

2008 – 2012

Type of Activity Micro

<9

(n=282)

Small

(10-49)

(n=74)

Medium

(50-250)

(n=39)

All

enterprises

(n=395)

Product 42 42 86 46

Process 30 38 73 36

Organisational 21 41 60 28

Marketing 35 43 81 41

Any Innovation 48 53 92 53

Type of Organisational Innovation Introduced By Number Of Persons Engaged 2008 to 2011

Number of persons engaged

<9 10-49 50-250 All

enterprises

Organisational Innovations:

New Business practices 16 39 60 25

New Knowledge systems

integration 15 35 54 23

New methods of organising

external relations 15 24 38 19

Any Organisational

Innovation 21 41 60 28

Type Of Cooperation Partner By Size Of Enterprise,

2008 – 2011 Number of Persons Engaged

<9 10-49 50-250 Total

Other enterprises within tourism

sector

34 42 58 39

Suppliers of equipment 21 26 21 22

Consultants 7 12 19 10

Clients or Customers 32 39 32 34

Competitors 24 31 30 26

Universities/Colleges 13 29 24 18

Government 12 22 22 15

Failte Ireland 38 40 50 40

Tourism Ireland 15 12 17 15

Any Co-Operation 30 40 63 35

Tourism Does Not Feature In Any Serious Way In National Policymaking For Innovation In

IRELAND Do You Need Proof?

Government Policy: Action Plan For Jobs 14 Areas Identified By Research Prioritisation Report of November 2011

The 14 priority areas are listed below and form the vital components on which Ireland’s future prosperity is being staked. Research/Competence Centres are established and funded following this broad architecture. • Priority Area A - Future Networks & Communications • Priority Area B - Data Analytics, Management, Security & Privacy • Priority Area C - Digital Platforms, Content & Applications • Priority Area D - Connected Health and Independent Living • Priority Area E - Medical Devices • Priority Area F – Diagnostics • Priority Area G - Therapeutics: Synthesis, Formulation, Processing and Drug Delivery • Priority Area H - Food for Health • Priority Area I - Sustainable Food Production and Processing • Priority Area J – Marine Renewable Energy • Priority Area K - Smart Grids & Smart Cities • Priority Area L - Manufacturing Competitiveness • Priority Area M - Processing Technologies and Novel Materials • Priority Area N-Innovation in Services and Business Processes

Rev €m

2002 Prices

2002

Actual

2006

Target

2006

Actual

2012

Target

2012

Actual

Overseas Visitor

Spend

3088 3835 3.80 6000 2.95

No Visitors (m)

Britain 3.5 4.1 3.82 5.5 2.72

M.Europe 1.4 1.7 2.25 2.3 2.24

N.America 0.8 1.0 1.03 1.8 .94

Other Areas 0.2 0.3 0.31 0.5 .43

Total 5.9 7.0 7.41 10.0 6.686

OVERSEAS REVENUE AND VISITOR NUMBER TARGETS FROM TOURISM POLICY REVIEW GROUP 2003 COMPARED WITH ACTUAL OUTCOMES

Draft National Tourism Policy Paper of July 2014

TARGET IS FOR €5bn in Real Terms From Overseas Tourism by 2025

Hard not to conclude the confidence policymakers have for tourism to contribute to national

development has been arrested since 2003.

This target seems to lack real ambition for the sector.

:

A more in depth understanding of what the sector contributes (Building a Tourism Satellite Account)

Building on Ireland’s advantages to link tourism and Creative Industries (OECD,2014)

Recognising that ICT and tourism are more entwined than ever and we need to study what opportunities and challenges this will engender-AirBNB -UBer

Recognising that tourism is more likely than other sectors to maintain and grow employment as artificial intelligence expands its reach

Dedicate resources to research the future of tourism for Ireland----”

MAYBE SOMETHING RADICAL LIKE THIS!

THANK YOU FOR YOUR ATTENTION