Committee Reports > List of Committees > Joint > 1985 > Committee on Small Businesses > Report No. 03 - Tourism, Catering, and Leisure

Foreword

At its meeting of January 1984 the Committee decided on the first phase of its work specifically the preparation of reports on:

Manufacturing Industry

Retail and Distribution

Tourism, Catering, and Leisure

Construction Industry

The First and Second Reports of the Committee were published in May and October 1984 respectively.

This third Report on Tourism, Catering and Leisure is laid before both Houses of the Oireachtas in accordance with paragraph (6) of the Orders of Reference of the Joint Oireachtas Committee on Small Businesses.

INTRODUCTION

This Report deals with the full range of service industries connected with the Tourism and Leisure Sectors, and also with some other aspects of catering and road passenger transport.

The activities covered include hotels, guesthouses, bed and breakfast, self-catering, restaurants, fast food outlets, public houses, and contract catering. The many diverse business activities connected with Tourist Services such as coaches, taxis, car hire, caravan and boat hire, and other leisure services, are also covered.

The vast majority of businesses in this whole area are small, often very small, and well dispersed throughout the country.

The number of businesses and employment in the various sub-sectors are:-

There are approximately 16,000 fulltime businesses involved and the 59,000 fulltime jobs account for 5.4% of the total work-force. However, some 40,000 seasonal and part-time jobs are also provided each year and this is the equivalent of about 15,000 fulltime jobs.

In addition the export tourism component i.e. visitors from overseas - consistently accounted for 4% of GNP over the last decade and 7% of foreign exchange earnings on average.

The Committee wishes to express its thanks to all those who assisted in the production of this Report (see Appendix 1).

[1]

BUSINESS ENVIRONMENT

Background

This chapter sets out the current situation in Tourism, Catering and Leisure and as such hopes to provide a profile of the sectors under review.

Economic recession and its associated decline in disposable income have severely affected all business activity. Nowhere is this more evident than in Tourism, Catering and Leisure, where businesses are crucially dependent on discretionary income for their success, indeed for their very survival.

Disposable income in Ireland has declined by 6.4% over the last four years. Uniquely among EEC member states Ireland’s international tourist receipts as a percentage of Gross Domestic Product declined during the period 1974-’82 (from 3.4% in 1974 to 2.7% in 1982). These problems have been compounded by, and are partly a result of, the indiscriminate imposition of high rates of VAT, PRSI, and Excise Duties on the small labour intensive businesses that essentially constitute these sectors.

Current examples of this overall depressed activity are:

The decline in business generally has to an extent led to a “dog eat dog” attitude between the different sub-sectors involved with Tourism. Examples of this are the allegations of unfair competition by hoteliers against Irish Homes (bed and breakfast accommodation), and disputes between publicans and restauranteurs in relation to amendments to the licensing laws. These attitudes, which are totally a negative influence on overall Tourism and Leisure business development, must change.

Further symptoms of this downward spiral of business and the consequential lack of profits for re-investment are seen in the lack of investment in modernising hotels, the growing number of hotels on offer for sale, the age and poor quality of the taxi and coach fleet, the loss of valuable summer employment in rural areas, the poor risk rating accorded by the Banks to firms in these sectors and the non-renewal of caravan and cabin cruiser fleets.

A prolonged and severe decline in business has an inevitable negative effect on business confidence and this has also been very evident to the Committee in preparing this Report.

Focus on Tourism

It is not necessary to deal at any length with the importance of Tourism to the Economy and to economic activity. Estimates for 1984 indicate that overall Tourism income amounted to some £900m. or 7% of GNP. Export tourism receipts for 1984 (excluding carriers) were approximately £390m., which is a 16% increase on 1983 and 6% increase in real terms. Tourism is one of the most labour intensive sectors of the Economy. It provides jobs employing over 40,000 people directly but the real number of jobs dependent on Tourism is nearly 80,000 when additional employment generated by tourist demand for retail services, entertainment, Irish craft goods and clothing, transport and other services within Ireland are taken into account. Most of the money generated is spent on home products thus creating wealth in other sectors which provide goods and services for which otherwise there would be a lower demand.

Tourism then is a very significant factor in the economy. International Tourism is increasing and based on indications and world trends this increase will continue. It is estimated that between 1974 and 1984 demand for international travel has increased by 130% and it is expected that this growth will be maintained. Generally then, Tourism is an expanding market and one in which Ireland, with the right policies, might expect to get a growing share. In this Report the Committee sets out the key issues that need to be confronted if Ireland is to obtain an increasing proportion of this growing market.

Apart from escalating costs, however, there are many other emerging issues which cannot be ignored if market opportunities are to be exploited.

(i)Lack of Planning

Tourism ranks after Industry and Agriculture as Ireland’s third largest generator of foreign earnings.

The overall tourist product is made up of many components including accommodation, access transport, internal transport, leisure facilities, and the standard and maintenance of facilities of all kinds.

However the Committee is very concerned that Tourism has not got the priority at official level appropriate to its role in the National Economy. This is manifest in the lack of co-ordination of planning at national level resulting in a lot of individual effort being dissipated e.g. Bord Fáilte, Forest and Wildlife Service, Board of Works. The Committee believes that this lack of cohesiveness and awareness of potential for Irish Tourism is underlined by the lack of resources allocated.

In order to justify this assertion and being aware of the reluctance of Government Departments to radically restructure their functions, a full chapter of this Report is devoted to the need for an Integrated Tourism Policy. The Committee believes that this central issue is at the core of the future development of Irish Tourism.

(ii)Lack of Competitiveness

Ireland has lost market competitiveness against other European countries in the field of Tourism and is perceived as poor or declining value for money. For example, in cumulative terms since 1980 our competitiveness has declined by 16% in Germany, 19% in France, and 15% in Britain.

This situation has arisen due to high inflation, high VAT, and other taxation. For example, car rental charges in Ireland are still among the highest in Europe in spite of the recent very welcome reduction in VAT from 18% to 10%.

The holiday market is very price sensitive and attitudinal research has constantly shown that the perception of value for money is imperative. Undoubtedly overseas visitor markets are subject to currency fluctuations and this can be an important factor in the business environment for Tourism.

(iii)Standards

Bord Fáilte have over the years built up standards in most areas connected with Tourism. Tourism standards include service and friendliness, hygiene, litter and dumping (a clean environment), clean and comfortable accommodation, and, freedom from theft and vandalism.

High standards are a vital part of the tourist’s perception of value for money. A tourist who is the victim of poor standards will be unwilling to come here again, and more importantly from the economic aspect, will act as a negative influence in his own country for tourism to Ireland.

There is a danger of a serious erosion of our standards due to prevailing economic conditions. For example, should return on investment in the hotel sector persist at anything like its present very inadequate level, closures and a deterioration in buildings, equipment and services are inevitable.

The Committee has also received substantial evidence to suggest in the accommodation sector - e.g. Irish Homes, caravan parks and self-catering rented accommodation - that their single greatest problem was that of unregistered and unapproved competition. This has dual negative effects of a poor overall image of standards and unfair competition for registered accommodation.

(iv)Northern Ireland

The consequences of nearly two decades of violence and instability in Northern Ireland have had severe consequences for Tourism in the Republic. Tourism promotion in overseas markets has had to continually counter the adverse effects on the image of Ireland arising from media reporting of violence connected with Northern Ireland.

The greatest loss has been in the British market. United Kingdom tourist expenditure in the Republic of Ireland accounted for 26% of all U.K. tourist expenditure in Europe for 1969. By 1972 Ireland’s share fell to 12.8%. In 1981 it was 11.5%. There have been other factors behind the collapse of the British market - loss of competitiveness in Ireland, relaxation of U.K. currency restrictions for travel overseas - but the principal factor has been Northern Ireland.

(v)Crime and Vandalism

A disturbing trend and one which is unfortunately a growing one is that of crime and vandalism. This ranges from vandalism of park benches, grafitti, and litter to violent crime particularly in centre city locations.

It is not perhaps the absolute level of crime at the moment which is important but the prevailing belief firstly, that it is growing and secondly, the fact that there is a feeling of helplessness as regards curtailing it.

A particular concern is the growing trend of crime against visitors and their property, and the consequent damage to our national Tourism reputation. The problem is becoming acute in the Dublin City Centre with the U.S. Embassy reporting in 1982 that up to 20 U.S. passports per day had to be issued to U.S. citizens robbed in Grafton Street and the immediate area.

(vi)Access

Ireland is an island and therefore tourist access is, by definition, restricted to transport by air and by sea. We are consequently at a comparative disadvantage with most European countries where overland transport by road and rail plays a major role in Tourism access, thus in the Tourism context Ireland is principally perceived as a secondary destination.

Given this natural disadvantage it is critical that all tourist interests in Ireland co-operate fully in making access as easy, as economical, and as comfortable, as possible. These questions are further dealt with in Chapter 2.

Conclusion

This chapter sets the scene for this Report outlining the key issues and current difficulties in this sector. All these issues have a common denominator, which is the negative effect on the overall wellbeing of Irish Tourism.

While much that has been said so far is depressing it does appear that the decline in disposable income here has been arrested and there should be a modest growth in the next few years. In addition the 1985 Budget contained some welcome relief in VAT for some tourism sensitive areas of business.

It is therefore appropriate at this point to set out a policy that encourages the maximum development of businesses in the Tourism, Catering and Leisure Sector, and facilitates their full potential for employment.

The Committee’s approach to this Report has been to outline in Chapters 2 and 3 what the Committee believes should be the macro and micro tourism policies of the State. Subsequently in Chapters 4, 5, and 6 we outline the specific sub-sectoral problems and solutions on an individual basis.

[2]

INTEGRATED TOURISM POLICY

Total revenue from Tourism in 1983 amounted to £808m. and was made up as follows:

(Source: Bord Fáilte Annual Report 1983).

While C.S.O. figures for 1984 are not available Bord Fáilte estimates that Export Tourism increased by more than 6% in real terms during 1984.

Tourism is Ireland’s third biggest generator of export earnings ranking only after Industry and Agriculture. With 40,000 direct jobs, well dispersed on a regional basis, Tourism is also a significant source of employment. It accounts for 7% of GNP.

Over 80% of the businesses involved with Tourism could be classified as small, under any definition. As a service industry Tourism is labour intensive and therefore particularly suitable for this country.

Its benefits are spread widely throughout the Economy as is shown by the following Bord Fáilte analysis of how the average tourist pound is spent in Ireland:

Yet the treatment of Tourism in recent years at Official level contrasts unfavourably with the wide and generous financial and administrative support provided by the State to Industry and Agriculture. At this point it is appropriate to compare State policy as it operates towards Industry, Agriculture and Tourism.

Policy Comparisons

The State support structure for Industry, Agriculture and Tourism may be summarised as follows:-

This table does not fairly reflect the relative role of Tourism in the Irish Economy due to the following factors:

(a)The substantial domestic tourism receipts are not outlined and would probably represent a greater proportion of total earnings than that of other sectors. The domestic earnings figure is often not fully documented due to incomes generated in unregistered accommodation.

(b)There is no ‘Black Hole’ factor in terms of repatriation of profits as can be the case in industry.

(c)Tax treatment of Tourism suffers relative to the other sectors and thus its contribution to the Exchequer is even greater. Indeed it has been estimated that the proportion of foreign tourism expenditure that goes to the Exchequer is as high as 68p in the Pound.

The Committee feels that these State policy and resource discrepancies are so great that we now outline them in further detail:

Industry

The Department of Industry, Trade, Commerce and Tourism has primary responsibility for the formulation, monitoring, and evaluation of industrial policy, including sectoral policy. This responsibility is implemented through the Department’s Industrial Policy Division which has a staff of 31, headed by an Assistant Secretary, and the Sectoral Industry Division which has a staff of 38, also headed by an Assistant Secretary. In addition there is a separate Science and Technology Branch with a staff of 10 headed by a Principal Officer.

The White Paper on Industrial Policy published in July 1984 stated that £430m. was spent by Government Departments or agencies directly or indirectly concerned with industrial development in 1983. In the same year a further £315m. in tax revenue was foregone through various tax reliefs designed to foster industrial development. State support for industry, including direct financial aid, training, and advisory services is administered through some 15 different agencies, with approximately 4,500 by way of total staff.

The White Paper provides that the overall level of State support to Industry will be maintained at its present level. Some 214,000 people, or 19% of those at work, are employed in manufacturing industry. The National Plan anticipates that industrial employment will increase by 13,000 to 227,000 by 1987.

Industrial exports for 1983 amounted to £5,400m.

Further policy towards Industry will be geared towards maximising wealth rather than employment.

Agriculture

The Department of Agriculture is one of the largest Departments of State, with a staff of just under 5,000. Its work embraces all aspects of agricultural development, and State support of £255m. for Agriculture was channelled through the Department in 1984.

The Department is assisted by An Foras Taluntais and ACOT, two important State Agencies, that provide educational, research, training, and technical services to the sector. These two agencies have a combined staff of 2,400.

There are 186,000 people, or 16.5% of those at work, directly engaged in Agriculture. The numbers engaged in Agriculture have been falling steadily and are projected to reach 177,000 by 1987.

Agricultural exports for 1983 amounted to £1,465m.

Tourism

We have already described the structure of the Department of Industry, Trade, Commerce, and Tourism in relation to Industrial Policy - two Divisions of the Department with a total staff of 69 and each headed by an Assistant Secretary.

This Department is also responsible for Tourism Policy. However the Departmental staff resource allocated to Tourism is insignificant compared with that allocated to Industry.

Tourism is dealt with by one of three branches located in the Department’s Commerce Division 2. The other two branches in this Division are

(i)Consumer Protection and Legal Metrology,

(ii)Prices.

Commerce Division 2 is headed by an Assistant Secretary and each of its three branches by a Principal Officer. Tourism Branch has a staff of 9!

Tourism Promotion and Development is the responsibility of Bord Fáilte, a Statutory Body established in 1955. Tourism information is provided by seven Regional Tourism Organisations (RTOs) established by Bord Fáilte in 1964. Total staff is

The Bord Fáilte budget for 1984 was £25m. and the 1985 Budget is £28m.

CERT, a State Agency which works to the Department of Labour, is responsible for training in the catering sector and has some tourism training responsibilities. CERT had a Budget of £4m. in 1984 and has a staff of 65.

Other Departments, Agencies, and Commercial State Bodies, with Tourism involvement include the Forestry and Wildlife Service of the Department of Fisheries and Forestry, Office of Public Works (National Parks and Monuments Branch including Inland Waterways), Shannon Free Airport Development Company (in the Mid-West), Aer Lingus and B & I Line. SFADCO is responsible to the Department of Industry, Trade, Commerce and Tourism. The Department of Communications is responsible for Aer Lingus, B & I Line, and CIE.

Present Structure and Consequences for Tourism

The Committee feels in the first instance that overall policy for an economic activity as fundamentally important as Tourism cannot be adequately dealt with by a small branch of a major Government Department with a multitude of other responsibilities. Moreover, the Committee fails to understand why Tourism can be categorised in the Civil Service structure at the same level as Legal Metrology and Price Control, given its significance and potential in the Irish Economy.

Indeed Tourism has been treated as a ‘Cinderella’ within overall National Economic Policy. The relative lack of support for Tourism has been compounded by high domestic inflation and indiscriminate taxation on sectors of business that depend on Tourism for their livelihood.

The Committee took evidence from Bord Fáilte, and while impressed by the evident professionalism and commitment of that organisation, felt that the best efforts of Bord Fáilte would be inadequate until the overall development of the tourist ‘product’ assumed a much more central role in framing Government economic policy, and the State Agency with responsibility for the promotion and development of Tourism given substantial resources and co-ordinating powers to implement Tourism policy.

We believe that our argument is supported by Ireland’s loss of market share in Tourism in recent years. An analysis of published figures for 1972-81 shows that Ireland had real Tourism growth of 35% over that period. The EEC average was 47%. In terms of Tourism growth Ireland ranked eighth out of ten EEC member states. (The Irish Tourism Industry - A review published by the Irish Tourist Industry Confederation in September 1984).

Recent improvements have been brought about mainly by the strength of the U.S. Dollar, which could be a temporary phenomenon. The whole recent experience of Tourism here shows the lack of a co-ordinated policy and of a suitable administrative environment for the development of such a policy.

The strength of the U.S. Dollar could simply represent a buying of time for Irish Tourism and underlines the need for implementation of the long term policy for Tourism set out in this Report.

The Tourism Issues: Product, Access, Manpower and Training, and Marketing

(i)Product

Already the State Sector has an involvement in the development of the Tourist Product. Bord Fáilte provides a limited range of incentive grants for investment in plant. It also provides advice on potential investment in Tourism backed up by its Market Research Resources. The State Sector owns and operates tourist facilities such as hotels and amenity facilities. Most of the State Transport Companies are involved in Access Transport and perhaps even 80% of Tourists come to Ireland using the services of these State Companies. Apart from these more obvious State concerns, already mentioned, Údarás na Gaeltachta, Aer Rianta and the Local Authorities, to name but a few, are all involved to a greater or lesser degree in Tourism.

The successful operation of Tourism requires a co-ordinated policy in areas such as Accommodation, Catering, Access Transport, Adequate Car Hire Facilities, Wet Weather Facilities, Road Sign Posts, Natural Amenities, Scenery and Pollution control. The Inspectoral role for Accommodation is exercised by Bord Fáilte for Camping and Caravan Parks, and the physical and natural Environment generally by the Local Authorities. There is no known standard or Inspectoral Role carried out by anyone for Access Transport, the routes which most of the customers must use.

There is concern about the vigilence and uniformity of standard of inspection across the range of facilities.

Seasonality is a major problem for Irish Tourism. Some 56% of our visitors arrive in the four months June-September inclusive - 35% during the peak months of July-August and 21% during the ‘shoulder’ months of June and September. This visitor pattern results in many tourist businesses operating at well below capacity for most of the year, or indeed, not operating at all. Our wide seasonal fluctuations are a negative influence on business investment in Tourism. There is potential to spread the Season but its achievement depends on careful planning and marketing with full co-operation between all Tourism interests including Promotion, Access, and Accommodation.

(ii)Access

In the previous chapter the Committee stressed the importance of tourist access to Ireland and the absolute need for all Tourism interests to co-operate in overcoming the access disadvantages posed by our peripheral location as an island.

However the present position is that there is considerable disagreement between the various tourist interests on the question of access.

Bord Failte estimates Ireland’s competitive position with regard to access transport in overseas markets as follows:-

Source: “Link” December 1984.

Some sources in the Tourism trade allege that there is a conflict between the commercial objectives of the State carriers, particularly Aer Lingus, and access for tourists. In this regard the Committee specifically took oral evidence from Aer Lingus and B & I, which it put in contrast with further oral evidence from Bord Fáilte and other Tourism interests.

(a)Air Transport

It was claimed that Aer Lingus:

was inhibiting the granting of licences for private air charter to Ireland;

was uncompetitive on certain air routes;

frequently failed to announce its fares until quite late in the tourist business year;

was more interested in transporting Irish holiday makers abroad through its summer charters to 19 Mediterranean destinations, than in developing tours to Ireland;

was hostile to scheduled competition from Europe into Ireland;

gave no special incentive fare packages to encourage travel agents to offer special group holidays into Ireland;

was more geared to emphasise business travel rather than developing Tourism, and finally;

Aer Lingus has a “special relationship” with the Department of Communications.

Aer Lingus vigorously disputed these claims and in making its own case:

claimed that fares between the Republic of Ireland and London were generally lower than fares for comparable journeys between major European cities;

referred the Committee to the wide range of low cost Apex fares;

pointed to its annual promotion budget of £14m. spent marketing abroad;

claimed that Aer Lingus carried seven out of every ten visitors by air to Ireland including 500,000 tourists last year;

stated that its US/Ireland schedule air fare has had held constant in dollar terms for 5 years;

denied obstructing proposals for private charters to Ireland, simply claiming to compete aggressively.

Finally Aer Lingus referred to the obligation imposed on the company to operate commercially and generate sufficient profits to facilitate fleet replacement so that Ireland would continue to have the strategic advantage of a national air carrier operating an extensive route network on a year round basis.

(b)Sea Transport

The Committee is also concerned at the frequent lack of consultation with regard to operational changes by the sea carriers which have an adverse effect on Tourism related businesses. The recent pooling arrangements on the Irish Sea between B & I and Sealink ferries is evidence of this lack of consultation. The Committee in the course of its work on this Report received strong criticism of the recent decision, whereby some of the daily sailings on the Pembroke - Rosslare route were suspended for the low season. The Committee also received complaints from Tourism interests in the South West Region regarding the lack of sea access services from the U.K. to Cork Port.

The Committee is appalled that such decisions are implemented without any prior consultation with Tourism interests. These episodes together serve as topical and typical examples of the ineffectiveness of State policy for Tourism and the incapacity of Bord Fáilte to respond to the needs of the industry.

Again there is a perception that standards on the Irish sea routes are lower than on English channel services. A survey of ferry users in the March 1985 issue of ‘Holiday Which’ found a “fairly low level of satisfaction” with B & I and Sealink services to Ireland In evidence to the Committee representatives of the B & I Line disputed this perception and claimed that with a recent 8% increase in passengers there had been a 10% drop in complaints.

Conclusion

It seems to the Committee that at Government Department level the Department of Communications has relatively more influence in relation to its responsibilities e.g. Aer Lingus, B & I Line -than the Department of Industry, Trade, Commerce and Tourism has in relation to Tourism.

In the view of the Committee it is simply intolerable that there should be anything less than full co-operation and co-ordination between all the State interests involved in this vital issue of Tourism access.

(iii)Manpower

It is essential to have a highly skilled labour force of highest international standards at the core of the industry.

CERT has over the past number of years expanded both the type and range of training programmes available for the Industry.

Its role and activities are central to the Industry especially in terms of a long term Strategic Plan for the Industry’s manpower requirements.

Specifically, CERT’s sector responsibilities may be identified as follows:

Hotels and Other Accommodation - Different grades; seasonal; group; owner-managed; farmhouses; guesthouses; town and country houses.

Catering - Public food service, including restaurants, cafes, in-store and take-away units; health board institutions; institutional catering; industrial and commercial catering; carriers; sports and social catering; tourist amenity catering.

Tourism - National organisations; trade associations; air, sea and public transport facilities; regional tourist organisations and offices; parks, monuments, houses and gardens; tour services; guides; Bord Fáilte approved facilities for tourism and leisure.

The Committee took evidence from CERT and, arising from this evidence and other submissions the Committee is reinforced in its view that successful small businesses within the hotel, catering and general Tourism sectors can make a special contribution to employment and job retention and therefore require special attention from CERT. There is a need for a more comprehensive counselling and support service to small businesses in this area, particularly at the critical start-up stage, but also to existing businesses. Although CERT carried out 74 in-company diagnostic consultancy projects last year it has neither the clear brief nor the resources for this type of service.

Within the Tourism industry generally there is no co-ordination of operational standards i.e. standards of service to the customer. There is a need for such a set of standards, which would best be operated on a voluntary basis by agreement between CERT and the Industry.

With regard to management education for persons intending to enter the Industry there is no formal CERT involvement with the educational system and there should be a mechanism whereby CERT would have a formal input into the content of relevant education courses.

The Committee must acknowledge that in its work it found wide-spread praise for and appreciation of the services provided by CERT among businesses that availed of them.

(iv)Marketing

A very large proportion of the Bord Fáilte Budget is spent on Advertising and Publicity - approximately £10m. in 1984. However it is difficult to assess the relationship between promotional expenditure and resulting tourist flows. The demand is also influenced by Economic and Social forces and promotional expenditure has to be viewed in that context.

Bord Fáilte tends to market Ireland as a whole and not to concentrate on sub-sectors which would yield a greater benefit, and certainly be more quantifiable. Again, the marketing initiatives of Bord Fáilte should be modelled more on those of CTT, which promotes exports of manufactured goods. These initiatives would include group marketing schemes, individual incentives for marketing executives, and practical schemes to support tour operators. The Committee acknowledges that Bord Fáilte operates schemes in these areas but they are felt to be inadequate and of limited scope.

In terms of quantifiable objectives it would be more important to increase tourist spending in the country rather than the volume of tourists and it is essential that marketing strategy be directed primarily at that segment of the market with a propensity to spend.

During 1984 the North American market became the biggest revenue earner for Irish Tourism, a position formerly held by the U.K. Given the strength of the U.S. Dollar this is an opportunity which must be taken, but Tourism planning must take full account of the long term potential of the European market, particularly within the context of EMS currency countries.

Conclusion

The problems in the Industry are many and diverse but not insurmountable, but the potential of the Industry is tremendous. The fundamental problem is the lack of a comprehensive and cohesive Government policy on Tourism and the lack of an Integrated Development Authority for Tourism. Taxation, Seasonality and Access Transport are merely contributory factors.

There is no evidence of any Comprehensive National Policy for Tourism. Promotional funding is on an ad hoc year to year basis. Decisions on investment are being made without any Cost Benefit analysis. Certain aspects of the Industry are focused on market segments which are yielding little return i.e. Ireland as a location for “cheap skate” holidays. Interaction between State Agencies is at best ad hoc and informal. Some six Government Departments at least have an interest in certain integral areas of the Industry.

The Committee believes that in the Tourism Policy area the State has a weak Department structure and a weak State Agency relative to other sectors of economic activity and the developmental policies pursued therein. Furthermore we believe the Tourism interest to be weak relative to other vested interests in the semi-State commercial sector or other State bodies with a peripheral Tourism role to the extent that the rigidity and autonomy of these groups are inhibiting Tourism development.

Recommendations

1. A Government White Paper on Tourism should be produced within 12 months. It should

2. Upgrade Departmental responsibility for Tourism at least to fulltime Assistant Secretary level.

3. Consideration should be given to transferring responsibility for Tourism to a restructured Department of Communications and Tourism, based on the conflicts already outlined between access transport operators and Tourism operators.

4. Establish a National Tourist Authority to replace Bord Fáilte, with power to implement a National Tourist Policy. It should be set up with powers equivalent of the Industrial Model of the I.D.A. The Authority should be established under an Act of the Oireachtas and have the following terms of reference:

CERT Recommendations

(i)The training and advisory services of CERT should be extended in order to provide a more comprehensive counselling and support service to small businesses in the hotel, catering and general tourism sectors. The additional required staff resources of six or so, should be made available.

(ii)CERT should be given the authority to co-ordinate operational standards within the tourist industry.

(iii)CERT should have a role in the co-ordination of management education for persons intending to enter catering and related sectors.

ICC/ European Investment Bank Loans

The Committee welcomes the doubling of the Joint European Investment Bank/Industrial Credit Company Scheme allocation of £2.5m. for Tourism capital projects in 1983 to £5m. in 1984. The Committee also notes with approval the £10m. made available by ICC for low interest working capital loans to the Sector.

However the Committee shares the view of many Tourism interests that these allocations, particularly on the capital side, are inadequate for the scale of the investment required.

Recommendation

The National Tourism Authority and ICC should agree on a capital allocation of up to £50m. of low interest loans for Tourism over the next five years, and a more flexible definition of Tourism projects.

International Comparisons

The Committee has studied Tourism Policy in a number of European countries (Appendix 2 attached) and arising from this study of the most up-to-date policy developments abroad the following measures are recommended for implementation at National level:

These measures collectively would form an innovative and efficient boost to the Irish Tourism Industry and, as such, would raise morale, business confidence, and confidence in the sector generally.

[ 3 ]

AMENITIES, ENTERTAINMENT AND TOURISM INFORMATION

Tourism is a very diverse product and its development requires a two-tiered policy. In Chapter 2 the Committee has outlined its recommendations for a National Tourism Policy. In this Chapter we focus on the second tier which requires regional and local implementation.

Entertainment, Sport, and Leisure

In this section we look at some of the activities and facilities, both commercial and non-commercial which have a Tourism role, particularly at local level.

Relative to her population Ireland has a wide variety of scenery and under-utilised natural amenities. This country also has a rich cultural heritage of traditional music and sport which is unique, and which could be woven more effectively into the overall tourist package.

The Committee wishes to outline a number of miscellaneous tourism products which require substantial localised development and promotion to reach their full potential in the Tourism context:

(a)Non-profit making activities such as Comhaltas Ceoltoirí Éireann, which have a traditional cultural activity for tourists. The Committee feels that the Comhaltas should be in a position to organise a high quality Seisiúin on a weekly basis during the high season, particularly in those areas where there is a strong tradition of Irish music.

(b) Sporting events which take place anyway but which are not promoted in the Tourism sense e.g. sporting occasions of the Gaelic Athletic Association, horse racing, horse riding, golf, sailing and other water sports.

(c)Historical houses, monuments, and museums which are currently promoted in a very diverse and localised fashion e.g. Newgrange neolithic tombs, Georgian buildings and other forms of 18th Century architecture. In the U.K. the restoration of old churches, houses, millwheels and other industrial architecture has been an important addition to the Tourism infrastructure.

The Committee believes the existing Office of Public Work’s programmes in this area are inadequate and that it is essential to implement a comprehensive conservation and restoration programme. Moreover the National Museum should receive the investment required to put it on an international footing similar to that of the National Gallery.

(d)Festivals e.g. Rose of Tralee, Wexford Opera Festival, Kilkenny Arts Festival. Such festivals greatly boost Tourism revenues and the local economy. However, these festivals are often totally reliant on voluntary dedication and meagre funding. The Committee feels that greater sponsorship and funding should be focused on such tourist attractions and professional assistance provided for marketing purposes.

(e) Leisure complexes located at traditional seaside resorts e.g. Tramore, Salthill, and Bundoran. Leisure complexes may contain a variety of facilities including caravan parks, self-catering apartments, retail outlets, squash courts, boating lakes, pitch and putt courses, amusement parks and swimming pools.

Seaside resorts with complexes of this type tend to appeal to the traditional British visitor who comes to this country in decreasing numbers due to a poor image of this country arising from the troubles in Northern Ireland, the perception of Ireland as an expensive holiday destination, and the decline of industrial employment in Britain which has affected disposable income of many potential visitors. The result is that most of the business for these resorts is now from the Home Market.

The emphasis should therefore be on promotion of existing resorts of Leisure complexes rather than on the provision of new complexes.

(f)Natural amenities - the coastline, beaches, forests and wildlife parks. Our 3,500 miles of coastline account for a major part of all holiday activity, and include amenities such as mountain and cliff scenery, sand dunes and beaches with coastal waters suitable for a wide variety of recreational activities.

We differ from most European countries in that the great majority of our coastline is undeveloped.

Some 340 miles or 10% of our coastline consists of sandy beaches, 70% of which are located on the west coast and away from our main population centres (An Foras Forbartha - National Coastline Study).

This Tourism resource is under threat, due to the suspension of new capital coastal protection schemes and the commercial removal of beach material. Maritime local authorities have insufficient resources to combat these problems and the management of this National asset requires proper central co-ordination and funding.

The Committee feels that the responsibility for the tourist development of our coastline is undefined and haphazard. Moreover the Committee feels that our coastline and other natural amenities are not being promoted effectively in the Tourism context.

(g)Language schools, cultural studies, activity and youth holidays.

There are almost 30 schools in Ireland recognised by the Department of Education as English Language Summer Schools for the teaching of English as a foreign language and the source markets for these schools can be broken down as follows:

Bord Fáilte estimates the annual figure of European students attending courses to be about 20,000 and a further 2,000 to 3,000 U.S. students attending non-language courses.

However the Committee feels that these summer courses have been concentrated in Dublin and there is therefore more scope for growth in the provinces.

Activity and youth holidays mainly comprise of outdoor pursuits such as sailing, orienteering, cycling, and horseriding. Specific centres for young European visitors should be further developed similar to summer camps or holiday villages in Europe which cater for larger numbers and multi-activity supervised events.

Many of these activities and amenities are not promoted in the Tourism sense and a focal point is required to bring them into the Tourism context. Moreover, there is often a lack of basic tourist information about such holiday facilities. Because of their diversity and especially because of their localised nature there is a need for a flexible statutory body which is not a national body to develop and promote them. If this is done successfully it should lead to national Tourism growth through the attraction of a greater number of tourists and secondly would increase the value added aspect of Irish Tourism by maximising the spend of visitors.

In the submissions received by the Committee it was obvious that these miscellaneous aspects of Tourism were not lobbied as vigorously as other problems as they did not represent vested interest groups and secondly, they are at best only of peripheral concern to the Tourism interests directly involved with promotion and development.

It is our view that the implementation of this second-tier of Tourism Policy, essentially at regional and local level, should be implemented through restructured Regional Tourism Organisations.

Regional Tourism Organisations

1.Background

In 1964 eight Regional Tourism Organisations (now reduced to seven) were established by Bord Fáilte with the support of local authorities, tourist related businesses, associations, clubs, and private individuals.

The principal responsibilities of the Regional Tourism Organisations (RTOs) are:-

(i)The servicing of visitors during their stay in Ireland (i.e. information, reservations, brochures, maps).

(ii)The development of facilities including accommodation, recreation, and amenities to meet present and future anticipated demand.

The RTO’s also have a peripheral involvement with marketing, primarily in relation to Domestic Tourism and the Northern Ireland market.

Each RTO is a company limited by guarantee, with no share capital, and has its own Board of Directors. Some of the Directors are nominated by Bord Fáilte and the Local Authorities, and the remainder are elected by members.

The main practical function is the information and reservation service for visitors through the information office system of 19 offices which are open on a year round basis and 55 offices open during the Season.

2.Funding

When the Regional Tourism Organisations were originally established it was envisaged that after a formative period of financial assistance from Bord Fáilte they would be financed solely from local funds.

This did not in fact occur. Today the RTO’s are funded as follows:

The budget for the RTO’s in 1983 came to only £2.5m. which is clearly an extremely low figure.

Part of the funding problem in the past has been

(i)Local Authority contributions, specifically for Tourism are at one old penny in the pound and the relevant legislation has never been updated, although some Local Authorities make higher contributions under various Planning Acts.

(ii)Until very recently the RTO’s were not encouraged to engage in commercial activities or to charge more than a nominal sum for their services.

(iii) The high levels of general taxation make it increasingly difficult to get companies or individuals to make additional voluntary payments.

Conclusion

The Committee believes that many of the Tourism products outlined in this chapter will continue to suffer from a lack of Tourism information, promotion, and development until such time as there is an adequate statutory body to encompass their needs.

The result of the low level of funding has been to stifle the development of the Tourism product at local level as the RTO’s have neither had the finance nor the authority to encourage or to oblige others to carry out tourist projects. Whatever influence they have had has been mainly through incentive grants provided by Bord Fáilte.

This situation is clearly unsatisfactory and in order to achieve the restructuring of the RTO’s there will have to be a proper allocation of resources and an improved private sector contribution to their funding.

The Committee notes extensive Tourism development under the auspices of SFADCO inthe mid-West Region e.g. Rent an Irish Cottage, Bunratty Castle, and Castle Tours. Ultimately the Committee would envisage that the RTO’s would aim for this level of role.

Recommendations

The Committee recommends that the Regional Tourism Organisations be re-examined, restructured and properly funded on a statutory basis, but also with private sector finance, to function as fully autonomous ‘one stop shops’ for all Tourism matters in the same way as IDA Regional Offices relate to small manufacturing industry.

The RTO’s should have a co-ordinating role for all tourist activities in a region to include:

1.Tourist information and reservation systems with fully computerised and telex facilities and a complete range of brochures and information leaflets on activities within the Region.

2.The identification and discretionary grant aiding of specific amenity projects including all weather facilities from an ‘amenities budget’ for this purpose. Any individual or business with a Tourism project could be considered for grant aid under this budget. The National Tourism Authority could determine whether this would operate on a rigid percentage basis as does IDA grant aid or on a flexible basis within the overall confines of the financial allocation for this purpose. The RTO will have to have particular regard to surplus capacity and it is not envisaged that normal accommodation or catering units would qualify under this category.

3.To establish an advisory and promotional service for local festival committees, sporting organisations, officers of Comhaltas Ceoltóirí Éireann, local racetrack executives and other local amenity interests in promoting regional events in a co-ordinated way.

4.The initiation of tourist related conservation and restoration projects either through the Office of Public Works, Local Authorities or Social and Youth Employment Schemes. The RTO’s should have sufficient funds at their disposal to retain technical consultants for any project and, both AnCO and the Youth Employment Agency should give priority to Tourism related projects, in consultation with the RTO’s.

5.A full consultative role with Local Authorities on all matters relating to Tourism, including physical planning, signposts, litter, derelict buildings, abandoned vehicles and public amenities. The role of the County Development Officer should be strengthened in the Tourism context and within the RTO structure consideration should be given to the appointment of a Tourism Officer for each county.

6.The promotion of sponsorship of tourist related events such as festivals and sporting events and the provision of a consultancy and promotional service to sponsoring firms.

7.Funding

The funding of RTO’s should be increased in line with requirements through

Other Entertainment Facilities

[ 4 ]

IRISH HOLIDAY AND TRANSPORT SERVICES

This chapter looks at the role of the Irish Handling Agents (inward travel agencies) and various internal transport services including coaches, car rental and taxis.

1. Irish Handling Agents

Just over one-third of all holidaymakers to Ireland pre-purchase an inclusive or ‘package’ holiday arrangement offered by a tour operator in his own country.

While responsibility for all the necessary arrangements and for representing the tour operator in Ireland rests with an Irish Handling Agent, in many instances the involvement of the tour operator in Ireland has been as a result of the marketing activity of an Irish Handling Agent. Hence, this sector fulfils an essential marketing role from ‘creating’ the package holiday and promoting it overseas, negotiating between producer and tour operator, to exercising quality control and ensuring customer satisfaction.

Given the situation that the Irish tourism product consists of small units and that for many foreign tour operators Ireland is very often a secondary destination, generating a relatively small share of their business, the Handling Agent represents an effective and economically efficient channel of distribution for Irish tourism. The potential for growth and development of new markets has not been fully exploited due to low marketing investment in this channel. Furthermore, foreign based and owned tour operators do not necessarily have a long-term commitment to Ireland and with a very small base of Irish companies operating overseas, Irish tourism is in a potentially vulnerable situation.

The problems facing Irish Handling Agents include:

-low margins resulting in low level of investment

-low asset base against which to raise finance

-high overseas marketing development costs.

Currently, there are 20 members of the professional body for the sector, the Irish Handling Association, plus two semi-state operators C.I.E. and SFADCO (Castle Tours). Employment is estimated at 200 full-time year-round jobs with a considerable additional seasonal content.

Recommendation

Recognising the need for a more commercial approach to expanding existing and developing new markets the activity of Bord Failte should be complimented by handling agents. This can be achieved by means of a CTT-type of programme to encourage greater overseas marketing such as funding support for placement of sales personnel overseas; training grants; encouragement of co-operative ventures; and sharing risk cost of test-marketing programmes. There should be a cost benefit analysis of the return to Irish Tourism from specific incentives to foreign tour operators based on the number of persons and extra spending power they would generate if given inducements to promote Ireland.

2. Coaches

(i)Background

Coach and bus transportation is provided by CIE and private operators. Business for this sector can be divided into four categories:

-provision of scheduled public transport service through the stage carriage licence

-express coach services between points within Ireland and to points outside the country,

-provision of coaches for tourists, including day tours, extended coach tours of Ireland, and transfers.

-domestic private hire and contract work (including school bus services).

CIE have a virtual monopoly of stage carriage and express services within the country. The private sector control the larger share of coaches for tourism, domestic private hire and contracts.

During the past 10 years the share of the overall market held by the private coach operators has grown dramatically. Today there are over 4,000 public service licences issued to vehicles from minibus size upwards.

The number employed full-time in the private coach business is 6,000 with a further 4,000 part-time employees.

Since 1933, the bus-coach industry has been controlled by Acts of the Oireachtas, designed mainly to protect the railways. No new scheduled passenger licences have been issued since the 1930s. All private coaches operating are restricted to private hire only.

The growth in the size of the private coach market took place in spite of the following:-

(a)Lack of protection from a licensing system such as the Road Haulage industry has;

(b)Competition from a heavily subsidised state company (CIE).

With regard to CIE the Committee notes with concern the condition of the CIE fleet in rural Ireland. Buses can be dirty and exhaust discharges seem excessive.

Entry to the private coach business is open to anyone who obtains a Road Passenger Certificate from the Department of Communications. Certificates are issued to applicants who fulfil the following 3 conditions

(1)Be professionally competent.

(2)Be of good repute.

(3)Be of good financial standing.

The growth of the private coach business was helped by the Department of Education Free Transport scheme. Approximately 40% of Irish school children travel to and from school on privately owned coaches. In some thinly populated areas, they operate exclusively the school transport scheme while CIE operate mainly in the population areas. Due to this anomaly, 60% of the vehicles hired by the Department of Education for the “Free Transport Scheme” are supplied by the private transport operators.

The competition between CIE and the private coach operators is mainly confined to 2 areas:-

(a)Transportation of passengers to and from Dublin especially at weekends.

(b)Tours of Ireland - the private coaches now compete with CIE and overseas based operators, for a share of this market. The 14 private coach tourism operators registered with Bord Fáilte have a total of 180 coaches - CIE have 31 tour coaches.

(ii)Tourism Aspects

A characteristic of the sector in recent years in relation to the Tourism traffic has been the decline in both share and absolute level of demand which is being serviced by Irish companies. British coach equipment is being used to a greater extent each year in meeting the needs of this growth market. Due to significant capital and operating cost differences the Irish supplier is uncompetitive on price and quality of equipment when compared with his British counterpart. The longer-term implications of this trend are serious, in terms of foreign revenue earnings, employment and the extent to which non-Irish companies will control the market. A consequence of the shift to UK coaching equipment is the fact that in many instances visitors to Ireland do not have the benefit of an Irish guide on their tour.

Demand for tourism coach hire will increase. This increased demand should be met by Irish rather than overseas operators, but as long as the tax structure in this area remains as at present, there is no prospect of Irish operators becoming competitive.

The Committee is satisfied from oral evidence from the Coach Tourism Council of Ireland that a system of registration of the 211 coaches or so used for tourist purposes only can be devised in co-operation with the National Tourism Authority and the Revenue Commissioners to facilitate taxation measures which the Committee recommends with a view to making Irish coach tourism competitive.

(iii)Effect of Taxes on Competitiveness

Foreign based coaches have a much higher standard of comfort than Irish based coaches. At least 90% of the Irish coach fleet is over 10 years old as Irish operators usually import secondhand coaches from the U.K. This is due to high excise duty and VAT.

There is a 6.5% excise duty on the new landed retail price of coaches and 23% VAT on the purchase price of the coach inclusive of excise duty. Coaches carry no excise duty in the U.K. Diesel fuel here costs 15% more than in the U.K. and vehicle taxes are higher. Capital allowances for coaches in Ireland are 20% per annum, in the UK 75% for the first year.

The position of VAT is particularly difficult. Passenger transport is exempt from VAT. There is therefore no refund of VAT on any inputs into the coach transport business, including the purchase of coaches, fuel and spare parts. VAT on a new coach is 23%. Transport is zero rated in the UK. The UK operator pays 15% VAT for his inputs and can reclaim it in full.

The principal consequence of this situation has to be a lack of competitiveness on the part of Irish coach operators in a growing international market.

The Commission on Taxation recommends in its Third Report that passenger transport be made subject to VAT. Commenting, mainly within the context of CIE, the Commission states that “the present exemption does not free passenger services from VAT. As the operator of an exempt service CIE is unable to reclaim the input tax on goods and services purchased for both road and rail passenger services. At present, input taxes incurred in day-to-day operation of passenger road and rail services amount to £7-£8m. per annum.” This is the equivalent to a VAT rate of approximately 5% on receipts.

The Committee is of the view that the rating for VAT of passenger transport at the present low rate of 10% would not have an appreciable effect on fares or hire charges and supports the Commission’s recommendation that VAT be applied to passenger transport services in respect of journies within the State.

Recommendations

(i)VAT: The Committee recommends that VAT be charged on all passenger transport within the State at the low rate of 10% - thus allowing operators to reclaim VAT on all equipment, parts, and fuel. For public transport, receipts can be offset by an increase in the State subvention to CIE.

(ii)Coach Tourism: A system of registration for Tourist Coaches should be introduced in co-operation with the National Tourism Authority and the Revenue Commissioners.

The following facilities would apply in respect of registered coaches.

(iii)Law Enforcement: All existing national laws and EEC laws should be fully enforced to ensure that non-complying operators get no competitive advantage.

3. Car Hire

This sector consists of 26 (BFE) approved car rental companies, operating a fleet of 6,000 vehicles and providing an estimated 225 full-time jobs. Turnover for the sector is estimated at £30 million.

Some 85% of car rentals are by overseas visitors, mainly North Americans, while 15 per cent are domestic business rentals.

A characteristic of this sector over the past 5 years has been a reduction in fleet; the failure of a number of companies; and the concentration of fleet in the hands of a number of the larger operators. While American demand is increasing, the level of business from mainland Europe and the U.K. continues to decline.

Car rental charges in Ireland are amongst the most expensive in Europe and Ireland’s lack of competitiveness in this aspect of Tourism is a major cause for concern. An indication of the seriousness of this situation is the level of rentals made in the U.K. by American visitors into Ireland. Attitude research by Bord Fáilte has shown that the cost of car rental in Ireland is considered very high by a significant number of visitors and is not judged to represent value for money. While the recently announced decision to reduce VAT on car rentals from 18% to 10% is most welcome we still have one of the highest rental structures in Europe.

The factors influencing the high cost of car rental in Ireland are:-

-the level of excise duty on vehicles at 23% of recommended retail price for cars up to two litres and 26% for cars over two litres;

-the growing cost of insurance premiums which are now 4.5 times higher in the U.K. than in Ireland;

-Insurance costs in Ireland represent 20%/23% of rental firm turnover compared to 5% in Switzerland;

-the cost of finance (18/20%).

-petrol in Ireland at over £3 per gallon is more expensive for tourists than in any other European country;

-a depressed car market in Ireland which affects fleet disposal as car hire firms dispose of vehicles after periods of between 6 and 18 months and are allowed only 20% per annum depreciation.

The cost and the difficulty of obtaining insurance cover effectively prevents new entrants.

The consequence of difficulties in this sector has serious repercussions on the composition of our tourism business. Research shows that car rental visitors tend to be more up-market and higher spending; more likely to come to Ireland by air; have a higher propensity to use hotel accommodation; and will visit the remoter areas of the country. This segment is being seriously curtailed by the cost of car rental.

The Committee has examined a scheme in Denmark which has a two fleet system of car rental - one for Danish residents and the other for non-residents. Cars for hire by non-residents are licensed separately and no duty is paid on these cars. Payment of excise duty is deferred until the vehicle is disposed of by the rental firm. This scheme applies only to cars for short term hire by non-residents.

Recommendations:

(i)That a system of deferred payment of excise duty be introduced for car-rental (similar to scheme operated in Denmark).

(ii) That car rental companies be allowed 50% depreciation allowance in the first-year of purchase.

Both of the above recommendations apply exclusively to cars for short term hire by non-residents and would have a special licence plate.

4. Taxis

In Dublin City there are 1,830 taxi licences or ‘plates’ and 2,500 certified taxi drivers. The controlling authority is the Carriage Office.

Compared with most other major cities the overall standard and identification of taxis in Dublin is poor.

Taxi operators are faced with the following difficulties:

-declining demand due to economic recession and emergence of courier firms,

-high cost of vehicle replacement and operating expenses including VAT. As passenger transport is exempt from VAT taxi drivers receive no VAT refunds for their inputs, including vehicle purchase,

-crime in Dublin City,

The Committee notes with approval the recent development whereby taxis are allowed to fully utilise buslanes.

Recommendations

(i)The Carriage Office in conjunction with the Taxi Federation designate a standard car for use as a taxi which could be imported on a deferred excise duty payment scheme or imported for assembly through an IDA assisted venture.

(ii) Taxi transport should be rated for VAT purposes, as passenger transport thereby allowing the operators to reclaim VAT on purchase of vehicles, parts and fuel. The VAT rate should be 10%.

(iii)Training for drivers should be improved after consultation between the Carriage Office and Taxi representative bodies, particularly in regard to the “street knowledge” test.

[5]

Accommodation

Introduction

The Irish accommodation sector is suffering from underutilisation. The main cause of this underutilisation is the erosion of Ireland’s competitive advantage resulting from cumulative price increases brought about by the high levels of inflation and VAT. The effects of these problems have been to considerably reduce profit levels and substantially raise the number of closures and redundancies. The lack of profit has also resulted in a lack of internally generated resources to finance re-investment in repairs, improvements and refurbishments and this is lowering the general level of standards.

In order to reverse this decline Ireland’s lack of price competitiveness must be restored. The most important factor in achieving this would be to view overseas Tourism as the important export that it is and, gear our VAT and excise duty structures accordingly. Secondly, Ireland’s competitiveness in standards must be improved by financially assisting the hotels in the form of grants, (since the industry itself lacks the finance to do this). Thirdly, we must establish a reputation for high quality services through increased training and by more closely monitoring and approving standards. Finally, these improvements must be communicated to the market through more promotional campaigns such as that of the “Value Inns of Ireland” voluntary grouping of small hotels.

The recommendations made in this chapter will require a greater involvement of state organisations (The National Tourism Authority and CERT) and this will inevitably mean a larger allocation of public finance to the Tourism sector. However, as the recent National Plan, “Building on Reality”, points out the Irish Tourism Industry can during the eighties expand at a rate of more than 5% a year, given a favourable domestic environment. The recommendations made in this chapter are required to give such a favourable environment and the costs should be quickly recoverable through increased tourist expenditure. The Committee fears that if such steps are not forthcoming then the costs are likely to be far higher through the loss of even more jobs.

Total Supply of Accommodation

Accommodation can be broken down into two main sectors; serviced accommodation and self-catering. Serviced accommodation includes hotels, guesthouses, farm houses and Irish homes (B & B), while self-catering comprises of caravans, camping, cabin cruisers, youth hostels and rented self-catering units.

Many of the problems faced by these types of accommodation are common to each other, as they are to the Tourism industry in general, but in addition they each have their own characteristics, advantages and difficulties, and must therefore be examined individually.

The following table gives an analysis of the supply of accommodation by category. These figures relate to approved registered accommodation outlets, but in addition there are numerous unapproved outlets the existence of which create problems for the others as there is absolutely no control over standards in the case of these unapproved premises.

Table 1 Supply of Accommodation

From the above table it can be seen that hotels, (with 20,000 rooms) is the single largest category of accommodation. The next largest category is the self-catering units (4,000 units) followed by Irish homes (1,591 units and 6,359 bedrooms).

These figures represent total numbers but not comparative annual capacity since much of the accommodation would only be available in the high season. The effect of this factor is to increase the dominance of hotels in terms of annual capacity.

The actual percentage share in bednights for long stay holidays (4 + nights) is as follows:

Table 2

Bednights in Accommodation (%)

A. Hotels

Economic Contribution

The hotel sector is the largest sector of the accommodation industry with a total turnover of £231m. in 1983, equal to almost 2% of GNP. Also, much of this turnover is received from overseas tourists so that the sector contributes a similar percentage to the nation’s total exports.

The sector also makes a significant contribution to the national economy in terms of employment. There are 13,500 permanent employees in the industry with up to another 6,000 being employed seasonally and 3,000 on a casual basis. Therefore the hotel sector directly accounts for 2% of the working population. Also a similar number of jobs are directly dependent on the hotel sector.

The hotel sector is also a major source of Government revenue, the main source of this revenue being:

Distribution by Region

Perhaps the most important under emphasised economic contribution which the hotel sector makes is the Regional Redistribution of Income Effect. Much of the expenditure on tourism is in the less developed parts of the country. particularly the West. Therefore the importance of the hotel sector for these underdeveloped regions far outweighs the national contribution made by the sector.

Hotel room distribution is analysed in the following table. As can be seen Cork and Kerry together account for over one quarter of the total capacity with the West and Mid-West taking another quarter. The remaining 50% of capacity is distributed relatively evenly over the rest of the country.

Table 3 Hotel Room Distribution by Region

Capacity of Hotel Accommodation and Recent Trends

In 1983 there were 659 official hotels with a bed capacity of 12.8 million bednights representing a drop of 5% on 1982. Total room capacity has fluctuated in recent years, but there has been no major growth with the bed capacity in 1983 being almost the same as in 1977.

A particular characteristic of Irish hotels is that only 23% of turnover is generated by accommodation, compared with nearly 70% in other developed countries.

Hotels, mainly in urban areas, have placed considerable emphasis in recent years on developing non-accommodation activities such as drink sales, functions, and discos. The Committee is particularly anxious to focus on the needs of those hotels that depend mainly on Tourism and for which accommodation is a much greater generator of revenue.

Grading

Hotels are graded under the Bord Failte Grading System into five main categories of quality. Only 2% of hotels are given the highest quality ranking of A* while the most common grade is that of B into which some 260 hotels fall.

It is doubtful if this grading system is still valid as hotels are not a homogenous product and individual hotels do not fit easily into classifications, which for example, take no account of hotel size. There is also considerable evidence that handling agents refer business to hotels on the basis of their own assessment rather than Bord Failte classification. Indeed the very word ‘hotel’ can be a misnomer abroad conveying an impression of something large, commercial, and impersonal. The need for better marketing segmentation in promoting our smaller and medium sized hotels is essential to convey the image of family atmosphere, friendly service, and informality.

Demand for Hotel Accommodation

Between 1977 and 1983 the number of hotel bednights declined by 15%. In 1982 the number fell by 8% on the previous year’s figures to 4.83m. and in 1983 fell even further to 4.6m. which is the lowest number since 1972. (See Table 3).

Table 4 Hotel Bednights 1977-1982

In 1983 and 1984 there has been strong growth from the American market which in 1983 represented 22% of total hotel guestnights. Despite poor performance from the home market, the Republic still accounts for over half of all hotel guestnights.

Table 5 Hotel Guestnights by Market Area 1983

One feature affecting the number of guestnights has been a reduction

in the length of stay of overseas tourists (as opposed to a reduction in actual number of overseas tourists). The total average stay by overseas visitors fell from 13 nights in 1974 to 11 in 1982 and an estimated 12 in 1983. American visitors since 1975 have reduced their average length of stay by 13%.

However, the most serious development in demand for hotel accommodation has been the loss of market share by the hotels of overseas visitors. In 1981 hotels accounted for 15% of total overseas visitors bednights; by 1983 this had declined to 11%. This has been particularly relevant in the North American market; hotels share of this market has fallen from 35% in 1976 to 25% in 1983. The hotels have been loosing out to guesthouses, Irish homes and farmhouses, resulting from the willingness of American visitors to experiment with different types of accommodation. This problem has been somewhat alleviated by the hotel sector’s overall growth in the North American market in 1984, but it is too early to say whether this growth has been sufficient to halt the decline in market share.

Some of these lower occupancy rates are further compounded by the problems of seasonality. With such a high proportion of tourists being concentrated in July to September some of the occupancy rates fall to very low levels in the off-season periods as can be seen from the following table. Lower occupancy rates are even more pronounced in the smaller rural hotels that are often family run.

Table 6 Quarterly Bed Occupancy Rates

The lowest rate is in the first quarter January to March. In two of the regions (South and North West) the rates in this period fall to as low as 20%.

Problems Facing the Hotel Sector

The hotel sector is facing serious problems and this is evidenced by the fact that in 1983 net profit as a percentage of turnover was only 1.4%, an extremely low ratio for any industry. The problems which are creating this very poor performance can be analysed as follows:

1.Competitiveness

Although there has been no increase in capacity since 1978 bed occupancy has fallen from 45% in 1978 to 35% in 1983. Hotels have lost competitiveness due to:

-high rates of VAT

-high rate of inflation.

VAT at 18% on accommodation and at 23% on meals has been the highest for any European country except Denmark. The reduction in VAT on accommodation to 10% is most welcome as a step towards restoring competitiveness

The inflation rate in Ireland over the last few years has also been one of the highest in the developed world. This is reflected in the fact that between 1980 and 1983 the percentage changes in consumer prices in Ireland were running at about twice the level of the average rate for all OECD countries.

The result of these higher prices on the demand for the hotel sector have been twofold. Firstly, overseas tourists are becoming increasingly aware of the lack of competitiveness of Irish prices compared with those of other countries. This has inevitably resulted in a severe restriction of the number of overseas visitors to Ireland. The main exception has been the American market. However, this is because of a very buoyant US economy and an exceptionally high dollar exchange rate. Once the dollar falls in value (and therefore the purchasing power of American tourists in Europe falls) Americans are likely to become more cost conscious and therefore more critical of Ireland’s lack of competitiveness.

The second effect of the high hotel prices has been to shift demand for accommodation away from hotels towards cheaper forms of accommodation, i.e. a reduction in the market share taken by the hotel sector.

2.Hotel Overheads

Despite the problems of limited demand and heavy competition the hotel sector might still expect to be more financially viable if it were able to exert tighter controls on its overheads. This of course is largely a question of good management but there are a number of cost categories which are effectively beyond the control of management. These include:

-RATES are chargeable on all registered hotels and payable annually. This is also considered by the industry to be yet another factor giving an unfair advantage to certain other forms of accommodation, since bed and breakfast unlike hotels do not have to pay rates, as they are regarded as domestic dwellings.

-PRSI payments are disproportionate relative to profits to the extent that Employers PRSI represents 40% of operating surplus in services, including hotels, compared with 10% in manufacture and are another form of overhead which is beyond the control of management. This is particularly relevant for the hotel sector since by its nature the sector is highly labour intensive. The only way to cut this cost is by laying off staff. It therefore amounts to a tax on employment.

-ELECTRICITY COSTS for industry in Ireland are among the highest in the developed world. The cost of electricity in the UK is about 20% cheaper than in Ireland.

Conclusions

The problems faced by the hotel sector have resulted in a very poor financial performance with profit as a percentage of turnover falling from 8% in 1978 to 1.4% in 1983. This has resulted in the closure of some 60 hotels since 1978 and the estimated loss of some 6,000 jobs. It has also resulted in a lack of re-investment in the industry and therefore an inevitable decline in standards which is reflected in a growing number of downgradings in the Bord Failte grading system. There is therefore a very real danger if the situation is not remedied that Ireland will be increasingly viewed as poor value for money resulting in fewer tourists and even lower profits and less investment, thereby completing a vicious circle. This would mean that the whole tourist industry which has been so carefully fostered could be undermined and it could take years to recover. It is therefore imperative that action be taken to redress the situation.

However the hotels themselves must develop more positive attitudes, particularly in areas of marketing and standards of service. They are perceived as poor value for money and need to review their own management and cost structures. Over the last two years VAT on accommodation has been reduced from 23% to 10% and the price of spirits was reduced in October 1984. While conceding that further tax changes are necessary the sector should take full advantage of concessions already given by competing more aggressively and improved marketing, especially in ‘the shoulder’ periods of the Tourism season.

Recommendations

In order to alleviate some of the problems being faced by the hotel sector the following recommendations are being made:

1.Register All Accommodation

In order to assist fair competition between hotels and other forms of accommodation all accommodation in excess of two bedrooms should be registered with the proposed National Tourism Authority.

2.Reduce VAT

VAT on accommodation has already been reduced to 10%. Similarly VAT on meals and other Tourism services should be reduced to 10%, to further restore the competitiveness of Export Tourism, but also to make home holidays more attractive for Irish people. In 1983 Irish residents travelling abroad spent £428m. and a more competitive Irish Tourism sector would reduce this outflow of funds. The arguments in favour of a reduction to 10% on meals are more fully documented in Chapter 6.

3.Develop a Co-ordinated Marketing Plan for Smaller Hotels

In the past the marketing efforts overseas have not been sufficiently targeted to be of much assistance to the smaller hotels. Marketing of smaller hotels should be redesigned and a different trade name introduced to get away from the hotel image. The Bord Fáilte travel incentive scheme should be revised to promote group marketing schemes on the lines of those operated by CTT. The Committee feels the future for such small hotels is dependent on voluntary group marketing schemes.

4.Introduce Refurbishment Grants for Tourism Hotels

The only existing capital grants scheme for hotels is the Bedroom Improvement Grant Scheme which was introduced in 1979 and is administered by Bord Fáilte. The scheme is confined to assisting in the addition of private bathrooms to bedrooms which do not already have this facility. A total of £340,000 was paid out under this scheme in 1983.

In view of the decline in investment in hotels and the lack of profitability in recent years, a limited scheme of refurbishment grants for tourist hotels should be introduced for a period of three years by extending the Bedroom Improvement Grant Schemes to cover all capital refurbishment i.e. other than decorating.

5.Development Scheme to Tourist Hotel Investment

The Business Development Scheme announced in the 1984 Budget should be extended to investment in hotels that derive most of their business from Tourism i.e. more than 50% of their earnings from overseas visitors. A working group representing the Irish Hotels Federation, the National Tourism Authority, and the Revenue Commissioners should be established to develop an effective and workable scheme. Tax based lending under Section 84 of the Finance Acts should be extended to include such tourist orientated hotels.

6.Improve Hotel Training

CERT should re-allocate more resources to the training of hotel management through providing a comprehensive business advisory service on a consultancy basis specifically to the smaller hotels which are owner managed or family run.

7.Employment Incentive Scheme

The Employment Incentive Scheme should be revised in order to allow for greater participation by smaller hotels in the Tourism Sector. The scheme as at present constituted does not cater for the seasonal nature of tourist hotels and thus militates against employment in off-peak periods.

B. Irish Homes (Bed and Breakfast) Accommodation

In addition to Irish homes this sector also includes Guesthouses and Farmhouses. The following are the official number of homes involved in this sector:

The relative importance of each of these categories can be seen from the following table which gives a breakdown of the percentage of bednights by overseas visitors and home tourists for 1983.

Table 7 Percentage of Bednights by Accommodation

To an extent the sector has more flexibility arising from the tax system. While guesthouses, like hotels, are liable for VAT and Rates, farmhouses and Irish homes are often exempt from VAT as they are below the qualifying thresholds. They are also treated as private residences and therefore exempt from Rates.

International Tourism accommodation patterns are changing, with a growing preference for the friendly and informal style of accommodation available in this sector.

Legitimate operators listed with Bord Fáilte have, like the Hotel Industry, to cope with the growing problem of unregistered accommodation. The number of unregistered units is estimated at between 4,000 and 6,000. Unlike listed accommodation they pay neither income tax nor public liability insurance. Moreover, unregistered accommodation, by definition is not subject to any official inspection with the resultant risk of inferior standards and unfair competition.

The Committee noted the professional marketing and commitment to high standards of the representative associations - Irish Town and Country Homes Association and Fáilte Tuaithe. For example the Irish Town and Country Homes Association expended in excess of £250,000 on Tourism promotion during the last four years. Bord Fáilte Assistance has been limited to discretionery grants for travel and overnight expenses abroad.

Conclusion

From the foregoing it can be seen that some of the Irish homes accommodation sector is less susceptible to some of the problems facing the hotel sector. This is reflected in the fact that while the hotels have been loosing market share the Irish homes sector have, despite some fluctuations, been maintaining their share.

Recommendation

(i)We reiterate our earlier recommendation that all accommodation units with more than two bedrooms be registered. While the registration system would have legal effect it should be supported with a national campaign to have all accommodation registered.

(ii)The National Tourism Authority should support and assist the overseas promotions of Associations representing approved and registered Irish homes accommodation with a 20% grant aid scheme.

(iii)The sector should be represented on the National Tourism Authority.

C. Self-Catering - Rented Accommodation

In 1983 this sector accounted for 15% of total main holiday bednights for domestic holiday-makers and 7% for overseas visitors. Self catering rented accommodation clearly divides into two categories, those owning single units and those that have groups of accommodation units which are commercially run and available annually for renting. The Irish Catering Holiday Association (ISCHA) has over 40 members who own some 600 cottages, holiday homes and apartments. However, outside the Association there are another estimated 3,500 units, so that the total number of all units is probably around 4,000.

This sector has experienced relatively rapid but unco-ordinated development, particularly along the Western Seaboard. This took place in the late 1970’s and was further boosted by a once-off grants scheme. Unfortunately this resulted in a high concentration in a number of relatively small geographical areas, resulting in individual areas of oversupply in accommodation and cut rate competition.

The difficulties of this sector relate not only to unfair unregistered competition but more especially to viability and profitability. This is due to: the capital intensive nature of units, e.g. construction costs and site development can amount to £30,000. per unit; limited seasonality can result in a poor cash return e.g. £4,000 per annum per unit; refurbishment costs also contribute to poor cash flow and inability to service interest payments.

A profile of the organisation and membership of this sector reflects its unco-ordinated development. Often these small businesses form a secondary income for their proprietors. This has resulted in management and marketing deficiencies and an overall lack of promotion and development of the sector. The Committee feels, however, that the self-catering rented accommodation sector has potential for growth - through widening its seasonality; competing cheaply with short holidays at home and abroad; and gives substantial benefits to the local economy e.g. shops and restaurants. To realise this potential it needs to generate extra turnover through more effective marketing and develop local tourism infrastructure e.g. all weather facilities such as pitch and putt, indoor tennis, and other indoor sport facilities - to boost its attractiveness.

Recommendations

1.The primary recommendation of the Committee for this sector must be towards boosting receipts. This can primarily be achieved by increased marketing activity, by the Irish Self-Catering Holidays Association and the National Tourism Authority. 20% grant aid should be made available for marketing initiatives, with emphasis on off-season periods and as a cheap alternative to short stay holidays abroad (e.g. weekend London holidays).

2.The Regional Tourism Organisations should examine the need for and establishment of recreational and sporting facilities in the vicinity of self-catering rented accommodation. As the proprietors of such accommodation are unable to afford these facilities in isolation, the future development of this form of accommodation should be linked to areas where such facilities are available, through hotels or on a community basis.

D. Caravan and Camping and Youth Hostels

(i) Caravan and Camping

There are an estimated 300 caravan and camping parks in Ireland giving full-time employment of about 200 jobs and another 200 seasonal ones. Horse-drawn caravans are included in this sector, there are currently five companies operating about 200 vans.

The sector is highly dependent on the home market but relatively unimportant for the overseas market. Indeed the sector accounted for 19% of bednights of domestic holiday-makers but only 4% for those from overseas.

There are three categories of caravan parks:

This latter category of Unapproved and Unregistered Parks poses the greatest problem for the approved operators.

These sites are difficult to compete with, since they do not charge VAT and they also bring the sector into disrepute since they often offer little or no service or facilities. While an order can be obtained to get these unofficial sites to cease operation, some of these sites simply re-open year after year. There is often a lack of consistency between local authorities in implementing the 1948 Sanitary Services Act relating to the operational standards of caravan parks.

Other difficulties for this sector relate to the fact that they are assessed to pay local authority Rates on an annual basis although they are used only for a short part of the year. It is extremely difficult for caravan parks to obtain liquor licences. The Committee notes and welcomes the recent reduction in VAT to 10% for this Sector.

(ii) Youth Hostels

While the 52 Youth Hostels in Ireland cater mainly for young Irish people, they also account for 2% of all overseas visitor bednights.

While the Committee notes with approval that Bord Fáilte paid £90,000 by way of Accommodation Grants in respect of hostels during 1983 there is still a perception that some of our hostels are inferior to those on the continent and the necessary funds should continue to be made available within the Tourism context to bring our hostels up to Continental standards.

Recommendations

(i)The 1948 Sanitary Services Act should be amended for the control and monitoring of caravan park licences by local authorities so that the current Bord Fáilte standards would become regulatory in law. The Committee feels strongly that both the standards of caravans and the sanitary services available in parks must be improved and subsequently brought into line with similar continental facilities.

(ii)The anomaly whereby Rates payments are treated on the same basis as all year round premises should be rectified through a remission on Rates accounts at the discretion of local authorities.

The Committee believes there to be substantial scope in this sub-sector of Tourism. In Western Europe there has been a substantial growth in the number of caravans from 850,000 units in 1967 to 4,000,000 at present. For Ireland to participate in this growth we must have a marketable product of the highest quality.

E. Cabin Cruisers

After rapid growth in the 1970’s the cabin cruiser market has been in serious decline since 1980. The Irish cabin cruiser fleet declined by 17% from 527 in 1980 to 436 in 1983.

This cut-back in supply was a response to over-capacity in a sub-sector that relies on overseas visitors for 80% of its business.

The main reasons for this decline are:

(i)Ireland joined the EMS currency system in 1979 and subsequent adjustments of the Irish Pound within the EMS system did not take sufficient account of disparities between high rates of inflation in Ireland and low inflation in Germany, the principal overseas market for Irish cabin cruiser holidays.

(ii)VAT on cabin cruiser hire rose from an initial 5.26% in the early 1970’s to 23% in the early 80’s but has now been reduced to 10%.

(iii)The number of cabin cruisers aided by a Bord Fáilte grants scheme now terminated, peaked just as the downturn in demand started to bite.

The troubles in the sector also mean that there has been no programme of replacement for older boats in recent years. Cabin cruisers for hire cannot be continually repaired but must be replaced. This factor combined with the low level of demand will make it increasingly difficult for some of the cruiser companies to stay in business.

However, our inland waterways are a major tourist asset and the Committee feels that, with the recent reduction in VAT, and the decline in Irish inflation, steps should be taken to restore the growth of the cabin cruiser sector.

Recommendation

The National Tourism Authority and firms in the sector should develop a marketing campaign aimed at specific European countries, particularly Germany and Switzerland, to include special air charters to Irish airports. Group marketing grants of 20% should also be provided. In addition the sector should develop a special incentive package for ‘shoulder’ period holidays aimed at the home market.

[ 6 ]

CATERING

This Chapter deals specifically with

1. Restaurants, including hotel dining rooms.

2. Public Houses

3. Contract Catering

4. Fast Food Outlets

1. Restaurants (including Hotel Dining Rooms)

Restaurants and hotel dining rooms have major roles in the tourist industry. Latest Bord Failte figures show that 55% of overseas holiday visitors used restaurants and 41% used dining rooms. The need to have regard to the export tourism role of this branch of catering should be fully recognised in the application of VAT rates, implementation of standards, framing of licensing laws, and training.

Margins in this industry are under severe pressure due to contracting disposable incomes and increasing costs. The one major change recognised by all participants as being necessary to alleviate the current situation is a substantial reduction in the current VAT rate of 23%.

Like all other sectors the restaurant is suffering from the twin effects of declining disposable incomes and increasing costs. By far the greatest inhibiting factor identified as preventing buoyancy in this sector is the level of VAT at 23% on meals, referred to in numerous other areas in this report. Indeed, many consider VAT on meals as a sales tax as food is not taxed at source and therefore VAT on a meal is not recoverable.

In sales of certain luncheon and other meals the competition is extremely intense, there are severe restrictions on price increases and therefore effective price limitations, thus VAT at 23% can be paid not as a value added tax but as income of the restauranteurs own margin.

Other than VAT and the common problem of high interest rates the main problem areas identified are:

(i)Recognition of the major part played by the industry in context of the Irish Tourist Package. In this regard the relative ‘ease of entry’ into the restaurant business is seen as the main contributory factor to the diverse range of standards evident within the industry.

(ii)The quality of food suppliers originating from the home market is an area where much improvement is required in terms of marketing, presentation, and grading. There is a need for a mechanism between the catering trade and producers, similar to the Trade Linkages Council recommended in the Committee’s Report on Retail and Distribution.

(iii)It is the view of the Committee that the 5% gross charge imposed by credit card companies has very detrimental effects on the profitability of restaurants.

(iv)The failure to supply full licences to restaurants operates to the detriment of the tourism industry and employment. At present restaurants may serve wine but not beers and spirits.

Restaurants and Licensing Laws

Varying views were expressed on this area and depending on sectoral interest there was general support or disagreement with the provision of full licences to restaurants.

The licensed trade argues that there are already some 11,000 full licences in existence and a latest estimate indicates that there are possibly 3,239 establishments which could seek a licence on the basis that they are serving food. An increase in the number of licences of anywhere near this magnitude would be detrimental to publicans whose main livelihood is the supply of drink.

They would argue that if a restaurant wishes to have a full licence there is nothing to prevent them acquiring such licences in the normal way and thus maintain the overall number of licences at its present level.

The hoteliers support the arguments of the Vintners stating that full bar services are available in hotel dining rooms.

However the Committee notes that the Licensed Trade has moved into the food business in a substantial way, particularly at lunch-times. Hotel dining rooms operate quite limited hours, and it is often quite difficult to get a meal after 9.00 p.m., and hotels simply do not offer the same flexibility as restaurants.

In almost every other country bona fide restaurants may serve a full range of alcoholic drinks. The Committee feels that it is possible to ensure that only certified and registered restaurants exclusively benefit from an amendment to the licensing laws in this area. It would be readily possible and practical to ensure that fast food outlets and other establishments would not be licensed to avail of drink sales. Furthermore we believe it is possible to restrict drink sales within restaurants purely for table use with a meal. Therefore it would be unlikely to detract from consumption levels in public houses.

Our recommendations in this area (B and C below) are designed to assist restaurants in the context of Irish Tourism. Subsequently in the Report we set out to resolve many of the publican’s other difficulties.

We fully acknowledge that the Joint Oireachtas Committee on Legislation is currently analysing these matters and our recommendations are purely from the perspective of the small business sector.

Recommendations

VAT

A.The rate of VAT on meals should be reduced to 10%. Such a reduction would encourage eating out and help restore the competitiveness of Irish Tourism. This tax concession would cost the Exchequer £26m. per annum. While this measure is extremely costly we consider it the single most important recommendation in this Chapter and the greatest taxation impediment to boosting tourist receipts.

Registration

B.The establishment of a registration system for restaurants by the National Tourism Authority to ensure minimum quality and standards and to control possible abuses of more flexible licensing laws.

Licensing Laws

C.The existing licensing laws in relation to the granting of new licences should be amended to enable bona fide registered restaurant proprietors to freely purchase liquor licences from the Department of Justice. This licence would permit the sale of the full range of alcoholic drinks strictly for table use with a substantial meal until 12.30 a.m. The licence should be subject to annual review and open to third party objection. The Committee feels that any such change should be effectively policed and the necessary manpower made available for enforcement.

Licensed restaurants should fulfil bona fide certification criteria which would exclude take-away food outlets and off-sales of drink.

Credit Sales

D.The Committee strongly recommends that the Credit Card Companies and Banks review and reduce the 5% gross charge on credit card transactions for meal sales.

Raw Material Quality

E.The establishment of a council comprising catering trade and agricultural representation to improve quality, grading, presentation, and marketing of Irish produce for use in catering, similar to the Trade Linkages Council recommended in the Committee’s Report on Retail and Distribution.

2. Public Houses (including Hotel Bars)

Public Houses and hotel bars are important in the context of Tourism and it is estimated that 32% of overseas visitors and 51% of Irish holiday makers visit singing pubs (Bord Fáilte). A summary of the findings of a report entitled “The Economic Importance of the Drinks Industry in Ireland” by A. A. John and J. W. O’Hagan indicate that the drinks industry generally, including the manufacturers of drinks, has a major importance for the Irish economy. The manufacturers of drinks (although outside the strict scope of this report but relying very much on the ability of the Retail and Catering Trades to continue to sell their produce) managed to maintain employment at approximately 8,000 people between 1970 and 1981.

Fulltime employment in the retailing of alcoholic beverages for 1984 was estimated at 26,718 and part-time employment at 17,147 which is considered to represent some 20% of the total retail employment.

The report on the Economic Importance of the Drinks Industry in Ireland also highlighted that certain drinks such as Stout, Irish Whiskey and Cream Liquors were significant in the International perception of this country. On the financial side, within the E.E.C. only France had a higher percentage of its exports in the form of alcoholic beverages.

Excise duties on alcohol represented over 10 per cent of total taxation receipts ranking Ireland highest in the world and third in a world wide sample in respect of the taxation percentage of the product price, behind only Sweden and Norway (The Taxation of Alcoholic Beverages in Ireland by J. W. O’Hagan, published by the Drinks Industry Group in 1983).

Even within the EEC there are major variations in excise duties which will have to be faced in future when taxation within the Community is harmonised. Beer duty is 30 times higher in Ireland than in France. This level of taxation has led to a position where sales on the home market have fallen, a factor which led the Government to effectively reduce excise duties on spirits last year by 8p per half-glass (including consequential VAT reduction). This was an effective tax reduction of 15% on spirits.

This industry is thus a major contributor to the National finances and to the attraction of this country as a tourist centre. The 22% reduction of volume sales in public houses and off-licences since 1980 is the fundamental problem in this sector.

In addition to Taxation the other major problems for the bar trade are the Licensing Laws.

Licensing Laws

There was grave concern expressed at the current state of the licensing laws particularly in relation to such areas as opening hours, distinctions created between hotels, public bars, clubs, and restaurants, and the variation in the enforcement of these laws.

(i)Opening Hours

There was general satisfaction concerning the opening hours and there was no perceived demand for the extended opening hours as proposed in the National Plan 1985-1987. However drinking hours should be geared to meet the public needs and indeed tourist needs. The increased importance of public houses as providers of mid-day lunches particularly in Dublin and Cork means that there is great difficulty in clearing a premises by 2.40 p.m. The present day purpose of closing for 40 minutes (or less) is open to question and thus the Holy Hour should be abolished as recommended below. With regard to the Sunday closing between 2 p.m. and 4 p.m. this is seen as a peak leisure time and the reasons for depriving the public of the facility to enjoy alcoholic drink must be questioned.

(ii)Unfair Trading

There is increasing concern by publicans particularly in the Dublin area, about the growing number of community centres, sports and social clubs which are establishing themselves as effectively public bars. The major concern is these clubs are now effectively acting as public bars supplying drink to members and non-members alike. Clubs are easily registered and the supervision of these premises is far less exacting than that of public houses whose proprietor’s livelihoods are endangered by any endorseable prosecutions. The loopholes which are regarded to exist in the legislation on such clubs are regarded as leaving major room for abuse of the licensing laws.

(iii)Other

As the laws now stands children under the age of 18 years cannot be present on a licensed premises even in the company of their parents. This is an unnecessary restriction on families and particularly tourist families.

In general relating to licensing laws there was concern that:-

(i)all the onus on complying the regulations appeared to be on the licence holder,

(ii)the penalties on conviction of a licence holder operate with excessive severity.

Garda attention needs to be directed towards the increasing security and armed robbery problems facing certain publicans at closing times.

In view of the increasing violent crime rate and the significant amounts of cash handled by public houses they have now become a prime target for burglary and, indeed, armed robbery. This is creating problems for staffing, particularly in some city centre locations and Dublin suburbs.

Recommendations

(i)Excise Duty on beer should be reduced to help reverse the declining trend in sales. While the Committee is not in a position to recommend a specific reduction there should be particular regard to the price differential between Northern Ireland and the Republic and the recent reduction in spirits. In Northern Ireland a pint of beer costs GB£0.77 (or IR£0.92). The bar price in Dublin is £1.18 per pint.

(ii)Closing hours should be fixed at 11.30 p.m. all year round on a seven day basis and until 1.00 a.m. on New Year’s Eve and St. Patrick’s Day. This would change the Sunday closing hour and abolish Summer and Winter time changes. Drinking up time should be extended from 10 to 30 minutes. Therefore public houses should be closed and empty at 12.00 midnight, which should be simple and easy to operate and enforce by both Publicans and Gardai. The Committee further recommends the abolition of the ‘Holy Hour’ closing between 2.30 p.m. and 3.30 p.m. on weekdays in Dublin and Cork.

(iii)The Licensing Laws should be standardised for all lounge/bar outlets and enforced in a similar manner e.g. restrictions on garda supervision of Clubs should be abolished, regulations in relation to supply of drink by Clubs to under-age and non-members should be enforced most rigidly. The registration procedures for all groups within the drinks trade should be the same. Extensions should be available to individual pubs in line with clubs. This would be separate from the existing area exemption orders and would be based on the 12 extensions per annum already available to clubs.

(vi) The resonsibility for vacating the licensed premises should rest with the customer, with the licence holder being responsible for finishing the serving of drink within the licensing hours and taking all reasonable steps to clear his premises. However, fines for conviction of persons on the premises after hours should be increased to re-establish their deterrent value. On-the-spot fines should be introduced. The existing penalties should be increased from £5 to £25 for customers found drinking after hours.

(v)The forfeiture of a licence should be a discretionary sanction of the Courts and not a mandatory one. After the expiry of two years from a conviction the endorsement should be removed from the licence, provided there have been no subsequent convictions.

(vi)Restrictions on credit sales under present laws should be altered in order to allow publicans to cater for Organised Groups, Receptions and Resident Guests.

(vii)Children, accompanied and fully supervised by their parents, should be allowed on licensed premises until 6.00 p.m. Of course this does not alter the underage drinking provisions of the existing law.

3. Contract Catering

Definition

This is where a client effectively sub-contracts his catering by appointing an independent catering contractor to manage and be responsible for the provision of his on-site catering services.

Areas which are covered include Industrial and Commercial staff cafeterias, institutions such as Schools and Hospitals, and off-shore oil and gas fields.

Employment

Contract Catering is a highly labour intensive industry and it is estimated that some 70% of employees are under 35 years of age and live locally.

The over-riding factor inhibiting this sub-sector is that contract catering is not recognised as a separate industry, quite different from other forms of catering, resulting in the imposition of VAT as a tax on costs rather than on sales.

VAT levied on Costs and not on Sales

VAT levied on staff canteens may not be offset against a company’s sales, and in the case of subsidised canteens VAT is levied on the cost of the meal i.e. the sales revenue and the cost of the subsidy.

The VAT charge to a client for the operation of a subsidised cafeteria employing ten persons with a turnover of IR£10,000 per four week period would be as follows:-

Conclusion and Recommendation

Ireland is the only EEC country to levy VAT in this manner on its contract catering sector and it is an anomaly that should be removed. In the contract catering sector VAT should be applied to cash takings only and not to any subsidy element.

4. Fast Foods

The fast food sector is comprised principally of fish and chip shops, hamburger outlets, fried chicken outlets, chinese take-aways, pizzarias, and kebab shops.

A fast food outlet may be a take-away outlet, a premises where fast food is both served and consumed, or it may have a dual take-away/sit-down facility.

Figures on the number of outlets and employment are not available but it is clear that the variety and volume of outlets has grown significantly in recent years.

There are no personal qualifications required to open a fast food outlet. However a premises must be registered and approved by the appropriate Health Board under the Food Hygiene regulations before business commences, and is subject to continuing inspection.

There is an anomaly, however, in that the unknown number of fast food vans are not subject to the Food Hygiene Regulations, although they are required to obtain a Casual Trading Licence.

There is also a VAT anomaly in that meals consumed on the premises are subject to VAT and those purchased for consumption off the premises are not subject to VAT.

The Committee feels that there is no justification for this VAT distinction and that all meals, whether consumed on or off the premises should be subjected to VAT.

Recommendations

1.In view of its growing importance in the Catering sector and the lack of relevant statistical information, the CSO should identify ‘Fast Food’ as a separate category for statistical purposes.

2.The Food Hygiene Regulations should be amended to oblige fast food operators in mobile units to obtain a permit under guidelines to be established by the Health Boards.

3.VAT, at the low rate of 10%, should be levied on all commercial catering outlets, in order to permit a reduction from 23% on other meal sales, and to ensure uniformity in the taxation of all aspects of catering.

[ 7 ]

Summary of Recommendations

* Includes Tourism Allocation of £1m. for EEC Border Area Programmes and SFADCO Tourism allocation of £2m.

*major areas of unapproved and unregistered accommodation for which official figures are unavailable.