The head of Fáilte Ireland has said those working in the tourism sector need to ensure they're providing value for money, in order for the industry to continue its recovery.
Paul Kelly was speaking at a virtual tourism event watched by over 1,700 tourism operators, providers and employers from across the industry.
"While the dollar to euro exchange rate has been a big help in value perceptions among US visitors, we are seeing early warning signs on our value for money ratings among domestic, UK and European visitors," Mr Kelly said.
"This is something that we, as an industry, need to be really mindful of this year," he added.
In terms of the domestic market, figures from Fáilte Ireland show that 82% of those living in Ireland plan to take a holiday here this year, in line with 2019 levels.
However, Mr Kelly said offering good value for money is "critical" to convert these intentions into bookings.
According to Fáilte Ireland, the overseas market recovered well last year, and inbound arrivals got closer to pre-Covid-19 levels towards the end of the year.
"The EU market was the fastest to return and towards the end of the year we started to see strong US business, but the UK remains challenged," Mr Kelly said.
The figures revealed a 21% drop in tourist passenger arrivals from Great Britain in 2022 compared to 2019.
Responding to the data, the Irish Hotels Federation (IHF) expressed serious concerns that a potential increase in tourism VAT would further undermine the recovery of the sector.
The 9% VAT rate for the industry is due to expire at the end of the month, when it will revert to 13.5%.
"Our main focus should be on securing the recovery over the next 12 months - doing everything we can to safeguard livelihoods and the long-term prospects for our industry," said Denyse Campbell, IHF President.
"We should do nothing to put the recovery in tourism at risk and are urging the Government to retain the 9% VAT rate," she added.
On pricing, Ms Campbell disagreed with the CEO of Fáilte Ireland and said there is "great value to be had in Ireland".
Speaking on Drivetime, Ms Campbell said she believed Ireland had a great reputation, and that now was the time to "protect that and protect our competitiveness," she said.
She said that hotels will do all they can to provide good value, but that there are no indications that businesses could absorb this tax, particularly when the cost of food and supplies have increased.
Meanwhile, Fianna Fail Senator Timmy Dooley told RTÉ's Drivetime he believed it was time to "move back" towards the old VAT rate, as there's demand for hotels, despite a different profile for hotels outside the capital city.
Regarding the VAT rate, he said it required balance in terms of whether to help hoteliers or the vulnerable.
Recovery plan
Speaking about Fáilte Ireland's latest recovery plan for the sector which was launched today, CEO Paul Kelly said he believes it will lead to "transformational change".
"Our plans for 2023 are built around 7 key pillars," he explained.
"These are driving sustainable recovery at the level of individual businesses; supporting employers and employees in making tourism an attractive long-term career; accelerating growth in domestic tourism; enhancing our outdoor tourism product and the quality of visitor experiences in destinations; building the digitalisation of the industry and driving climate action," he said.
Challenges for the sector
Following a difficult 2022, Mr Kelly acknowledged that the sector will face further challenges this year.
"You don't need me to tell you about the unprecedented rise in operating costs that every tourism business is experiencing: energy, labour, insurance, food & drink, linen..," Mr Kelly said in his address to industry representatives.
"These rising costs are putting huge pressure on all operators and many businesses are struggling to maintain margins," he added.
He said Fáilte Ireland is engaging with all stakeholders to ensure that there is a full understanding of these cost pressures and to push for any actions which can be taken to help businesses manage this.
Mr Kelly also acknowledged the capacity constraints impacting the accommodation market due to the humanitarian response to the Ukrainian conflict and issues around housing supply.
"Nationally, between 20-30% of the visitor accommodation stock could be unavailable for use in 2023 by tourists," he said.
"There are counties and towns where the majority of tourist accommodation is currently unavailable to tourists and if this remains the case across the summer, this will have a devastating impact on other businesses that rely on visitors staying in the area," he added.
Mr Kelly said they are monitoring the situation "very closely" and are providing insight to Government on the impact.
He also said recruitment and retention of staff continues to be an ongoing issue for the industry and that the labour market remains very tight.
Following issues last year around the availability of hire cars for tourists, Mr Kelly said the situation has improved this year, but he said some issues may arise.
"Hire car stock projections for the high season are still significantly lower than 2019," he said.
"With such a strong air access forecast, this is likely to mean there will be pressure on hire car availability again this summer," he added.
Mr Kelly said their latest recovery plan addresses all these challenges.
"We want to ensure that Irish tourism doesn't just bounce back from Covid-19 but bounces forward to an even bigger and brighter future," he added.
Minister for Tourism Catherine Martin welcomed Fáilte Ireland's plans and priorities for the year ahead.
"I look forward to seeing the results across the country of their ambitious plans.
"While I know hotel capacity, energy costs and labour shortages are real challenges for the industry this year, I am continuing to direct significant resources to support the sustainable recovery of the sector," she said.
"In Budget 2023 I secured additional funding for the industry in the areas of marketing, skills and staffing, product development and sustainability," she added.
