Fourth Annual Tourism Policy Workshop

Dromoland Castle

November 15th to 17th 2013

“Reflections on Irish Tourism Policy and Performance: Learning From The Past Can Inform Future Policy”

Professor Jim Deegan

Head, Department Of Economics and Director, National Centre For Tourism Policy Studies,

Kemmy Business School University Of Limerick

Prelude Insights From New Research

• Acemoglou and Robinson argue convincingly in a new theory “that the wealth of nations is not determined by climate, geography or culture but by institutions”.

• Mazzucatto argues that the common view of a parasitic public sector and an entrepreneurial private sector for innovation is very much wide of the mark

• “essentially the failure to recognise the role of government in driving innovation may well be the greatest threat to rising prosperity” (Martin Wolf, The Financial Times)

Outline of Presentation

• Part One-Understanding Tourism and Marketplace Change;

• Part Two-International and Irish Tourism: Performance/ Economic Impact/innovation and Common Themes From The Reviews of Irish Tourism and

• Part Three-Recommendations: Learning From The Past To Inform The Future

UNDERSTANDING TOURISM PART ONE

TOURISM

Definition:

“The activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes”

(World Tourism Organisation, 1993).

The nature of tourism expenditure means that there is no clear output along traditional lines of national accounting. No economic activity called tourism.

Necessary Conditions For Tourism Success: The Evidence

• 1. Regular and competitively priced access to and within the country.

• 2. Good macroeconomic management at the destination-Price Competitiveness and

• 3. Good Quality Products and Service-not just about Price.

• Ireland 1985 on these issues? • Increasingly the adoption of the latest ICT is

critical to destinations/enterprises and for collection of tourism data.

SUMMARY OVERVIEW OF THE FORCES DRIVING TOURISM SINCE THE 1960S

Section 1(B)

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

Forecast Made in 1995

25 55 70 110165

210287 327

458564

697

1,018

1,600

0

200

400

600

800

1000

1200

1400

1600

1800

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

*Actual Arrivals in 2010 Were 940 million

Consumers:- Sun-lust

- Inexperienced

- Mass consumption

- New-found prosperity

Mass tourism

Management:- Sameness of hotels

- Hotel and holiday branding

- Promotional air fares

- Mass marketing

- Credit cards

Production:- Cheap oil

- Extensive hotel construction

- Charter flights

- Packaged tours

- Airline oligopolies

- Multinational hotel chains

Technology:- Jet aricraft, automobile

- Computers, telephone, telex

- Limited reservations systems

- Accounting systems

Frame conditions:- Postwar peace and prosperity

- Paid holidays

- Government tourism promotion

- Regulation of air transportation

- Incentives to attract hotel chains in developing countries

Factors responsible for the spread of mass tourism From 1960s

Consumers: - Experienced travellers - Changes in values - Changes in lifestyles - Changing demographics - Flexible - Independent

New tourism

Management: - Mass customisation - Yield management - Market segmentation - Innovative pricing

Production: - Diagonal integration - Production flexibility - Integration of marketing and product development - Innovation - Customer-driven

Technology: - A system of information technologies - Rapid diffusion - Adoption is industry-wide - Technologies “talk” to each other

Frame conditions: - Airline deregulation - Environmental pressures - Consumer protection - Flexibility to take holidays any time of year - Actions by host countries - Disenchantment of host countries with the benefits and costs of mass tourism

Factors responsible for the spread of new tourism From 1980s to Today

Comparative Analysis of Mass Tourism and New Tourism Consumers

Mass tourists Inexperienced Homogeneous Predictable Sun-lust Get sunburnt Security in numbers Superiority Escape

New tourists Mature Hybrid Spontaneous Sun-plus Keep clothes on Want to be different Understanding Extension of life

THE EXPERIENCE ECONOMY OUTLINED BY PINE AND GILMORE IN 1999 HAS ARRIVED IN FULL FORCE

Role Of Technology Is key

• Advent of Google and all forms of social media.

• More information created every 2 days now than from the history of time until 2003.

• More information on mobile phones-organise your life and your travel-provision of broadband is now akin to electricity for an increasing cohort of tourists.

• Trip advisor-expedia-walkscore etc.

• Information can often be distributed at zero marginal cost( Think how this is so different to the time before the internet). Anderson’s Long Tail.

The World Has Changed and So Has Good Tourism Policy

• In the past demand management in a Keynesian framework dictated policy through an emphasis on tourism promotion.

• Progressive tourism policy is moving away from the obsession with promotion to the creation of “frameworks” that foster competitiveness of tourism clusters and the use of instruments similar to those advocated by Porter for Industrial Policy.

• Focus shifting from demand to supply side action.

Correcting Deficits In Factor Creating Mechanisms

• The factors most important to the competitive advantage of a country or destination are increasingly not inherited but created. The stock of existing factors is less important than the rate at which they are created, upgraded and specialised.

• Manifest failures in tourism arising from predominance of small and micro enterprises and a poor “ecosystem” of tourism innovation, poor knowledge/dissemination of important information and poor “networks”

• Result: Innovation weaknesses in the supply of leisure goods and services as well as a relatively low share of the information sector.

• Policy needs to enhance factor creating mechanisms such as education and research and promote a culture of innovation through the active development of meaningful tourism networks. This requires a particular skillset not usually available in Tourism Agencies.

INTERNATIONAL TOURISM PERFORMANCE

Section 2 (a)

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

Forecast Made in 1995

25 55 70 110165

210287 327

458564

697

1,018

1,600

0

200

400

600

800

1000

1200

1400

1600

1800

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

*Actual Arrivals in 2010 Were 940 million

International Tourist Arrivals 2012 (1,036 million)

Source: UNWTO

Source: UNWTO

Tourist Arrivals Market Share

1980

2012

2030

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

2030 Predictions

Number of International Tourists (mn)

Actual 2012 arrivals 1,036

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

Prediction for 2030 with slower economic growth

1,400 (↑ 35%)

Prediction for 2030 with higher costs of transport

1,660 (↑ 60%)

Prediction for 2030 with lower costs of transport

2,000 (↑ 93%)

adapted from UNWTO

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

IRISH PERFORMANCE Section 2(b)

Total Overseas Visitors to Ireland

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Tou

rist

nu

mb

ers

(0

00

's)

Total Overseas Visitors to Ireland

Tourist Numbers

Tourist Arrivals by Zone 1985-2012

0

500

1000

1500

2000

2500

3000

3500

4000

4500

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Nu

mb

ers

(o

oo

's)

Tourist Numbers 1985-2012

Britain

North America

Mainland Europe

Other Overseas

Annual Percentage (%) Change in Overseas Visitors

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

11.5 15.6 15.6 10.4 -1.5 4.0 5.5 9.0 15.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

10.7 6.9 10.5 7.4 4.0 -5.5 1.4 4.4 3.3 5.9

2006 2007 2008 2009 2010 2011 2012 Total Change

9.7 4.3 -3.9 -11.5 -9.6 5.0 0.7 234.2

% Market Share 2000-2011 (source: UNWTO)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Global Share

European Share

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Pe

rce

nta

ge

Northern Europe Market

Northern Europe Market

0

10

20

30

40

50

60

70

Pe

rce

nta

ge

Market Share of Visitors 1985-2012

Britain

North America

Mainland Europe

Other Overseas

source: Failte Ireland

Total Overseas Nominal/Real Revenue 1986-2011 (1986 = Base Year)

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

4500.0

Re

ven

ue

(m

illio

ns)

Year

Nominal Revenue

Real Revenue

ECONOMIC IMPACT-SOME BRIEF COMMENTS

Section 2(c)

Comments on Economic Impact

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

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

3. TSA pilot gave an employment estimate that was far less than that being quoted by DAST at the time-what was overlooked was the insights on what tourism accounted for in related industries.

Delaney and Mc Feally 2012 Innovative Use of Business Registers

• For 2010 they found:

• (a) Tourism accounted for 12% of all enterprises in Ireland and 11% of all employment;

• (b) Affected by the downturn since 2007 but more resilient than other sectors;

• (c) The regions of the north west, west and south west most dependent on tourism for economic activity;

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

• (e) Tourism employs more females, young people and immigrants than other sectors of the economy.

THE INNOVATION LANDSCAPE Section 2(d)

Benchmarking Innovation in Irish Tourism Deegan (Forthcoming December 2013)

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

• 47% of firms open declare no innovation over the period.

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

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

• The “ecosystem” to stimulate tourism innovation is weak.

0

0

2

15

23

38

43

44

70

83

83

2

1

7

22

11

20

27

15

50

58

54

0 10 20 30 40 50 60 70 80 90

No need due to prior innovations by yourenterprise

No need because of no demand forinnovations

Difficulty in finding co-operation partners forinnovation

Lack of qualified personnel

Lack of information on markets

Uncertain demand for innovative goods orservices

Market dominated by established enterprises

Lack of information on technology

Innovation costs too high

Lack of funds within your enterprise or group

Lack of finance from sources outside yourenterprise

Percentage: 'High Importance '

Innovating Non-Innovating

Highly Important Factors Constraining Innovation Activities activity For All Innovating and non-innovating Enterprises: 2008 – 2011

Type of Innovation Introduced By Tourism Enterprises 2008 to 2011

Category of Innovation

(n=395)

n %

Product 183 46

Process 142 36

Organisational 162 28

Marketing 112 41

Any Innovation 211 53

Detailed Innovation Activity Rates By Enterprise Sector,

2008 – 2011 Sector Product Process Organisational Marketing All

enterprises

Hotel/Guesthouse 60 48 47 55 65

B&B 31 24 8 25 33

Self-Catered 32 21 9 14 36

Restaurant/Licensed

Trade

59 47 34 44 69

Tourist Attraction 50 40 35 50 60

Transport Company* 83 67 67 100 100

Festival

Management

42 42 42 42 50

ITO/DMC/PCO 44 29 24 44 53

Total 46 36 28 41 53

Detailed Type of Innovation Activity By Company Size, 2008 –

2011

Type of

Activity

Micro

<9

(n=282)

Small

(10-49)

(n=74)

Medium

(50-250)

(n=39)

All

enterprises

(n=395)

Product 42 42 86 46

Process 30 38 73 36

Organisational 21 41 60 28

Marketing 35 43 81 41

Any

Innovation

48 53 92 53

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

Number of persons engaged

<9 10-49 50-250 All

enterprises

Organisational Innovations:

New Business practices 16 39 60 25

New Knowledge systems

integration 15 35 54 23

New methods of

organising external

relations

15 24 38 19

Any Organisational

Innovation 21 41 60 28

Type Of Cooperation Partner By Size Of Enterprise,

2008 – 2011 Number of Persons Engaged

<9 10-49 50-250 Total

Other enterprises within tourism

sector

34 42 58 39

Suppliers of equipment 21 26 21 22

Consultants 7 12 19 10

Clients or Customers 32 39 32 34

Competitors 24 31 30 26

Universities/Colleges 13 29 24 18

Government 12 22 22 15

Failte Ireland 38 40 50 40

Tourism Ireland 15 12 17 15

Any Co-Operation 30 40 63 35

TOURISM DOES NOT FEATURE IN ANY SERIOUS WAY

IN NATIONAL POLICYMAKING FOR INNOVATION IN IRELAND

Do You Need Proof?

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

2011

• The 14 priority areas are listed below and form the vital components on which Ireland’s future prosperity is being staked. Research/competence Centres are established and funded following this broad architecture.

• Priority Area A - Future Networks & Communications • Priority Area B - Data Analytics, Management, Security & Privacy • Priority Area C - Digital Platforms, Content & Applications • Priority Area D - Connected Health and Independent Living • Priority Area E - Medical Devices • Priority Area F – Diagnostics • Priority Area G - Therapeutics: Synthesis, Formulation, Processing and Drug Delivery • Priority Area H - Food for Health • Priority Area I - Sustainable Food Production and Processing • Priority Area J – Marine Renewable Energy • Priority Area K - Smart Grids & Smart Cities • Priority Area L - Manufacturing Competitiveness • Priority Area M - Processing Technologies and Novel Materials • Priority Area N-Innovation in Services and Business Processes

We Need to Formally Recognise The Significant Knowledge Base Of Tourism By Establishing A

National Innovation Centre For Tourism

RECURRING THEMES FROM REVIEWS OF IRISH TOURISM POLICY

Section 2(e)

Recurring Themes From Tourism Policy Reviews/Commentaries 1945-2013

• 1. Tourism is not taken seriously despite purported economic importance-why? (a) Colonial Legacy; (b) Female employment; ( c) Poor career structure and pay-tourism not seen as a serious industry-”image problem”; (d) Poor data.

• 14 Priority Areas For Research/University Interaction yet no explicit understanding of where tourism fits in-is tourism not in the research space?

• 2. Organisations supporting tourism not being “fit for purpose” or dismissive of industry concerns;

• 3. Private sector seen as not being innovative and too dependent on subventions-a grant mentality with little evidence of additionality or concern/understanding of “displacement” when seeking state subvention(s)-”a dependency culture”

Contd: • 4. Regular debate on “labour shortages versus retention”; • 5. Concern that the return from promotional expenditure is

poor and worse that there is and has been a consistent reluctance to undertake evaluations.

• 6. A criticism of the emphasis on GB was highlighted in NESC Report 1980 as was/is the failure to embrace new and emerging markets (Mainland Europe at that time) by the state agencies and the private sector;

• 7. The absence of innovation or need to stimulate same receives commentary in many reports but no guidance on how this is to be achieved. In fact-very poor understanding of innovation and how it can be measured/improved.

Contd:

• 8. Consistent criticism of the failure to develop a coherent transport and aviation policy (and an aviation policy) that factored in tourism as a major concern;

• 9. Numerous reports outlined the need for a “whole of Government “ approach for tourism but it has still failed to emerge and

• 10. Consistent concern for the role of “sustainability” but little concrete action other than the EU directives.

• 11. Tourism policy statements vague and little clear guidance on how stated objectives were to be achieved.

So We Need To Understand

• Nations fail because of poor institutional arrangements/rent seeking and the inability to challenge vested interests and or a resistance to change/innovation(Acemoglou and Robinson) and

• The state sector has a significant role to play in supporting and stimulating innovation (Mariana Mazzucato)

• Are these two things incompatible?

• No-We need institutions that reflect societal priorities and the time we are in rather than something of the distant past.

RECOMMENDATIONS Section 3

Recommendations • 1. Tourism’s role in Irish economic policy needs clear recognition through

adoption of the standard international measurement of the sector-the Tourism Satellite Account. Additionally, far greater emphasis needs to be placed on how we can use new forms of ICT to collect tourism data;

• 2. The tourism sector has changed dramatically and policy needs to be altered-far more emphasis on supply rather than demand side measures-from marketing to capacity building. A broad based innovation centre using the intellectual resources of Ireland’s univeristies/institutes in all disciplines ( not just tourism) is required to improve innovation for the sector;

• 3. Research needs to be embedded to the development of the sector and the education/innovation “ecosytem” and networking must be enhanced;

• 4. The factors that drove tourism success in the past must be re-inforced and

• 5. Implement long standing recommendations in relation to shifting market emphasis away from GB to emerging markets.