Outlook for NI tourism 20 th March 2015 NIHF Tourism Summit Helen McDermott

Outlook for NI tourism

20th March 2015

NIHF Tourism Summit

Helen McDermott

2

Overview

3

Global economic overview

Global tourism performance

Northern Ireland economic outlook

Structure of NI tourism industry

NI tourism outlook & key challenges

Overview

4

Global economic overview

5

Global GDP grew by 2.6% in 2014…

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Advanced Economies

Emerging Markets

World

World: GDP growth Emerging Markets vs Advanced Economies

Source: Oxford Economics

6

…with a weak end to the year…

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

2006 2007 2008 2009 2010 2011 2012 2013 2014

World: Monthly export indicator

Source : Oxford Economics/Haver Analytics

Indicator based on US, German and Chinese export orders surveys

Standardised index

7

…and China slowing markedly…

8

…contributing to drop in oil prices...

Update1985/6: Oil price halved and then remained low as supply was strong

2009: Oil price fell from $147 to $40 but then rose again as capacity was tight

9

…while oil supply remains high...

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2013 2014

Demand Supply

World: Oil supply and demand% year

Source : IEA/Oxford Economics

10

…there will be winners and losers…

11

…but in net terms this will boost world growth...

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2014 2015 2016 2017 2018 2019

Global GDP growth, real US$Annual % change


12

US$ appreciation will dampen US exports…

0.0

0.5

1.0

1.5

2.0

2.5

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US dollar exchange rate, vs Euro and British pound

US$ vs Euro

US$ vs GBP

US$ per currency


13

…but good news elsewhere

3.1%

0.4%

3.7% 3.8%

2.7%

3.7%3.5%

4.2%

5.7%

3.4%

4.6%

5.3%

4.4%

4.9%

3.7%

0%

1%

2%

3%

4%

5%

6%

7%

US UK Eurozone Germany France

2014 2015 2016

Exports growth across key markets


14

Emerging markets showing no signs of improvement

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Brazil China India Russia

GDP growth, real local currency

2014

2015

2016

2017

Annual % change


15

Risks to the outlook skewed towards the downside…

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

World GDP growth under 4 scenarios, real local currency

Baseline

Greek exit of Eurozone

Investment stalls in China

World GDP picks as oil prices fallfurther

Annual % change


Forecast

16

Greek exit is big threat to Eurozone recovery

17

Global tourism performance

18

Visitor numbers forecast to slow in 2015…

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Overnight visits growth

GDP, real US$ growth

Global overnight visits and GDP (US$, real) growthAnnual % change

Source: Tourism Economics

Forecast

19

…driven by weak growth from Russia and Asia EMs

4.9%

3.6% 3.8%

6.0%

9.2%

4.8%

3.1%

4.5%

0.6%

5.4%

6.1%

3.9%

4.9% 5.1%

3.4%

6.6%6.4%

4.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Global Americas Europe Asia Middle East Africa

2014

2015

2016

Outbound overnight visits growthAnnual % change


Back to menu

20

…and Ukraine also down, but at a lower volume

-0.3%-0.7%

-2.8%

5.3%

3.9%

-10.7%

-4.0%

-8.7%

1.8%2.7%

1.6%

4.9%

-2.1%

6.4%

3.2%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Russian Federation Poland Ukraine Hungary Czech Republic

2014

2015

2016

Outbound visits growth, Emerging EuropeAnnual % change


Back to menu

21

Russian weakness can be seen in sub-region trends…

5.0%

1.7%

3.8%

2.8%

-3.3%

0.6%

3.8%

2.7%

3.4%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Western Europe Emerging Europe Europe

2014

2015

2016

Outbound visits growth from Europe by sub-region, 2014-16


22

Northern Ireland economic outlook

23

Recovery finally picked up in 2014, but lags behind UK…

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GVA growth, NI vs UK

United Kingdom

Northern Ireland

Annual % change


Forecast

24

…however, employment growth expected to stagnate…

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Employment growth, NI vs UK

United Kingdom

Northern Ireland

Annual % change


Forecast

25

…with the return to pre-recession peak remaining evasive

760.0

780.0

800.0

820.0

840.0

860.0

880.0

29,000.0

30,000.0

31,000.0

32,000.0

33,000.0

34,000.0

35,000.0

36,000.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Employment (000s), NI vs UK

United Kingdom

Northern Ireland

UK employment (000s)


Forecast

NI pre-recession peak

UK pre-recession peak

NI employment (000s)

26

Mixed fortunes for tourism related sectors recently…

76.8%

76.6%

71.4%

29.5%

25.1%

22.7%

20.4%

19.0%

6.0%

-0.2%

-0.7%

-1.5%

-10.8%

-29.2%

-50.6%

-56.3%

-57.9%

-76.0%

-164.3%

-200% -150% -100% -50% 0% 50% 100%

Health & social workManufacturing

Admin & supportInformation & comms

Arts, entertainment, etcOther services

EducationReal estate

Professional servicesElectricity, gas, etc

Mining & quarryingWater supply

Accommodation & FBSFinancial & insurance

Transportation & storagePublic admin

Wholesale & retailAgriculture, forestry, etc

Construction

Net contribution to total jobs growth

Contribution to employment growth by sector, 2010-14


-7,000 jobs 2010-14

27

…but more promising outlook

53.3%

33.6%

32.8%

27.2%

24.8%

20.5%

19.4%

18.9%

11.7%

4.6%

-0.1%

-0.2%

-1.2%

-1.3%

-3.3%

-11.4%

-22.3%

-25.5%

-81.5%

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80%

Admin & supportConstruction

Professional servicesTransportation & storage

Information & commsAccommodation & FBS

Other servicesArts, entertainment, etc

Wholesale & retailReal estate

Electricity, gas, etcWater supply

Financial & insuranceMining & quarrying

Agriculture, forestry, etcHealth & social work

EducationManufacturing

Public admin

Net contribution to total jobs growth

Contribution to employment growth by sector, 2014-20


+11,000 jobs 2014-20

28

Unemployment remains high but growth to track UK

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Unemployment rate (claimant count), NI vs UK

United Kingdom

Northern Ireland

Unemployment rate (%)


Forecast

29

Structure of Northern Ireland tourism

30

Tourism is a key contributor to NI economy…

15.0%13.3%

11.2%10.4%

8.5%8.1%

6.6%5.4%

4.4%4.4%

3.7%3.2%3.2%

2.4%2.4%

2.2%1.3%

1.2%1.0%1.0%

0% 2% 4% 6% 8% 10% 12% 14% 16%

Wholesale & retailManufacturing

Public adminHealth & social work

EducationReal estate

Total TourismConstruction

Financial & insuranceProfessional services

Transportation & storageInformation & comms

Admin & supportAccommodation & FBS

Direct TourismOther services

Arts, entertainment, etcWater supply

Agriculture, forestry, etcElectricity, gas, etc

% share of total economy GVA

Sectoral contribution to total GVA, NI, 2013

Source: Oxford Economics, NITB

UK total tourism contribution = 11.4%World total tourism contribution = 9.5%

31

16.2%16.2%

9.8%9.0%

7.2%7.0%

6.5%5.8%

5.5%4.3%

3.9%3.9%

3.8%2.4%2.4%2.3%2.3%

0.9%0.7%

0.2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Wholesale & retailHealth & social work

ManufacturingEducation

Public adminConstruction

Total TourismAdmin & support

Accommodation & FBSProfessional services

Direct TourismAgriculture, forestry, etc

Transportation & storageOther services

Arts, entertainment, etcFinancial & insurance

Information & commsReal estate

Water supplyElectricity, gas, etc

% share of total economy GVA

Sectoral contribution to total jobs, NI, 2013

Source: Oxford Economics, NITB

…and supports 1 in every 15 jobs across the region

UK total tourism contribution = 11.7%World total tourism contribution = 8.9%

32

NI tourism dominated by domestic visitors…

48.6%

28.6%

9.8%

3.2%1.3%

1.1% 2.2% 2.9%

% share of visits to/in Northern Ireland, 2013

Northern Ireland domestic

Great Britain

Republic of Ireland

US

Germany

France

Canada

Spain

Italy

Netherlands

Rest of Mainland Europe

Other

33

…which has remained relatively stable in recent years

2,046

4,713

2,018

3,906

1,983

4,584

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Within NI RoI / GB

2011

2012

2013

Trips taken by NI residents in recent years

Source: NISRA

£192mn expenditure by NI residents during trips within NI = 26.6% of total tourism spending

34

However, visitors from outside of NI bring greater return

2.31

2.74

5.21

0

1

2

3

4

5

6

Average stay

NI domestic

RoI

GB & overseas

Average length of stay by origin market

Source: NITB

£97

£143

£280

0

50

100

150

200

250

300

Average spend per trip

NI domestic

RoI

GB & overseas

Average spend per trip by origin market

Source: NITB

35

With total tourism expenditure of £474mn in NI in 2013

Britain58%

Mainland Europe15%

Other areas14%

North America13%

Structure of tourism expenditure by GB & overseas visitors in NI

Source: Tourism Ireland

36

GB the clear leader in visitor arrivals growth since 2000

52%

16%

10%

6%

5%

5%

5%

5%

1%

0%

-2%

-3%

-10% 0% 10% 20% 30% 40% 50% 60%

Britain

Other Europe

Other areas

Spain

Germany

France

Australia

US

Italy

Netherlands

Canada

Nordics

Net contribution to total visitor arrivals growth from overseas

Contribution to overseas visitor arrivals growth by origin, 2000-13


+335 visitors 2000-13

37

NI tourism outlook and key challenges

38

Arrivals exceed peak with continued expected growth…

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

Northern Ireland visitor arrivals from GB and overseas (000s)


+369mn visitors from2014 level(+21.1%)

Forecast

Return to peak by 2015

39

…despite challenge of euro depreciation…

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Euro / £

Euro / GB pound exchange rate


40

…with moderate falls in market share…

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

Northern Ireland visitor arrivals share of Global outbound


Forecast

41

…travel from EZ markets is weaker…

Great Britain

US

CanadaFranceGermany Italy

Spain NetherlandsNordicsOther Europe Australia

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 1% 2% 3% 4% 5% 6% 7% 8%

Orig

in m

arke

t sha

re 2

014

Average annual growth in visitor arrivals, 2014-20

Origin market share vs average annual growth, 2014-20


42

…but larger markets are the key driver of growth

70.9%

6.5%

4.5%

3.6%

3.6%

2.2%

1.4%

1.0%

0.9%

0.9%

0.1%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Great Britain

US

Canada

France

Australia

Netherlands

Spain

Other Europe

Italy

Germany

Nordics

Net contribution to total visitor arrivals growth from overseas

Contribution to overseas visitor arrivals growth by origin, 2014-20


+369 visitors 2014-20

43

An additional £162mn in revenue expected by 2020

0

100

200

300

400

500

600

700

Revenues from GB and overseas (£m, current prices)


+£162mn from 2014 level(+35.2%)

Forecast

44

Expected arrivals growth to NI, below RoI average

NI RoIGreat Britain 139024 276051 50.4%North America 2030 61892 3.3%Mainland Europe 15593 302226 5.2%Other Areas - - -Source: NITB, Tourism Ireland

NI relative

seat capacity

2014/15 Seat Capacity, NI vs RoI

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

NI

RoI

Visitor arrivals growth, NI vs RoI (% per annum, 2014-20


Forecast

45

VAT reduction could be key to tourism industry

■ VAT in Northern Ireland is currently set at 20% - relatively high we compared to a European average of 10.8% and the Republic of Ireland at 9%. Since the Republic of Ireland reduced their VAT rate on the hotel industry to 9% in 2011, they have seen a surge in visitor numbers and revenue, albeit with a lag period of around 1 year.

■ The reduction in VAT is forecast to lead to record revenue and visitor numbers in 2015 in the Republic of Ireland – A clear indication of the power of tax cuts in the tourism industry

0

1000

2000

3000

4000

5000

6000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

Overseas visitors and revenue in Republic of Ireland

Overseas visitors

Overseas tourism revenue


Visitors (000s) Revenues (€mns)

VAT cut

46

Improving access – particularly air to gain market share from long haul markets where visitors typically stay for longer and spend more

Policy support to the tourism industry via tax cuts (VAT & APD)

Building on recent successes and securing new events that attract international visitors (e.g. World Police and Fire Games, Derry-Londonderry City of Culture, Giro D’Italia, Ryder Cup)

External challenges will prevail in the form of weaker euro

Key challenges to NI tourism

47

Forecast gives cause for optimism and concern

2013 2020Net change 2013-

20 TargetGrowth

requirementContribution to

target

Visitors (000s)Domestic NI 1,983 - - - - -RoI 400 - - - - -GB & Overseas 1,693 2,118 425 - - 100.2%Total 4,076 - - 4,500 424 -

Revenue (£mn)Domestic NI 192 - - - - -RoI 57 - - - - -GB & Overseas 474 622 149 - - 53.6%Total 723 - - 1,000 277 -Source: DETI, NITB, Tourism Economics

2020 Tourism Strategy Targets vs expected performance

48

For more information:

Helen McDermott,

Lead Economist,

Tourism Economics, an Oxford Economics company,

+44 28 92 635 404,

[email protected]

49

Annex

50

…as lower oil price boost incomes…

51

…and pick-up in consumer confidence

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

0

40

80

120

160

2001 2003 2005 2007 2009 2011 2013 2015

Source: Haver Analytics

Eurozone(RHS)

US(LHS)

Consumer confidence: US, UK and Eurozone1985=100 % Balance

UK(RHS)

52

Few sectors outperforming UK since recession…

1.4%1.3%

0.4%0.1%

-0.2%-0.4%

-0.7%-0.7%

-0.8%-0.8%

-1.0%-1.8%-1.8%

-2.7%-3.2%

-3.6%-4.1%

-4.8%-4.9%

-5.9%

-7% -6% -5% -4% -3% -2% -1% 0% 1% 2%

Public adminManufacturing

Electricity, gas, etcReal estate

Other servicesInformation & comms

Health & social workAdmin & support

EducationArts, entertainment, etc

Wholesale & retailTotal

Mining & quarryingFinancial & insurance

Water supplyAccommodation & FBS

Professional servicesTransportation & storage

ConstructionAgriculture, forestry, etc

NI average annual growth - UK average annual growth

NI sectoral employment growth relative to UK, 2010-14


53

…growth sectors have smaller market share

82.3% share of 2014 jobs

17.7% share of 2014 jobs

1.3%0.8%

0.5%0.4%

0.4%0.3%

-0.1%-0.1%

-0.2%-0.2%-0.2%

-0.2%-0.3%

-0.5%-0.5%

-0.5%-0.6%

-0.6%-0.7%

-0.9%

-2% -1% -1% 0% 1% 1% 2%

Agriculture, forestry, etcElectricity, gas, etc

Water supplyMining & quarrying

ManufacturingInformation & comms

Transportation & storageOther services

Health & social workEducation

Financial & insurancePublic admin

Admin & supportArts, entertainment, etc

ConstructionAccommodation & FBS

TotalWholesale & retail

Professional servicesReal estate

NI average annual growth - UK average annual growth

NI sectoral employment growth relative to UK, 2014-19


Documents

Outlook for NI tourism 20 th March 2015 NIHF Tourism Summit Helen McDermott