Eoghan O'Mara Walsh: Tourism and hospitality sector not immune from global risks

At home, a new government will shortly take shape which will look an awful lot like the last one. Its first task surely? Steer good ship Ireland through the choppy economic waters that lie ahead.

“Campaign in poetry and govern in prose” is a much-quoted phrase and it seems very apt for Ireland at the turn of the year.

The incoming government will have to drop excitable party manifesto promises and instead ensure that this small open economy is not overly damaged by vulnerabilities within its main trade partners.

The British economy is set for the doldrums while both France and Germany, our biggest European partners, deal with political and financial challenges. Meanwhile, observers will be nervously watching the new US president and what impact his threats of tariffs and trade tensions will have on an exposed Irish economy.

Ireland’s tourism and hospitality sector is not immune from these risks. North American visitor spend accounted for over a third of the Irish tourism economy in 2024 — brilliant if it can be maintained with US visitors, typically high-spenders who tour regional Ireland.

However, should the US economy take a wobble, or the dollar weaken, then Irish tourism would be seriously exposed with no other market looking strong enough to fill the void.

Tourism chiefs are working hard to secure a more balanced portfolio of source markets as we enter 2025.

Irish tourism has a long proud record of being resilient and once again the sector has underpinned its role as Ireland’s largest indigenous industry and biggest regional employer.

One in nine people, according to the CSO, now work in tourism and hospitality enterprises nationwide — a remarkable statistic — and it is estimated that €6.2bn annually is spent by international visitors to the country.

Despite cost and competitiveness challenges, tourism chiefs are ambitious for the year ahead and the outgoing Government’s recent national tourism policy targets growth of 6%.

Industry leaders share this ambition but are worried that capacity constraints will unnecessarily curtail growth.

The primary constraint is at Dublin Airport which has a strict passenger cap already making for a weak Q1. Although there is a High Court ruling to pause the effects of the passenger cap for next summer, the planning limit of 32 million passengers annually is still as contentious as ever. 

Both Fianna Fáil and Fine Gael vowed to have the passenger cap lifted in their manifestos but neither party stated how this would be accomplished.

There is a huge onus now on the incoming government to work out a legislative solution to give Dublin Airport headroom to grow. Cork and Shannon airports must expand too, and state aid rules should be urgently aligned with EU permissible levels, but further growth at regional airports will not compensate for lost business to Ireland as a result of Dublin’s restrictions. 

The new government must address the passenger cap urgently — if not, it will undermine all the lofty economic promises bandied about pre-election.

Another constraint on tourism growth within the gift of the new government is its over-dependence on hotels and guesthouses for humanitarian reasons.

The latest data compiled by Fáilte Ireland shows 10% of all tourism accommodation is being used to house refugees and asylum seekers and thus not available to visitors. This has a crippling knock-on effect in tourism towns on downstream businesses including restaurants, pubs, and attractions.

Despite best efforts, tourism remains a seasonal sector and many businesses will be facing a long, cold winter before the first tourists re-emerge.

In that context, businesses are anxious that the cost challenges faced by tourism and hospitality enterprises are mitigated. Being watched most closely is whether Fine Gael’s red-line issue of a reduced 11% Vat rate for the hospitality sector wins favour in coalition negotiations.

What is clear is that nearly all issues relating to a key indigenous industry such as tourism — from investment to access, from competitiveness to decarbonisation — have economic arguments at their core.

There has been a failure to recognise the sector’s strategic importance.

Tourism needs a ‘whole of government’ approach and policy must be formulated in the next Dáil primarily through an economic lens. With this in mind, it would seem to make eminent sense for tourism to move from its current departmental configuration to an economic portfolio. A Department of Enterprise, Tourism, Trade, and Employment would seem a natural home.

• Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation.