Drilling down with AIB’s David McCarthy
It was good to learn in AIB’s 2018 Pubs Outlook that customer spend in Irish pubs had risen 6% in the year to last October. But I felt it might be worthwhile to drill down a bit further into the report’s findings on the country’s 7,200 pubs. Fortunately the report’s author, AIB’s Head of Hospitality & Tourism at the bank’s Retail & Business Banking section David McCarthy, was able to oblige me.
As a result, we learned which regions can boast the highest growth in North American tourist spend, for example.
With over 80% of passenger traffic routed through Dublin Airport the majority of North American (US and Canada) visitors also come into Ireland via Dublin.
“As such, it’s no surprise that AIB Merchant Services Card Spending in Irish pubs tells us 43% of North American visitor spend in Irish pubs happens in Dublin,” David tells me, “When we look to the rest of the country and exclude Dublin, the counties that benefit greatest from North American visitor spend in pubs are Clare with 28% market share, Galway 21%, Kerry 16%, Limerick 9.5% and Cork 8.4%. Noticeably, all are on the Wild Atlantic Way route which shows that the efforts of Tourism Ireland and Fáilte Ireland in marketing this route are paying off.”
He points to an overall growth in North American spend in pubs of 10% for the 12 months to October.
“As per CSO data, US visitor numbers were up by 16.2% in the 12 months to October, now accounting for 21.2% of total tourist numbers into Ireland.”
A comparison of UK and North American market tourism growth figures indicates that North American visitors could soon pass out the UK in terms of spend – but what about the impact of Brexit? How much North American/UK spend has occurred in each county?
“The UK accounted for 37.5% of total visitor numbers in 2017 compared to North American visitor numbers accounting for 21%,” says David, “The UK share percentage has been in decline for a number of years as other markets continue to grow due to increased availability and affordability of flights to Ireland.
“Fáilte Ireland’s Tourism Facts 2016 paper tells us that in 2016 the average spend of a UK visitor to Ireland was €306 whereas the average spend of a North American visitor to Ireland was €905. UK visitors spent €1.1 billion in Ireland in 2016 while North American visitors spent €1.34 billion.
“The North American market is now more valuable to Irish tourism than the UK and the contribution of the North American market will have grown again in 2017 due to visitor numbers being up by 16.2% while UK visitor numbers declined 5%.
“North American spend, should the average spend remain at €905, is expected to have grown by about €200m in 2017 due to the increase in visitor numbers which will significantly more than off-set any drop in spend from UK markets.”
There has been an increase in leisure visitors with a corresponding decrease in those visiting families and those coming for business, so is a different type of UK visitor emerging?
“While the risk of Brexit continues to prevail – and initial shocks have been felt with a decline in UK visitors in 2017 – it’s interesting to look into the detail of the type of visitor that’s coming to Ireland,” says David.
Between 2015 and 2016 there was a 13% increase in spending of ‘holiday’ visitors from the UK. This was the highest growth area of the four categories: Business Visitors, Those Visiting Family or Friends, Holiday visitors and Those Visiting for Other Purposes.
In the six months to June 2017 despite a decline in UK visitor numbers of 7%, there was a 3.5% growth in ‘holiday’ visitor spend from the UK vs the same six-month period of 2016.
“This leads us to believe there’s a different type of visitor coming to Ireland from the UK and again can perhaps be put down to the marketing efforts that have gone on in the UK by Irish tourism bodies.
“When we look at AIB Merchant Services Card Spending in pubs data we see that the counties with the highest market share of UK spending in pubs (excluding Dublin) are Cork (15%), Clare (13%), Galway (13%) and Mayo (8%), once again highlighting that the growth areas for Irish tourism are those on the Wild Atlantic Way route.
“This growth is hugely positive against a backdrop of lower value Sterling during the same time-frame. The proposition outside of major cities however remains competitive and hence is continuing to attract visitors from the UK.
“I think both North American and UK visitors are spreading out into the regions of Ireland,” he continues, “According to our data, 50% of the total spend by UK visitors to Ireland in Irish pubs is spent in Dublin. While there was growth of 3.4% in Dublin from UK markets in 2017, Dublin’s total market share reduced by 1% as UK visitors spent more money in regional Ireland than before.
“Dublin has about 48% market share of the North American spend in Irish pubs but as the total spend from this market is up by 10.2% in 2017 all areas are benefiting.
“Many rural or country areas are popular with tourists and the benefit of the increased spending is felt greater by these areas.“
The outlook for the hospitality sector remains positive, believes David.
“Issues such as regionality and seasonality are being naturally addressed by the continual increase in overseas visitor numbers,” he explains, “With flight costs projected to continue to decrease over the coming years due to the level of demand, coupled with new aircraft technologies, access to and from places all around the world will be much simpler and more easily afforded. New markets are opening up to Ireland such as China and other parts of Asia. These are huge markets with real spending powers that can have a massive effect on the Irish economy. Many efforts have already been made to sow the ground roots of this potential.
“AIB’s historical card spending data shows us monetary growth from each market – pubs, restaurants and hotels – as well as all other hospitality industries. At a national macro level we see growth of card spending in Irish pubs of 6.5%, growth in eating places (restaurants and cafés etc) of 6.4% and growth in accommodation of 6.5%.”
Dublin’s legacy debt
David doesn’t know just how much of Dublin’s pub stock is still managed by liquidators etc but what he can say is that the percentage of Dublin stock changing hands has reduced from 6.3% in 2014 to 4.25% in 2017. During the same period the percentage of distressed asset sales has decreased from 65% down to about 30%.
“There are still a number of pubs around the country with unmanageable debt levels and it will take a few more years before that is normalised,” he believes, “Debt levels in the pub sector have reduced from €2.25 billion in 2011 to €890 million in 2017 which indicates that the problem is considerably closer to normalisation than even two or three years ago.”
Amen to that.