How important is connectivity to the Northern Ireland economy?
Very important. The growth in air access to the island had been skewed disproportionately, in recent years, to the Republic of Ireland leaving us feeling a bit more regional and peripheral. There are gains from the additional connectivity of the island but it is holding back economic development in this part of the world in that we haven’t had our fair share of the gain in connectivity.
We are an island off an island. Air and sea access are therefore vital for both inbound tourism and business. As Invest NI has had increasing success in bringing international companies in, we need to be able to connect directly to a greater number of destinations. I think we have a lot to do to catch up but we are positioned well for further development in our connectivity.
As a large foreign direct investor, it is hugely important for us to be connected to our primary clients. It is one of the key things we talk about when we have people visiting from the US. The connectivity from here to London is hugely important to our ongoing success.
Tourism is increasingly important to the economy of Northern Ireland. It is one of the key areas of the economy that is growing and has the potential to grow. Last year it was worth £723 million and 65 per cent of that is from off the island. From a tourism perspective, it is a key enabler. Good access, convenient access is absolutely critical for the growth of tourism and to achieve the target of doubling the contribution of tourism to the economy to £1 billion by 2020.
Economic activity causes connectivity and connectivity might also cause economic activity – it is a chicken and egg situation. Harmonisation of both is important for commercial activities such as banking and also for tourism.
It is a crucial part of our economic infrastructure, driving tourism, trade, exports and FDI. If you improve your air access, you increase your jobs potential and attractiveness to inward investment.
Currently there are 2 billion middle class people in the world of 7 billion. By 2050 it is estimated by the UN that the world’s population will be 10 billion, with 5 billion middle class and most of that increase will be in Asia. Connectivity is fundamental in terms of bring us to the economic standard of the rest of the world. We will fall behind if we do not have good connectivity.
There are two main areas to be addressed. Direct air access and the image of Northern Ireland. We need to make sure Northern Ireland is associated with positive images such as the Giro or next year’s Tall Ships, to outweigh the negative images. Thankfully this year, to date, the images have been overwhelmingly positive and Rory lifting the Claret Jug did us no harm.
Heathrow is a very important hub airport but we need to have links to other hubs such as Schiphol or Frankfurt, which would connect us to other parts of the world.
Can I just echo that point around the importance of capacity into hubs in the future? If you look at the risks for the future of Northern Ireland, connectivity into hubs such as Heathrow is crucial. As we see the price of slots into Heathrow increase and the continued pressure on Heathrow generally, connectivity into alternative hubs or more capacity at Heathrow would be a big benefit for the future.
From a tourism perspective, Great Britain would be our most important market as it drives the volume of visitors from off the island. We have good access to Britain but we are a short break destination, which is a highly competitive market. In order to drive the numbers higher, we would need direct access to Europe and we need to pair that access with investment in the visitor’s experience with such things as major events.
One big issue is the air passenger duty, particularly for those flights out of Britain as duty is payable both ways.
Speaking from a first principles point of view, you want to be demand-led because stimulating markets is only sustainable for short durations. So, in a sober assessment, you will be surprised that Belfast is one of the best connected cities in Europe. If you take that slice by slice, connectivity to the UK, not only to London, is per capita probably the best in the UK. It is also demand-led through the development of outbound sun destinations – it is quite stunning for a city of Belfast’s size.
What is lacking clearly is the demand to and from continental Europe, and we have analysed the figures and it is the ‘chicken and egg’ problem. You should probably start with inbound tourism as a stimulator but to be followed by trade relationships – that cannot be neglected as Belfast and the surrounding region is connected economically to the UK.
How do we realise the potential for tourism for Northern Ireland?
Leisure-bound travel is very price-sensitive. From a tourism perspective, we find ourselves going on cheap sunshine destinations. Others coming to Northern Ireland are looking for value. There are a number of structural reasons why we can’t offer the same value as some of our competitors.
The first of these is VAT, where we are only one of three regions in the EU that levy the full rate of VAT on accommodation and visitor attractions. In the Republic of Ireland, the rate is 9 per cent compared to our 20 per cent.
Secondly, for the last three years, sterling has appreciated against the euro and the US dollar which for year-on-year price-sensitive coach tours makes us more expensive. Thirdly, the air passenger duty issue is a barrier. I agree with Christoph. We are well connected but that is with Great Britain. If you look at the flights between Ireland and continental Europe, there were 110,000 seats per week and only 6,000 of those came to Northern Ireland. We get 50,000 Australians coming here every year and that is more than the number of French or German people coming here. Very few of the 80 million Germans find their way here.
And there is no direct flight from any airport in Northern Ireland to Germany. Period.
The Secretary-General of the World Tourism Organization was here a couple of years ago and he made an interesting observation about the map of the world. He pointed out that New Zealand is the main tourism market of interest to the Chinese outside China and to travel from Beijing to Auckland is longer than Beijing to Belfast. So we have an antiquated imperial view of the world based on the geography we learnt at school.
What worries me most is that I’m not sure we are selling this place as well as we might. We need to do more work on the experience visitors want and we need to package our offering in a way that is fundamentally interesting to the traveller. Things like ‘Game of Thrones’ offer us the opportunity to do that.
For me, a Damascene moment was when I went to Macau last year and going from Hong Kong to Macau by turbojet, you could see the physical construction of the 30km bridge section coming out of the sea which will be part of the 50km Hong Kong to Zhuhai to Macau link costing more than $11 billion. Macau had a population of 300,000 people some 30 years ago. Today, it is nearly twice that number. They are doing whatever they need to do to create connectivity and wealth – it exemplified to me that anything is possible if you put your mind to it.
We can’t go and tell everyone in the world to come here, so we have to be very clear who we are targeting and what experiences they are looking for and how do we package them in the most attractive way. We have very few visitors from the BRIC countries but the average Chinese person spends £2,000 when they are here.
Golf is a key opportunity for Northern Ireland, with the investment in golf events over the coming few years and with the success of our local golfers we are in a unique position to benefit from that – particularly American golfers who want to come here and play links golf.
Business does have a role to play in tourism. We spend a lot of time trying to get visitors to come to see us and they are always wowed by what we have on offer. They invariably say that they will come back for leisure at some stage in the future. It is a question of: “How can we capitalise on that?”
I remember at one Tourism Ireland meeting, Christoph emphasised the need for visitors to have a compelling reason to come here. Titanic Belfast is a game changer. In addition to the Giant’s Causeway, you now have a compelling reason to come to this region. We now have a world class visitor attraction and coupled with our ability to host major events such as the Giro and next year’s Tall Ships, we are now beginning to give people compelling reasons to come here in a way we have never done before.
It can be a catalyst and it doesn’t have to be a museum that stays there forever. We see that with large sports events. Barcelona is one of the best examples, as it was largely unknown as a destination in Europe until the Olympic Games and now its visitors exceed Madrid.
Another example that illustrates Brian’s point about image is the Basque region in the north of Spain. It was abandoned for decades as a tourist destination because of its bad reputation. The Guggenheim Museum in Bilbao is not the sole reason for its revival but it is the reason plus other attractions such as the region’s food. It is similar for Northern Ireland – all the good work from the golf and the Giro will disappear if it is interrupted on an annual basis.
As regards overseas visitors we should acknowledge the reciprocal visa arrangements for visitors from India and China, which is a positive step forward.
Air passenger duty has a very important influence on customer behaviour. Who would have thought Emirates and Etihad would be flying from Dublin with such numbers? They have doubled their capacity and yet travel to Asia-Pacific accounts for 1 per cent of air travel from Ireland. They are now flying two 777s a day and that is because people from the UK now travel via Dublin – this now accounts for half the demand.
By flying to Dublin via a low cost operator, a family of five from Britain can save £600 because the APD for long haul in the UK is £120. That proves the customer is smart and takes all costs into account.
It is argued by the Executive that if APD is removed, it will take too much from the block grant. But I think it is more an argument of fairness because they have made exemptions for the isles and islands. It is unfair that a part of the UK is disadvantaged compared to its neighbour.
There is a lack of clarity around the facts underlying the debate on APD. I have seen figures regarding costs ranging from £40 million to £100 million and I think we need a proper analysis of the costs and benefits.
Part of that analysis should look at what was done in the Republic of Ireland. There was a dialogue between the airlines and government and the quid pro quo was APD was reduced to zero but the airlines increased capacity and the number of seats coming into the Republic. We are capable of doing something similar and there needs to be a mature dialogue with real figures, and it is not a zero sum game. There will be a tax loss but there will be an economic gain – and we need to articulate that.
To establish a tour operator programme takes two and a half years’ lead time. So it requires investing in the future. In the UK, there is a 300-day pre-booking period. You have to invest in the tour operators with start-up funding for the first seasons. Visitors from the continent, unlike Americans who come only once, tend to come four times. It is not to subsidise the carriers but to give tour operators start-up funding.
My understanding is that the old Air Route Development Fund is now defunct. It did make a real difference and there are things that can still be done regarding marketing and promotional support and we should be looking at those.
How do we meet the specific needs of business travellers to Northern Ireland?
It is all about speed through the airport and if you have an airport like Belfast City that is very efficient, that makes for a much more pleasant experience. The new route into London City Airport has been particularly well received because of the convenience of financial hub to financial hub travel.
Frequent direct connectivity is obviously the preference for business travellers but we acknowledge that is not always possible – which comes back to the importance of good connectivity into hubs.
From a business perspective, it is worth noting the Waterfront Hall in Belfast for the first time will be able to host major conferences and exhibitions when it opens in a couple of years’ time.
Business travellers are very important, primarily because they spend more money, whether coming for a business meeting or to attend a conference. The business traveller of today will also become the leisure visitor of the future. From a business traveller’s perspective, it is the totality of their experience from how they get here and their experience when they arrive. From a tourism perspective, it is important that we treat business travellers well.
What one practical measure would aid air access for Northern Ireland?
I can’t help but think that the immediate continental opportunity is one we should do a lot of work on. Certainly, Titanic Belfast is keen to pursue that market. We need to put our heads together to figure out how we make the proposition so persuasive. I fully recognise the challenges, such as the price points Howard mentioned, but we need to attack that market in a much more meaningful way.
Greater capacity and access to additional hub airports. From a global connectivity perspective, that would deal with concerns on future access into Heathrow.
I would focus on continental Europe as access to the UK is already good in comparison and that would produce over-capacity with all the impediments attached with that. Secondly, North America access. The market is certainly there. It is very discouraging that United will interrupt flights to North America.
The Northern Ireland Centre for Economic Policy is currently doing an air connectivity study looking at the price sensitivity on route planning and it will be interesting to see what comes out of that from a policy perspective. The Chancellor announced earlier this year a regional connectivity fund and it will be interesting to see what the impact of that will be for Northern Ireland.
I think the key issue for Northern Ireland is that we are in competition with Dublin from an air access perspective and that is unique to us, unlike any other region of the UK. Within the Regional Development Strategy, there is the need for a joined up aviation strategy that goes beyond just access into but also around Northern Ireland. It is absolutely critical that as a region we are competing as effectively as possible with Dublin.
The continued ease of use of the airport and that includes getting here – be that by car, taxi, bus or maybe even train at some stage. The check-in and security facilities and the experience in the departure lounge – if we can maintain what we have here in terms of a very easy-to-use asset – it will pay dividends for us into the future.
In the short term, I think we can, and will, create a niche European network out of this airport. We have started with sun routes because that is the safe way to start and then to build on that. In the slightly longer term, we need to address the air passenger duty issue.
That will take time and taking Kevin’s point, it needs a proper piece of research to work out the figures but I believe that the kind of European network that we aspire to can be achieved within the next few years.
It is interesting that the debate on our local economy is very focused on devolved corporation tax because, for any inward investor, it is open and clear from a taxation perspective. They don’t want reliefs and allowances or bits around the margins – they want something clear and straightforward. Removal of air passenger duty would do the same for airlines who are looking at potential routes – that would certainly help boost our air connectivity.
Brian’s career, spanning 38 years, has included senior management positions within Bombardier in engineering, business development and operations. He was appointed Director of Operations at Belfast City Airport in 1997 and promoted to Chief Executive in 2004. Brian is currently Chairman of Mencap Northern Ireland, Chairman of Tourism Ireland, a trustee of the Titanic Foundation, and a member of the board for Business in the Community. He was awarded an OBE in 2011.
Howard is Managing Director of Hastings Hotels whose six hotels in Northern Ireland include the Europa, the Slieve Donard and the Culloden. The company also owns 50 per cent of the Merrion Hotel in Dublin. Howard has chaired the Northern Ireland Tourist Board for the past six years and also sits on the board of Tourism Ireland. Howard studied law at university and is also a qualified chartered accountant.
John is a Director at Citi and the Head of Citi’s Service Centre in Belfast. He joined Citi in July 2007, having previously been the Chief Information Officer of a local SME. He has also worked as a project manager for Liberty IT and also for JP Morgan Chase, latterly at its near shore technology centre in Glasgow. He graduated from Queen’s University Belfast in 1992 with an MSc in computer science.
David has been Chief Executive of Titanic Quarter since June 2012. He was previously Executive Director at Quintain plc responsible for specialist fund management. Prior to that, he was CEO of the Strategic Investment Board. David also chairs Visit Belfast and the Arena Network (the environmental arm of Business in the Community). Married to Helen with eight children, he enjoys country life in County Down and keeps fit by running and cycling.
Kevin is Deputy CEO and Managing Director for Business Banking at Danske Bank, with responsibility for the leadership and strategic development of all aspects of business and corporate banking, markets, asset finance, invoice finance and cash management. He is also currently the President of Northern Ireland Chamber of Commerce and Industry and a past Chairman of the Chartered Accountants Ulster Society.
Christoph joined Aer Lingus as its Chief Executive Officer in September 2009. He has extensive experience within the aviation and communications industries, having previously held the positions of Executive Aviation Director at TUI Travel plc, Chief Financial Officer of DHL Worldwide and a membership of Deutsche Post AG’s executive committee. He is also a board member for Tourism Ireland and Chairman of An Post.
Kathryn was appointed Chief Operating Officer of the Northern Ireland Tourist Board in December 2007 following three years as its Director of Finance and Business Planning. She oversees the corporate development and organisational development directorates. Prior to joining NITB, she worked in the senior finance team within NHS Greater Glasgow, primarily involved in business and financial planning.