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It's time for tourism industry to consider paying its own way

By John Simpson

Published 16/06/2015

Jonathan Bell, minister with responsiblity for the tourism industry
Jonathan Bell, minister with responsiblity for the tourism industry

Jonathan Bell, now minister with responsibility for tourism, is asking the tourism and leisure industry providers for advice on what, if anything, government should be doing to make sure that Northern Ireland has enough good accommodation available to attract more tourists.

Policies on tourism are not an act of charity. Tourists are welcome because they bring spending power and pay for the use of tourist assets. Similarly, accommodation providers are a critical feature to attract visitors, always provided that the accommodation providers should be expected to operate to earn returns on their investment.

The consultative document issued by the minister is only a virtuous statement of ambition. In the minister's defence, the suggested accommodation policy is not a wide-ranging tourism development review.

The main parameters for the accommodation policy is the ambition to secure 4.5m overnight visitors, spending collectively over £1bn per annum by 2020. These targets, themselves both modest and imprecisely targeted, are inherited from earlier government policy. In another place and using more structured analysis, there needs to be a reconsideration of the stronger formulation of the ambition for a tourism and leisure sector.

Underpinning the consultation is the assumption that government intervention is only justified if the market forces influencing further development would not themselves be strong enough to generate growth. The key test is whether there is 'market failure' to provide the critical parts of a modern sector.

The consultative paper is lightweight in offering statistical evidence on the adequacy (within reasonable growth assumptions) of the possible market response. How much accommodation has closed or passed into administration during the recent recession? There have been casualties alongside continuing successes. Is there evidence that the casualties were self-inflicted through differential marketing styles or pricing?

In contrast, there is evidence that hotel occupancy rates in the Belfast area have been sustained at averages which are buoyant and compare favourably with other city areas.

Without giving a detailed statistical underpinning, the minister poses the suggestion that, whilst there is an interest in further better quality hotel accommodation in the Belfast area, he is considering two particular ideas. First, the evolution of Belfast as a significant centre for bigger conferences, using the redeveloped Waterfront Hall, for links to support a new large 400-bedroomed hotel. Second, in support of hotel development in Belfast, there is a case to make available investment capital but only in the form of equity or loans at commercial rates and up to a maximum of 30% of building cost. The existing policy of no capital grant aid in Belfast is to be continued.

These questions prejudge the general question of whether Belfast is now under-provided with four and five star quality hotel accommodation. The consultation offers no evidence on this conclusion. The specific exception seems to be the readiness to support a 400-bedroom conference hotel.

Outside a 10-mile radius from Belfast, the minister offers a regime including grant aid, for three, four and five star hotel accommodation, constrained by the rules on regional state aid. Grant aid may vary from 30% for small hotels to 10% for large units.

The consultative paper is cautious on bed and breakfast and guest house accommodation. Expansions and new build 'will not be prioritised' but upgrading to market reposition in these sectors will be eligible for support if the project reaches at least a three star rating.

The consultative proposals for incentives to increased good holiday accommodation come with two constraints. First, the regional state aid rules are tight. Second, the budgetary call on the funds of Invest NI will be modest.

Perhaps this is another way of saying that the tourist industry in Northern Ireland should get used to the idea of paying its way.

Belfast Telegraph

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