Wednesday, 24 November 2010
Dáil Éireann Debate
27. Deputy Dan Neville asked the Minister for Tourism; Culture and Sport if she has held discussions with the Minister for Environment, Heritage and Local Government with regard to the burden of rates on the tourism industry; and if she will make a statement on the matter. [44129/10]
Deputy Mary Hanafin: I am aware of the difficulties that many hotels, restaurants and other tourism businesses face in meeting the cost of local authority charges and have written to the Minister for the Environment, Heritage and Local Government regarding these costs. The issue has also been discussed and considered at the Cabinet Committee on Economic Renewal, of which I and the Minister for Environment, Heritage and Local Government are members.
I understand from the Minister that local authorities have taken a number of steps to reduce their own cost bases in order to minimise the charges they must pass on to customers, including businesses. These include reductions in staff numbers and payroll costs. Further reductions are to be made in the context of the report of the local government efficiency review group and the Government’s four year plan.
I also understand that the Commissioner of Valuation is actively reviewing options which might hold potential for delivery of the national revaluation programme in a shorter timeframe than originally intended. Where they have taken place, revaluations have resulted in significant reductions in rates for hotels although other categories of premises have experienced increases. In any event, it is important that valuations are as up to date as possible.
It is vital that local authorities do their best to support jobs in their local area and to avoid putting unnecessary financial pressure on existing businesses through excessive charges. At the same time, I appreciate their funding is under considerable pressure in the current economic environment. I believe it is in everybody’s interest that local authorities should have a broader and more sustainable income base from which to fund vital local services. The introduction of water charges, as signalled in last year’s budget, will help to ensure that this is the case, as will other local charges.
A broadening of the revenue base at local level will help to relieve some of the burden on tourism and other businesses. At the same time, given that the Deputy’s party has a large proportion of members on the city and county councils I urge him to do everything in his power to ensure that his party councillors consider the needs of employers when setting their annual budgets, with a view to supporting jobs for local people.
Deputy Jimmy Deenihan: One restaurant a day is closing in this country and 82% of hotels will shed jobs before Christmas because of their financial position. Given that the Valuation Act 2001 envisaged that every rateable property would have its valuation revised every five to ten years and that to date the Commissioner of Valuation has only carried out revisions in three out of 88 rating areas around the country, the Minister must agree that is not acceptable. It has been found that where revision has been completed local authority rates are reduced by an average of 30% for hotels. Did the Minister have any discussions with the Minister for the Environment, Heritage and Local Government? I do not know if the two strands of Government are talking to each other. The issue is critical at this stage.
Deputy Mary Hanafin: I accept it is an important issue and that is why we have put into the plan that we will expedite the revaluation of the whole country. It is quite a heavy burden, particularly on hotels. Where revaluation has taken place hotels’ rates have been reduced. I understand rates account for nearly 7.6% of the operating costs for hotels whereas for other retailers it is between 1% and 4%. It seems to be disproportionate and that is why within the plan we have accepted that this is something that needs to be expedited and we will do it.
Deputy Mary Upton: Many hotels in the current climate will only be open for a portion of the year. Is it possible to give some consideration to basing rates on the length of time for which hotels remain open? It seems very unfair that they continue to pay rates for 12 months when they may be operational for seven or eight months of the year.
Deputy Mary Hanafin: That is one issue hotels have raised with me. In other cases, many of them shut down bedrooms and keep a bar open. There are various ways of operating. If there was a more up to date and equitable revaluation then it would be within their power to be able to pay because they would be able to see it was fair. Another issue to which I referred briefly in my answer is that all of the burden falls on businesses. When water rates and additional local contributions — another word for property tax — included in the plan are implemented that will balance out the payments being made to local authorities and should help businesses generally.
Deputy Jimmy Deenihan: I have asked the Minister this question before and called upon her to do something about it. Has she addressed the issue of hotels controlled by NAMA and those run by banks? I understand some 120 hotels are now being run by banks. They are providing very unfair competition to hotels that are still performing legitimately and paying their staff, taxes and so on. It is becoming more of an issue every day with the registered guest house sector and hotels in the country. I understand the issue is not being addressed.
Deputy Mary Hanafin: As the Deputy will know I met NAMA and senior officials in my Department and from Fáilte Ireland to discuss the issue of hotels generally. They have assured me that they are not in the business of propping up hotels, but at the same time they have to take an economic valuation to ensure there is not a fire sale because that would not be in the best interests of the industry. They are very open to working with the national policy guidelines which I believe are very helpful. There is speculation about the numbers of hotels held by banks and NAMA. NAMA currently has some 30 hotels based in Ireland and it anticipates that by the end of its dealings it will have 60 or 65 hotels. It is not the huge numbers people thought. It is considering a geographic spread to determine its current position.
What we need, because we have set out a target to increase the number of tourists visiting Ireland to 8 million people over the next four to five years, is to have a range of quality hotels available so that there are three to five star hotels, guest houses and bed and breakfasts. We also we need to ensure that we do not get rid of hotels and then find that we do not have sufficient capacity. I have no doubt that the market will determine that.
Deputy Mary Hanafin: As I informed the House previously, I received a number of representations from the car rental industry throughout 2010 seeking support on the basis that it was required to provide additional car hire capacity for tourists. The matter was also raised with me at meetings with other tourism interests in the early part of the year. The concerns expressed to me related mainly to the availability of automatic transmission cars in the traditional summer peak season, chiefly with the North American market in mind.
From a tourism perspective our main concern is the availability of cars and the price consumers have to pay. In that regard, my Department and the tourism agencies monitored the situation closely with regard to its possible impact on visitors from overseas. Although I received representations urging Government intervention during 2010, I also received a number of approaches, both from within the car hire industry and the wider tourism sector, against such a course of action. In these cases, the view was that the potential shortages would not be as extensive as suggested and the market should take its course.
As part of our monitoring exercise, my Department conducted a number of web-based surveys of car hire throughout the year. Our conclusion and that of the tourism agencies was that the availability of cars in 2010 was such that it did not warrant a Government intervention to ensure an adequate supply for tourists and I am happy to advise the House that this proved to be the case. The tourism agencies have since advised me that there were very few shortages in 2010. There was some pressure during the peak two weeks of the 2010 season leading to increased prices but these were not enough to cause major concern and intervention during the year could not have been justified.
I am planning to meet the Car Rental Council of Ireland to discuss the sector and its budget submission to the Minister for Finance in the near future. I will continue to consult the Minister for Finance regarding the options open to Government if State intervention is considered necessary. For State intervention to be warranted there would have to be clear evidence of market failure and the prospect that any intervention would result in incremental hire vehicles coming on to the market, and remaining in place, to deal with potential peak demand in 2011 and later years. It is too early yet to say if shortages might arise in 2011 but I will continue to engage with the sector and monitor developments closely.
Deputy Jimmy Deenihan: It is fair to acknowledge that there was not a problem because there was such a fall-off in tourists coming to the country. They come in different ways but most tourists who come here need a car. The fact that we will be down about 1 million tourists this year would have decreased demand on our car rental fleet. If the Minister expects to build up tourism figures to 8 million she must have adequate current supply available. I am sure she would agree that for rural tourism especially, car rental is essential.
The requirements of the tourism car rental sector and the car industry are not compatible because the car industry has to ramp up the number of cars available from May to July and then there is a surplus available in the winter. Will the Minister consider making a proposal to the Minister for Finance that the car scrappage scheme be extended for 2010 car rentals? It would provide an incentive. I ask her to consider other measures to encourage the availability of more automatic cars, especially for American tourists.
Deputy Mary Hanafin: I accept that over the next few years with the aim to increase tourism there will obviously be increased demand. It is interesting that the Irish Tourism Industry Confederation, of which the Car Rental Council is a member, did not look for support for the car rental sector for next year in the budget. It did last year.
There is also a certain sense of annoyance that the Car Rental Council of Ireland perhaps under estimated the number of cars it had available in 2010. There was significant pressure, under which we all came here and elsewhere, that there would be not be enough cars and yet the size of the fleet was perhaps larger than it had anticipated or indicated when it came to the summer months. The first thing that must change is the model the car rental companies have been using. The VRT element has been changed in previous budgets but it needs to look at the model it is using. I am not satisfied extending the scrappage scheme to it is the way to do it.
Deputy Jimmy Deenihan: The reason we did not have a problem this summer was the fall off in the number of tourists. I am aware of people who were coming to Ireland and who telephoned ahead to see if cars were available. I do not exaggerate but they were told cars were not available when they needed them, whether mid-week for a few days. That is the reason they did not come to Ireland. As the Minister knows, the whole nature of tourism has changed. People come here for shorter periods, perhaps for three or four days mid-week. The demand that existed was, in some way, disguised by the overall view of the industry last year. It is more complicated than that. Given the fall off in tourist numbers this year, it may not have manifested itself as clearly. We want a vibrant tourism industry and we need car hire availability similar to that in France, Italy, Spain and elsewhere.
Deputy Mary Hanafin: The car rental industry should look to see what works well in other countries. I accept car hire is an important part of the rural tourism trade. It is the means people use to get around the country. When the industry looked to have the scrappage scheme extended, the Department of Finance was anxious not to do so because by extending it to used cars, which is effectively what the rental car would be at the end of a few months, the scheme would cost much more and there would be no corresponding increase in VRT or VAT coming back to the State. The millions of euro required for it were simply not there. We anticipate an increase in tourists next year. I have no evidence to suggest there will be major pressure for car rentals. I was due to meet the Car Rental Council of Ireland last week but unfortunately I had to cancel due to a Cabinet meeting. However, I will reschedule that meeting to hear its views.
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