Sunday 22 September 2019

Dublin: €22, Nice: €10. Why we must get real to survive

Dublin, July 2009. Unremarkable, average-sized pizza and a glass of wine in a franchised restaurant where customers are whisked in and out. Cost: €22 a head.

Nice, July 2009. Tasty pizza the size of a wagon wheel and a glass of wine in a family-run restaurant where customers are free to while away the night people-watching. Cost: €10 a head.

And we wonder why our tourism and restaurant industries are in trouble.

It's not just the bill, which is prohibitive. Or the service, which ranges from slapdash to unfriendly. Or the food, which can be patchy in quality. It's a combination of all three factors.

The credit crunch may have curtailed our trips abroad, but that doesn't mean we're now content to pay over the odds for less at home. Those globetrotting years allowed us to see how other European countries treat their visitors. And Ireland needs to shape up to compete.

This week's tourism figures underline why our damp, expensive little country must box clever if it hopes to appeal to an overseas market and satisfy the home team.

CSO statistics show that the number of visitors dwindled by more than 18pc in May, a strong indicator that activity during the peak summer months will also be disappointing.

Tourism is an important source of revenue, and it makes sense to shore it up. Especially since jobs are melting away in other industries.

I'm writing this in France, where many menus show items with a red line scored through the original price and a new rate quoted at 10pc or 15pc cheaper: the need to offer value for money is recognised.

And an innovation currently being introduced by some establishments is the touch-screen menu, with a photograph and choice of languages describing each dish. The idea behind it is to simplify the dining experience for foreigners.

Irish establishments cannot match prices in Spain, Italy or France because our minimum wage is set so high, as is our VAT: we're caught in a pincer movement.

Significantly, the minimum wage of €8.65 an hour was introduced in July 2007 -- just weeks before bank shares began to collapse, presaging the recession. Clearly, that figure belongs to a different era.

Yet one of the reasons our wages are steep is because Ireland remains a pricey place to live. Yes, rents, mortgages and food prices have dropped. But restaurants are expensive, public transport is not cheap (by comparison, €1 will take you anywhere on the buses in Nice), and energy prices are dear, although falling.

These costs contribute to the almighty pickle in which we find ourselves. By the end of the year, the ESRI predicts the economy will shrink by almost 9pc and next year we are facing into 16pc unemployment.

Let's take our verging-on-the-excessive VAT rate. In 2008, Gordon Brown cut the UK's rate to 15pc for a year to stimulate growth. "Extraordinary times require extraordinary actions," he said. While VAT is due to go back up to 17.5pc, it will still be 4pc below Ireland's, which is 21.5pc.

Brian Lenihan's first move, as soon as he needed to raise money last autumn was to add another 0.5pc to VAT. This step did generate some revenue -- but it also accentuated the value for money of shopping in the North. Counter-productive, perhaps?

A general principle exists in economics that you cannot tax your way out of a recession but you can easily tax yourself into one. My pin-up economist, Paul Krugman, notes in his discouragingly titled book, 'The Return of Depression Economics': "We surely do not expect a recession will be met, Herbert Hoover style, by raising taxes, cutting spending and increasing interest rates."

And what have our leaders done? Raised taxes and cut spending. Thankfully, interest rates are out of their hands and safely in the grasp of Jean-Claude Trichet in Frankfurt, who has lopped off 3.25pc.

If we are to live to tell the tale of this once-in-a-century recession, we need to access those survival-of-the-fittest genes hardwired into our DNA.

On the tourism front, we can no longer expect to entice visitors who will be content simply to admire the scenery. What we do have to offer -- our unique selling point -- is our reputation as the Land of Saints and Scholars; our literary tradition. We can attract tourists by offering well-organised, weather resistant events: one extension of the "smart economy" we should not ignore.

Last week I visited the West Cork Literary Festival in Bantry, noticing how it bucked the national trend towards frugality by buzzing with business. This did not happen by accident but because the organisers targeted specific sectors and built diversity into their programme.

Aside from headline speakers such as 'Brokeback Mountain' author Annie Proulx, a plethora of creative writing workshops presented everything from short story master classes to song writing with Jack L. To maximise demand for the travel writing class, travel agents were targeted -- an example of imaginative marketing.

The novel-writing sessions were sold out. Roughly one third of participants were drawn from abroad (the US and UK), the second third were from elsewhere in Ireland and the final third were local. Many treated it as a holiday with a chance to learn a new skill. Crucially, they were injecting money into the local economy -- hotels, restaurants and gift shops all benefited.

If Bantry can do it, so can the Irish economy. It's called adapting to the new reality, rather than complaining about trouble in paradise.

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