Ireland’s Competitiveness Performance & Challenges Ahead

& Future Skills Needs for the Hospitality Sector

Tourism Policy Workshop

Marie Bourke, Secretariat, National Competitiveness Council

20th November 2015

About the National Competitiveness Council

o Established by Government in 1997

o Reports to the Taoiseach & Government on:

- Ireland’s competitive position

- Recommendations on actions to enhance Ireland’s competitiveness

o Independent voice championing competitiveness

o Evidence-based analysis across a wide range of issues

The essence of our message

o Competitiveness encompasses a diverse range of factors and policy inputs

o Ireland’s ability to compete, trade & sell our goods/services abroad is a key determinant of our wages, living standards & our ability to finance services - health, education & welfare

o Competitiveness is part of the DNA of sustainable jobs

o It also allows our economy to withstand shocks that are beyond our control

o In the medium term, productivity improvements must be primary driver of Irish competitiveness

Stabilisation in Ireland’s international rankings…

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

More Competitive Less Competitive

IMD WEF World Bank

Ireland’s Competitiveness Challenge

o Recovery is underway and many strengths remain

o Improved competitiveness performance has been a key driver of recovery, Ireland’s international competitiveness position has improved but is under threat

o Positive GDP, employment, export and retail sales growth

o The drivers of growth have become more balanced, albeit from low bases

o Competitiveness challenge is to ensure sustainable growth, employment and quality of life improvements. We must:

1. Maintain Fiscal Sustainability 2. Invest in Physical and Knowledge Infrastructure 3. Ensure Cost Competitiveness 4. Enhance Talent and Skills 5. Improve Access to Finance for SMEs 6. Foster Innovation and Productivity 7. Broaden the Enterprise and Export Base

Which Costs Matter Most?

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Including location insenstive costs Excluding location insensitive costs

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Capital Non-Income Taxes Income Taxes

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Maintaining cost competitiveness

o Against backdrop of modest recovery, cost pressures are emerging

o Increases in house prices & residential rents have adverse knock-on consequences on prices & wage expectations

o Real wages determine living standards - challenge is to ensure that the interaction between wages, prices & productivity is sustainable & enhances both competiveness & real living standards

o A competitive income tax regime is essential - bring marginal tax rates below 50 per cent for all earners

o It’s necessary to increase housing supply – both social housing & removal of barriers limiting construction of private housing

Enhancing access to finance

Interest rates for non-financial corporations by loan size (new business), 2015

Ratio of non-performing loans, 2014

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Enhancing access to finance

o Access to affordable finance is absolutely necessary for firms to improve their productivity, expand their operations

o Key issues are continued constraints on credit availability and the relatively high cost of credit where it is available

o Addressing mortgage arrears & completing bank repairs is essential to ensuring sufficient credit is available for enterprise investment

o Continue to develop and support credible and transparent alternative sources of non-bank finance

o Focus on supporting internationally trading businesses in terms of both the provision of credit and the bank facilities/products

o Continue to upgrade skills within the banks and promote improved financial skills in the wider business sector

Developing a more sustainable enterprise base

o Ireland can improve as a location to start and run a business

o Continuous flow of new start-ups that can survive & thrive in international markets plays a crucial role in improving competitiveness

o The number of active enterprises, persons engaged and value-added remains below pre-crisis levels

o SMEs account for 99.7% of active enterprises in Ireland, 68% of persons engaged, 50.3% of turnover and 46.2% of gross value added (GVA)

o 91% of enterprises in the Irish business economy are micro-enterprises

o Micro & small firms are involved in a broad spectrum of sectors & activities – many of which while low in terms of export & value added components are strong generators of employment

Broadening the Enterprise Base

Continuous flow of new start-ups that can survive & thrive in international markets plays a crucial role in improving competitiveness

o Entrepreneurial activity strengthens enterprise not only by creating new businesses, products /services but also by improving performance in existing businesses

o A supportive environment for doing business exists compared to many of our euro area competitors. World Bank’s latest Doing Business report, Irelands 17th for ease of doing business, but 25th for starting a business, out of 189 economies

o In digital trade, Ireland is one of the best performing EU countries - 24% of enterprises selling goods /services online in 2014 compared with 14% in the euro area

Recommendations

o Strengthen productivity & trading profiles of Irish-based small & micro firms o Reduce administrative & regulatory burden on enterprise o Ensure business conditions nurture greater entrepreneurship & investment -

enhance ease of doing business o Increase the number of SMEs trading digitally o Enterprise Policy 2025 – targets for start-ups, internationalisation, scaling

Conclusion

o Recent economic crisis showed how international / national authorities were watching the wrong indicators & missed significant economic threats emerging

o Risk is that, having concentrated on improving Ireland’s macroeconomic indicators people assume the hard work is done

o Councils message is that there is no room for complacency

o Maintaining our strong international competitiveness requires constant improvement across a broad range of policy areas

o While growth prospects for the Irish economy are strong, we must continue to deliver aggressively the structural reforms required to support competitiveness, productivity & growth

Expert Group on Future Skills Needs - Assessing Future Skills Requirements of the Hospitality Sector in Ireland 2015-2020

o Assess skills demand in Hospitality Sector to 2020 – Hotels, Restaurants & Bars, Canteens & Catering

o Ensure there will be the right supply of skills to drive Hospitality sector business & employment growth

o EGFSN study, covers a major part of Tourism Industry - Accommodation & Food & Beverages Services

o Takes into account demand in other sectors for hospitality related occupations – chefs, kitchen, catering, bar & waiting, restaurant & catering managers etc.

o Assesses skills demand at all NFQ levels – with focus on career progression opportunities at lower skilled levels to help meet anticipated job openings

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Profile of Hospitality Sector

o 160,000 persons are employed – 8% of employment o €3 billion or nearly 2% of total gross value added in the economy

o 16,000 enterprises

Hotels and other accommodation (16%), Restaurants / food service activities (40%), Bars / Beverage serving activities (40%) Catering / other service providers (4%)

o High extent of seasonal/casual and part-time employment (40%)

o 30% non-national staff

o The sector is a significant contributor to regional employment.

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Drivers Impacting on the Demand for Hospitality Skills

o Changing Consumer Demand

o Value Competitiveness

o Technological Change

o Growth of new Hospitality Products and Services

o Domestic Consumer Spending

o Number of Overseas Visitors and length of stay

o Seasonal nature of Demand

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Baseline Employment analysis

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27,509 23,948 23,255 18,719 8,242 6,299 5,724 5,504 3,810 3,436 3,087

17.4%

15.2% 14.7%

11.8%

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Current /Anticipated Skills Gaps/Shortages

Main skill recruitment difficulties – chefs. Shortages of commis chefs feeding into shortages at higher & specialist levels (demi chef, chef de partie, pastry chefs)

Other skill gaps

o Basic skills missing in all departments at entry / junior level

o Revenue management, Pricing, HR, General management skills for SME owners

o Specialised reception & front-of-house skills

o Practical Bar staff with waiting skills for food service & modern drink skills

o Customer service skills, cultural awareness, numeracy, digital skills, social media

o Specialist knowledge: employment, licensing & consumer law, pricing, allergens calorie counts

Some variance in skill shortages area – not just in rural locations but also in terms of availability of rental accommodation & access to public transport in urban areas.

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Trends in Hospitality related NFQ Awards 2008-2014

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Demand Scenario Summary

Scenario 1: Tourism Policy Review Targets

o Employment in the Hospitality sector projected to reach 179,500 jobs by 2020

13.6% increase from 2014

Scenario 2: ESRI Medium-Term Review Economic Recovery Scenario

o Employment in the Hospitality sector to reach 168,000 jobs by 2020

6.3% increase from 2014

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Replacement Rates

2012 2013 2014

Waiters and waitresses 26% 19% 25%

Bar staff 33% 18% 20%

Kitchen & catering assistants 12% 17% 17%

Catering & bar managers * * 16%

Receptionists 18% 10% 15%

Restaurant managers * * 15%

Sales assistants 16% 15% 13%

Housekeepers & caretakers etc. * 8% 13%

Elementary cleaning occupations 8% 12% 11%

Publicans * * 10%

Hotel & accommodation managers * * 7%

Chefs & cooks 8% * 4% Source: National Skills Bulletin 2013, 2014 and 2015

Note: The replacement rate is calculated by SLMRU based on the no. of identified transitions from employment to inactivity (e.g. retirement, home duties, study, etc.) & net exits due to inter-occupational movements. Replacement rates exclude casual staff who exit & re-enter employment on a seasonal basis.

*Denotes instances where the number of observations is too small to report.

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Replacement Rates for Hospitality-Related Occupations

Example Demand – Supply Gap for Chefs & Cooks for the 5 year period to 2020

Employment 2014 24,000

Expansion demand up to 2020 4,030

Replacement demand up to 2020 10,600

Total Skills demand up to 2020 14,630

Potential domestic education & training output up to 2020 - 5,450

Potential retraining of Unemployed - 1,900 - 2,500

Reduction in Replacement Rates

(a) Reduction in Replacement rate by 15% = 1,600

(b) Reduction in Replacement rate by 30% = 3,180

Balance of Skills Demand Shortfall up to 2020 = (a) 5,580 (b) 4,000

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Findings and Recommendations

Main challenges to addressing current & future skills needs within the sector include:

More structured approach to meet Hospitality sector skills requirements

Promote hospitality career opportunities from entry levels to management

Address projected skill demand shortfalls – quantity & quality - including chefs

Increasing FET related NFQ Level 4/5 provision for kitchen/catering, bar & waiting staff

Develop career progression pathways including Apprenticeships & Traineeships

Support unemployed hospitality workers to re enter Hospitality workforce

Introduce recognised occupational standards & portable skills “passports”

Provide flexible accredited CPD to accommodate working patterns

Improve attraction & retention of hospitality staff.

o Recommendations address skills requirements to 2020 & contribute towards achieving employment creation targets under the ‘Action Plan for Jobs’ & Tourism Policy Statement

o Lead Bodies and timelines are indicated for the implementation.

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Recommendations outline

1) Establish a National Oversight & Advisory Group for the Hospitality Sector

2) Address projected skills shortfalls - chefs & other hospitality occupations

3) Align education & training provision with the skills demand of hospitality business

4) Greater investment by business in staff training, appraisal & skills progression

5) Promote Hospitality sector as a professional long-term career choice

6) Tap into Irish Hospitality Diaspora & encourage take up among “ grey” workforce

7) Support portability of qualifications & skills with flexible accreditation & CPD

8) Assist unemployed former Hospitality sector workers to return to employment

9) Enhance measures for the attraction of qualified chefs from the EU/EEA area

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Questions and Answers

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