Escalating business costs, particularly in energy, are placing an incredible strain on hotels and guesthouses across Ireland seeking to rebuild after an unprecedented two years of the pandemic.
Elaina Fitzgerald Kane, president of the Irish Hotels Federation (IHF ), speaking at the recent IHF Annual Conference, added that the Government "must do everything within its power to minimise the impact of this on tourism, with the first step being to scrap the proposed increase in tourism VAT rate planned for later this year.
"Having only just weathered the storm of Covid-19, hoteliers and guesthouse operators are now facing into a gale of spiralling operational costs which are putting an unbearable strain on their businesses. Our sector – which is at the heart of a communities throughout the country supporting over 270,000 livelihoods pre-pandemic – is being placed under real pressure by price hikes across all areas of operation.
"Hotels and guesthouses are reporting year-on-year increases of 88 percent in energy, 22 percent in water, and 18 percent in food and beverages, as well as significant insurance increases. Given that we already operate in a high-cost environment, these levels of increase are placing an incredible strain on businesses, with three in four hotels (77 percent ) significantly impacted by escalating business costs," Ms Fitzgerald Kane stated.
Ms Fitzgerald Kane said that to maintain international competitiveness in this escalating cost environment it was essential for the Government to provide certainty on the continuation of the nine percent VAT rate for the tourism and hospitality industry as soon as possible.
"The Government has gone the distance throughout this very trying pandemic in terms of supporting livelihoods and businesses in the tourism sector, and this has put us in a stronger position to recover than some of our international competitors. Continuing that support now with an extension of the nine percent VAT rate, until business levels stabilise, will underpin this great work and have a direct impact on the 270,000 tourism and hospitality livelihoods - one in 10 of all Irish jobs, with 70 percent of these jobs located outside of Dublin.
"The certainty over the nine percent VAT rate is vitally important. Many hotels – as well as tour operators – begin contracting for international business up to two years in advance. Our current VAT rate has only been committed to until September this year and this date is now looming large. The continued ambiguity is causing uncertainty in our highly competitive international marketplace and particularly as we seek to restore international connectivity to our island nation and rebuild international tourism in the aftermath of the pandemic.
"Increasing Ireland’s VAT rate to 13.5 percent would make Ireland a European outlier. Of the 27 EU countries, the VAT rate on accommodation is lower than nine percent in nine countries, is nine percent in six countries and exceeds 13.5 percent in only one country - Denmark.
"Tourism will recover, but it will take time, and businesses need certainty to allow them to plan properly for this year, and indeed years, ahead. The nine percent VAT rate has proven to be the right rate of VAT when compared to our European competitors and must be maintained," Ms Fitzgerald Kane concluded.
