Hoteliers hint boom time is over as they call for extension of 9% VAT rate

Irish Hotels Federation warns of ‘rapidly cooling demand’ amid galloping price hikes

The summer mini-boom is over for Irish hotels and the sector faces “rapidly cooling demand”, with industry representatives projecting forward occupancy of 23 per cent in November, according to figures released by the Irish Hotels Federation (IHF).

The industry group says hoteliers are projecting forward occupancy of just 18 per cent so far for December. The IHF says this, combined with rapidly increasing costs due to the energy crisis, means many hotels “are finding themselves under greater pressure now than during the darkest days of the Covid-19 pandemic”.

It represents a stark turnaround from recent months, when the IHF and its members defended the sector from accusations from the Government and others of “price gouging”, amid huge demand from tourists from late spring until the end of summer. Occupancy rates in the key summer months topped 90 per cent.

Meanwhile, it is also estimated that, at times, close to 15 per cent of the hotel rooms in the country have been unavailable for sale to the general public, due to being block-booked by the State to accommodate refugees from Ukraine and other countries.

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The IHF has also outlined the cost increases its members are said to be facing, as the sector steps up a last-minute lobbying campaign for the retention of its special 9 per cent VAT rate, which is due to expire at the end of February unless the Government renews it in next week’s budget.

The IHF says electricity prices for hoteliers are up more than 400 per cent since 2019, while gas prices are up 300 per cent in the same period. It says linen prices rose almost one-third over the last year, while food costs are up about 22 per cent, it says.

Denyse Campbell, the IHF president and general manager at the Dalata group’s Maldron hotel at Dublin Airport, said the price increases are “frightening” and are set to get worse.

“We are asking the Government to provide avenues of survival for tourism businesses in next Tuesday’s budget. There is an immediate need for measures to mitigate the impact of the energy price increases, financial support for businesses through continuity grants, and increasing grants to enable hotels to become as sustainable and low-carbon as possible,” she said.

“Critically, these are needed in conjunction with the retention of the 9 per cent VAT rate for the tourism and hospitality sector.”

Paschal Donohoe, the Minister for Finance, has indicated he will take accusations of hotel industry profiteering into consideration when making his decision on the 9 per cent VAT rate. The industry has faced a raft of criticism for charging inflated rates to the public for the last available rooms, while the IHF argues most customers pay far lower average rates.

Neither the Government’s Tax Strategy Group nor the Commission on Taxation and Welfare, which both recently reported to Ministers, expressed support for the 9 per cent rate.

Mark Paul

Mark Paul

Mark Paul is Business Affairs Correspondent of The Irish Times. He also writes the Caveat column