Hotel industry supported by VAT rate, conference told

Irish Hotels Federation hears how Government’s VAT band key to avoiding insolvency

There were 145 insolvent hotels in the State at the end of 2014 and the industry would have been in much worse shape were it not for the Government's special nine per cent VAT rate, the Irish Hotels Federation annual conference has been told.

Of the 145 insolvent hotels last year, 85 had been sold by December 25th and 35 were in the process of being readied for sale, corporate recovery expert Aiden Murphy said.

Minister for Transport, Tourism and Sport Paschal Donohoe told the conference the Government hopes to expand the numbers employed in the tourism industry to 250,000 - an increase of some 45,000 over the next 10-years.

The Government also wants to see annual earnings from overseas visitors rise to €5 billion and numbers of annual foreign visitors rise to 10 million over a similar period.

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Mr Donohoe said his department will publish a tourism policy statement next month which will build on the gains made in the last four years. The policy statement will be followed by the appointment of a “Tourism Leadership Group” which he said will “begin work on an action plan to deliver the policy objectives”.

Job creation

Prof Alan Ahearne, head of economics at the National University of Ireland, Galway (NUIG), said the lower VAT rate had created 30,000 jobs since it was introduced three years ago, bringing employment in the industry to 205,000.

He said the cost to the Exchequer had been “markedly lower than initially expected”, working out at €107 million in the first year, much of which would have been recouped in other taxes.

Prof Ahearne said the measure had proved to be a highly cost-effective way of boosting competitiveness and employment within the tourism and hospitality sector.

However, Prof Ahearne warned against thinking the job was now done, and said the lower VAT rate would remain hugely important to the viability of and prospects for growth within the industry.

Irish Hotels Federation chief executive Tim Fenn said the reduced VAT rate continued to be "one of the most successful job creation initiatives in modern times". He said it had supported the creation of tens of thousands of new jobs since it was introduced by the Government in 2011.

“Irish tourism as a whole is now on track to create a further 40,000 jobs by the end of the decade,” Mr Fenn said.

The conference, which saw more than 500 hoteliers and guest house operators gather in Ballyconnell, Co Cavan, also presented former president Mary McAleese with an award to mark her contribution to tourism, particularly in inviting Britain's Queen Elizabeth to Ireland.

Mr Fenn said the visit of Queen Elizabeth to Ireland was hugely significant and visitor numbers from the UK swelled afterwards, as British people felt “more comfortable” coming here.

Tim O'Brien

Tim O'Brien

Tim O'Brien is an Irish Times journalist