Pubs and hospitality sector struggling with rising costs

Pubs and the wider hospitality sector are struggling to keep up with rising costs which are threatening to make many businesses unviable according to new research. A report by Dublin City University economist Anthony Foley found that while the overall consumer price index rose 7.5 pc between July 2023 and July 2026 some of the main costs borne by the hospitality sector increased by double-digit percentages. These included electricity at 61.7 pc, labour at 15 pc, insurance by 26.6 pc and wholesale beer prices by 12 pc.

The report shows that the hospitality sector is very labour intensive mainly composed of small enterprises operating on relatively low margins. These three factors mean the sector is very exposed to cost pressures and has limited capacity to absorb substantial cost shocks. Overall energy prices increased by almost half at 48.8 pc in the three years between July 2023 and July 2026 while electricity prices increased by 61.7 pc. Despite being expected to decrease because of reforms in the sector insurance costs rose by more than a quarter at 26.6 pc during the same period.

The report was commissioned by the Drinks Industry Group of Ireland and comes only weeks after research showed that 2,205 pubs closed their doors for good in the last 20 years alone a reduction of more than one quarter. DIGI stated the findings offered further evidence of why the Government needs to immediately cut excise on alcohol by 10 pc in the upcoming Budget.

Anthony Foley, report author and Dublin City University economist, shared: “The hospitality sector is predominantly made up of small businesses, operates on very slim margins and is extremely labour intensive, which leaves it with very little cushion to absorb sudden financial shocks. As such, pub, restaurant and hotel owners find themselves exceptionally vulnerable to any increase in the cost of labour or inputs.”

Donall O’Keeffe, Secretary of the Drinks Industry Group of Ireland, shared: “It is abundantly clear that small hospitality businesses are facing an unsustainable cost of business emergency across Ireland. This is particularly true of small, family-owned pubs in rural Ireland who have endured an incredibly volatile business environment since 2020. While the Government took an important first step by reducing VAT on hospitality to 9pc last year, this did nothing for pubs that don’t serve food, which are being squeezed by rising costs on one side and declining consumption on the other. It’s little wonder then that an average of 110 pubs are closing every year, leaving a major gap in the communities that they serve. Yet despite this wave of closures, the Government is continuing to levy the second-highest alcohol excise tax in Europe.”