The Irish hospitality industry has described the decision to leave VAT at 13.5pc a ‘missed opportunity’ and expressed disappointment with Budget 2024 for failing to takle PRSI and labour cost issues, or to provide strategic support to small and medium-sized businesses.
The various lobby bodied had advocated for measures to address issues such as energy costs, commercial rates, insurance, recruitment and retention, among others.
The various lobby bodies claim that small businesses in the hospitality sector require sustainable and ongoing assistance to overcome the challenges they face. The association urges the government to revisit its approach and consider more comprehensive measures that address the industry’s ongoing concerns. In doing so, they hope to provide a lifeline to struggling businesses and safeguard the resilience of Ireland’s vital hospitality sector.
Instead, the Government has introduced a one-off support scheme, allocating €250m to businesses. Industry representatives argue that this limited financial injection may not be sufficient for some establishments to stay afloat.
Elaina Fitzgerald Kane, Chairperson of the Irish Tourism Industry Confederation (ITIC) , expressed regret that the budget lacked clarity on a dedicated mitigation fund for downstream tourism businesses, leading to a shortage of tourism beds in various towns across the country. she said Budget 2024 was “disappointing and underwhelming” for the tourism sector, citing a failure to address key challenges faced by the industry.”
Eoghan O’Mara Walsh, CEO of ITIC, said he was disappointed with the absence of a commitment to review the tourism and hospitality VAT rate, which has increased business costs and affected competitiveness.
ITIC highlighted the static investment in tourism services announced in the budget, which failed to keep up with inflation. Despite busy airports, the actual number of tourists visiting Ireland remains well below pre-pandemic levels. O’Mara Walsh emphasized the need for a balanced approach in accommodating Ukrainian refugees and international asylum seekers, urging the government to explore alternative forms of accommodation beyond the tourism sector.
Last month, ITIC unveiled its strategic vision for the sector until 2030, projecting a potential 50% increase in tourism revenue. However, the organisation stressed that achieving this growth relies on pursuing pro-tourism and pro-enterprise policies.
Overall, the budget’s shortcomings have caused frustration within the Irish tourism industry, risking the recovery of this crucial sector. The ITIC has called for urgent attention to address these concerns and support the industry’s long-term growth prospects.
Adrian Cummins of the Restaurants Association responded to the measures: “With the industry already grappling with soaring costs and razor-thin profit margins, the lack of long-term support leaves many uncertain about their future.”
He said it was
- A disappointing budget for the Hospitality sector
- No mention of 9% vat rate (or a decoupling for food led businesses)
- No mention of energy supports
- Let’s see the devil in the detail regarding grants for reducing commercial rates
- No detail yet on fund for downstream businesses impacted as result of war in Ukraine
- This Budget could have alleviated the rate of Hospitality businesses closing, but unfortunately we will see more closures in 2024, especially those serving food.
Denyse Campbell, President of the IHF, expressed concern over the failure to address government-controlled business costs, particularly employers PRSI (Pay Related Social Insurance).
Ms Campbell stated that labour-intensive industries such as tourism and hospitality are now at a critical juncture regarding business costs and needed a fundamental restructuring of employers PRSI, such as a targeted rebate over the next three years. “The absence of any support pertaining to PRSI is deeply disheartening and warrants urgent reconsideration.”
Ms Campbell said there seems to be no respite from rising cost inputs across all aspects of hotel and guesthouse operations. These escalating expenses coincide with a significant increase in interest rates, further burdening businesses in the sector. She critisiced the fact there was
- No commitment to reviewing the tourism VAT rate. Ireland now possesses the third-highest tourism VAT rate across Europe. The rural hospitality businesses and those heavily reliant on food services are poised to be the hardest hit, given their already tight profit margins and reduced profitability.
- No supporting sustainability initiatives within the hotels sector and the wider tourism industry. The IHF expressed regret that there was insufficient progress in this area. Hotels are eager to embrace further sustainability measures in line with the government’s Climate Action Plan, such as the adoption of renewable energy and achieving greater energy efficiency. The IHF had proposed the establishment of a dedicated National Hotel Retrofitting Scheme, which would have contributed to these goals, but unfortunately, no funding commitment was announced.
- No measures to address the escalating costs of doing business in the tourism and hospitality sector highlights the urgent need for government intervention. The minimal support in relation to employers PRSI, coupled with rising operating costs and the impact of increased tourism VAT, leaves businesses in the sector facing significant challenges. Without immediate attention, the long-term sustainability and profitability of the Irish tourism and hospitality industry could be at risk.
