Hospitality’s fears are well-founded

September 20th, 2022 11:40 AM

By Southern Star Team

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THE lobbyists have been lining up in recent weeks to stake their individual claims on aspects of the upcoming Budget, hoping to get a slice of the government’s rapidly dwindling financial cake.

As so many sectors and industries grapple with spiralling costs, there’s an element of ‘crumbs from the rich man’s table’ about it all.

Because for any sector to believe that the government has the financial capability to negate the onslaught of price rises hurtling down the tracks towards us this winter, well, that’s just pure naivete.

Of course what most are looking for is just some semblance of help – even of a sign that the government is taking their plight seriously and will do its best to mitigate the damage.

One of the first out of the traps to state their case was the hospitality industry. After two years of begging for help during the pandemic, the sector’s lobbyists are back again. But this time they really mean business.

And, borrowing some tactics from referendum lobbyists of recent years, they are also using very personal case studies to get their messages across.

Two weeks ago the Celtic Ross Hotel in Rosscarbery hit the headlines when its manager Neil Grant revealed the shocking jump in electricity supply prices. This week the manager of the Mullingar Park Hotel was on Morning Ireland describing the crippling jump in his bills for energy, food and other services.

Incidentally, he had a critical audience, as he was on the show because the hotel was hosting the annual Fianna Fáil think-in this week.

His comments came just days after a Drinks Industry Group of Ireland (Digi) report showed that all hospitality businesses were experiencing soaring cost increases, including food products (up 8.1%); meat products up (11.3%); poultry products up (13.4%); and dairy products (up 50%).

Electricity prices for the sector have now risen 60% more than the EU average, while business gas users experienced a price increase of almost one quarter (23.8%). The report also stated that profit margin projections for hospitality businesses have dropped significantly – though no surprise there – but that restaurant profit projections in particular were down from 7.3% to 3.5%.

Digi chair Kathryn D’Arcy said the findings were ‘very distressing and alarming’ and demonstrated the need for policies that reduce the costs facing thousands of businesses throughout the country.

Further to general inflation of 9.1%, indicative price changes from the Consumer Price Index show serious increases across the board in food prices. Over the period July 2021 to July 2022, food costs increased by 8.1%, beef was up 11.4%, poultry rose by 13.4%, and the price of fresh milk jumped by over 20% (21.2%).

However, stating the obvious, perhaps, the report said that it was soaring energy prices that posed the biggest concern to the hospitality sector. The price of electricity increased by 40% in July 2022 compared to July 2021, which followed a substantial increase of 11.3% in July 2021. Gas increased by 60.2% in July 2022 compared with a year earlier, while heating oil increased by 91.9% in July 2022, following on from an increase of 39.6% in July 2021. These rises in energy costs do not allow for further significant increases announced by electricity and gas providers over recent weeks.

The report found that energy price increases for businesses have exceeded household increases in many cases. Non-household electricity prices in Ireland were found to be 60% higher than the EU average in the second half of 2021. Business gas users have seen rises of more than double those of households.

Summing up, the report’s author made a stark comment. ‘We are looking at a crisis situation across much of the sector. Survival over the next six to 12 months will be the goal for many in the sector.’

Ms D’Arcy noted that the majority of hospitality enterprises are sole traders and small businesses who create employment and operate on the thinnest of margins. ‘For the long-term sustainability of the hospitality sector, we need to ensure there is a hospitable environment for business to thrive,’ she said.

In the short term, the industry is looking for the government to reduce excise by 7.5% in the forthcoming Budget.

Looking at the results of the recent report, if our tourism-dependent country wants to maintain a healthy hospitality industry, then acting on the excise request is the very least our government should do.

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