Local hoteliers plea for u-turn ahead of next February’s Vat hike of 50%

THE owners of 93 Cork hotels and guesthouses have written an impassioned letter to local TDs, looking for support for the retention of the Vat rate at 9%. 

The group highlighted the growing economic challenges facing their sector over the next 12 months as they grapple with record levels of inflation, skyrocketing business costs and a global economy that, they say, is edging towards recession. 

‘Simply put, the proposed 50% increase in tourism Vat next year makes no sense during a cost-of-living crisis. It would only add to inflation and undermine our Irish tourism’s competitiveness internationally when the focus should be on safeguarding jobs. 

‘We cannot afford to be complacent about tourism and hospitality given the vital role it plays in spreading employment opportunities and prosperity across the entire country,’ said Joe Kennedy, chair of the Cork branch of the Irish Hotels Federation (IHF). 

‘Tourism businesses are collectively our largest indigenous employer. Prior to the pandemic, our industry supported over 270,000 livelihoods including some 27,000 jobs throughout Cork (city and county), generating €895m in tourism revenues annually for our local economy.

‘Since the lifting of Covid restrictions earlier this year, we have seen a welcome upturn in tourism. 

‘Some of this is tentative, having been boosted by short-term factors, including high levels of pent-up demand during the summer and hotels catering for a large amount of displaced business previously contracted for 2020 and 2021. The recovery to date has enabled us to make enormous progress in restoring employment and we are now supporting over 240,000 tourism jobs – almost 90% of our previous 2019 levels,’ he said. 

However, he said most hotels and guesthouses, are still recovering, having come out of an exceptionally challenging two years of Covid during which time the hotels sector alone lost over €5bn in revenue. 

‘From a tourism perspective, the rising cost of living – both at home and internationally – means we are facing a potential tipping point with consumer confidence reaching decade lows across key overseas markets,’ Mr Kennedy added. ‘At the same time, the energy crisis is having an enormous impact on tourism and hospitality with many hotel businesses seeing increases of upwards of 300% in energy bills compared with 2019 levels. It is not just energy hikes that are hitting hotels and other tourism businesses – we have faced escalating increases across our entire cost base this year.’ 

Hotels, he said, are reporting average increases of 25% in the cost of food supplies, beverage costs up 16%, linen and laundry costs up over 30% and insurance costs up 18%. 

In light of the turbulent times ahead, he said it was very worrying that the government plans to increase the tourism Vat rate to 13.5% at the end of February next year. 

‘The looming increase means that Irish consumers and overseas visitors would be paying Europe’s third highest tourism Vat rate, putting us at an enormous competitive disadvantage as we seek to recover tourism levels and restore employment. 

‘Now is not the time to jeopardise the recovery by increasing taxes on visitors.’