Price increases are putting unsustainable pressure on businesses still rebuilding from the pandemic
A new survey of business costs by the Irish Hotels Federation (IHF) has revealed the scale of the challenge facing hotels and guesthouses across the country, as unprecedented energy price increases are putting unsustainable pressure on businesses still rebuilding from the pandemic.
Denyse Campbell, President of the IHF, said that Government support in next week’s budget is critical to offset the immediate financial shock that businesses in every village, town and city in the country are currently experiencing, and that now is not the time to increase the 9% Tourism VAT Rate, which would only add to inflationary pressures in the system.
“As the main tourism season draws to a close, businesses are reporting skyrocketing cost increases, which are nothing short of frightening. Hoteliers are reporting increases of over 400% in electricity charges and over 300% in gas charges since 2019. One hotelier in the Southwest has reported how their monthly electricity bill rose from €8,300 in July 2021 to €18,000 in July 2022. Another larger hotelier in the Northeast received a one-month energy bill for €122,000 in August 2022, up from €27,000 in August 2021. Large year-on-year increases are also being reported across other business costs including Linen (29%), Food (22%) and Beverage (12%).
“What’s even more concerning is that energy prices are projected to get worse. Combined with rapidly cooling demand – with hoteliers projecting forward occupancy of 23% in November and 18% in December – many businesses are finding themselves under greater pressure now than during the darkest days of the COVID-19 pandemic.”
Ms Campbell said that hotels are the backbone of the tourism industry in Ireland, which is a major contributor to the exchequer and employment throughout the country and that Government supports are urgently required.
“The Government’s pro-tourism supports during Covid-19 were critical for the survival of our tourism industry, particularly in regional Ireland, acting as a lifeline to the viability of businesses. Since the springtime, our industry has made great progress in restoring the livelihoods of almost 90% of the 270,000 people who were working in the industry pre-pandemic. These jobs are in rural, regional and urban communities throughout the country, with more than 70% of them based outside Dublin. However, we are now in the midst of another crisis.”
“We are asking the Government to provide avenues of survival for tourism businesses in next Tuesday’s budget. There is an immediate need for measures to mitigate the impact of the energy price increases, financial support for businesses through continuity grants, and increasing grants to enable hotels to become as sustainable and low carbon as possible.”
“Critically, these are needed in conjunction with the retention of the 9% Vat rate for the tourism and hospitality sector. The 9% VAT rate is the right rate for long-term sustainable growth in the tourism industry and has brought us in line with our European competitors. Increasing the VAT to 13.5% in March 2023 would make Ireland’s VAT rate the second highest in the EU and will impact tourism businesses in every part of the country. The Government must do all it can to avoid adding to inflation and this is certainly not the time to make a decision to increase the tourism VAT rate by 50%”
During Leader’s Questions on the Dáil floor on Tuesday, September 27, An Taoiseach Michael Martin stated during a reply in relation to rising energy costs ‘We will do everything we possibly can to protect jobs again in this unprecedented crisis’.
Ms Campbell concluded, “We are asking the Government to do exactly that, to protect jobs and businesses in an industry that is essential to the Irish economy, particularly in rural and regional Ireland and which is not expected to recover to pre-pandemic levels until 2027.”
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