Hospitality businesses in Ireland are more negative about their prospects in the next 12 months as they face a “perfect storm” of rising costs and cooling demand, a report from a selection of industry groups has found.
The Irish Tourism Industry Confederation (ITIC), the Restaurants Association of Ireland (RAI), the Vintners Federation of Ireland (VFI), the Irish Hotels Federation (IHF) and the Licensed Vintners Association (LVA) have called for action from Government to address the issues facing the hospitality sector, saying it was now “at a crossroads”.
That includes the reinstatement of the lower VAT rate of 9 per cent for hospitality and food businesses as they struggle to cope with higher costs.
According to the tourism and hospitality industry bodies, operating costs have risen by 16 per cent across the sector, with employment costs cited as a key part of the rise.
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That comes as food sales have fallen around 9 per cent on average this year, with 91 per cent of businesses in the sector saying profitability on food sales had fallen. More than three quarters have a negative outlook for their trading conditions in the next 12 months, with food sales expected to be down 12 per cent over the rest of the year.
The VAT rate for hospitality and food businesses rose to 13.5 per cent in September 2023, but industry research that surveyed more than 700 hospitality businesses found 96 per cent had been negatively impacted by the rise in VAT, and 68 per cent classed it as a “very negative” impact.
Businesses have taken a number of actions, including reducing opening hours and cutting back on the number of days they operate. Almost 60 per cent said they had cut the range of food they offer.
Representatives from the groups warned that “decisive action” is needed to stabilise the industry.
“Despite reassurances that it understands the financial challenges facing our sector, we have yet to see a meaningful Government response to the severe challenge facing hospitality businesses,” the industry groups said in a statement.
“Further Government inaction would pose enormous risks to our industry which, as one of Ireland’s largest indigenous employers, supports over 270,000 livelihoods the length and breadth of the country. As we look to develop and grow our hospitality and tourism product, the focus should be on making us more attractive as a destination and enhancing the range and availability of tourism and hospitality services.”
The groups are due to meet Minister for Finance Jack Chambers and Minister for Public Expenditure and Reform Paschal Donohoe next week.
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