Tourism sector prices will only get worse if costs are 'not mitigated' 

Chief executive of the ITIC Eoghan O’Mara Walsh said hotel room prices in Dublin are comparable to Amsterdam, Lisbon and Prague. 

The Irish tourism and hospitality sector is only going to get more expensive if the increasing costs of doing business are “not mitigated”, a new report has found, as sector representatives once again try to pile pressure on the Government to reduce the Vat rate.

The report, which was authored by economist Jim Power on behalf of the Irish Tourism Industry Confederation (ITIC), found businesses in this sector could see payroll costs increase by €456 million in 2024 and €1.4 billion by 2026 due to Government policies. 

Since the start of the year, the national minimum wage increased to €12.70 an hour, there has been an increase in employer PRSI contributions, and statutory sick pay has increased to five days. Pension auto-enrollment is also expected in the second half of this year. 

According to the report, those increases, along with the Vat increase for the sector last September, mean the viability of many businesses are being threatened.

Recent Eurostat figures show that Ireland has the seventh highest price index for restaurants and hotels across the European Economic Area. These figures were published in January but the analysis was from 2022 when the 9% Vat rate was in place.

When asked how the consumer would benefit from the report's recommendations, Mr Power said it is an “expensive country” to do business “but it's going to get worse if all of these measures are not mitigated”.

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Chief executive of the ITIC Eoghan O’Mara Walsh said hotel room prices in Dublin are comparable to Amsterdam, Lisbon and Prague even though there are less rooms.

"When the government talks about competitiveness, having a 13.5% Vat rate, on top of all the really high input costs, it just doesn't make any sense,” he said.

While the report acknowledged that the Government is providing support to small and medium-sized enterprises (SMEs) through energy supports and a rebate of commercial rates, it said they will be “overwhelmed” by the increasing cost of doing business.

The report calls for a return to the 9% Vat rate, reform to employers' PRSI for SMEs, as well as an enterprise support package every year out to 2026.

The ITIC also suggested that the accommodation sector could be decoupled from the food services sector to allow different Vat rates between the two.

According to the Restaurants Association of Ireland, 71 café’s, restaurants, and other food businesses closed down last month with an average of 22 jobs lost in each establishment.