Soaring costs leading to 'crisis situation' for hospitality industry

The report revealed that Ireland's electricity prices for businesses is 60% higher than the EU average leaving many businesses close to financial collapse.

Hospitality firms have been faced with substantial price increases this year.

Soaring energy bills and a sharp increase in food costs are causing a "crisis situation" for many businesses in the hospitality sector new research has revealed.

The report, commissioned by the Drinks Industry Group of Ireland (DIGI), revealed that Ireland's electricity prices for businesses are 60% higher than the EU average leaving many businesses close to financial collapse.

Profit margin forecasts have declined significantly in recent months with restaurant businesses recording a steep decline in profit projections, down from 7.3% to 3.5%.

Hospitality firms have been faced with substantial price increases this year, with meat products up 11.3%, poultry products rising in price by 13.4% and the cost of dairy products increasing by 50% on an annual basis.

DIGI chair Kathryn D’Arcy said: "the findings of the report are very distressing and alarming for the hospitality sector." She added that the study highlighted the need for the introduction of policies that reduce business costs.

While the report revealed that food costs had increased by 8.1% on an annual basis from July 2021, it is soaring energy costs that are causing the greatest concern among hospitality firms.

Recent increases in energy prices were found to have exceeded those of households, with business gas users experiencing price rises of more than double that of households.

The study also showed that average hospitality hourly earnings during the first quarter of 2022 had risen to €15.45, a 16% increase from the same period in 2019.

Author of the report, Professor Anthony Foley, said that the hospitality industry was in a "crisis situation" and that "survival over the next six to 12 months will be the goal for many in the sector, with ever tightening margins a reality for most".

Ms D'Arcy stated that to ensure the long-term sustainability of the sector it was important that businesses have a "hospitable environment" in which to thrive.

Ahead of Budget 2023, DIGI called on the Government to reduce excise by 7.5% which it says would help business viability by offsetting the rising costs elsewhere.