Tourism sector warned of 'value for money ratings' amid VAT hike threat

CEO of Fáilte Ireland Paul Kelly said that the inbound tourism recovered well in 2022 getting close to pre-covid levels towards the end of the year.

The tourism sector needs to be “really mindful” of its “value for money ratings” this year as many are concerned about inflation and the general cost of living, the Chief Executive of Fáilte Ireland has warned.

It comes as the Government is expected to decide this week on whether to remove the special VAT rate of 9% for the hospitality sector, which is due to expire at the end of this month, bringing the VAT rate back up to 13.5%.

Today, Fáilte Ireland held a virtual event for the tourism sector where it outlined its plans for 2023 which it hoped would bring ‘transformational change’ and drive ‘sustainable recovery’ of the sector.

Speaking during the event, CEO of Fáilte Ireland Paul Kelly said that the inbound tourism recovered well in 2022 getting close to pre-covid levels towards the end of the year.

However, Mr Kelly warned that this year “value for money will continue to be a key issue” with many concerned about inflation and the general cost of living.

He said that while the dollar to euro exchange rate has been a “big help” with the value perception amongst US visitors, “we are seeing early warning signs on our value for money ratings among domestic, UK and European visitors and this is something that we, as an industry, need to be really mindful of this year”.

‘Visitor satisfaction is high but offering good value for money is critical to converting domestic intention into domestic bookings,’ he said.

According to Fáilte Ireland, many tourism businesses expect this year to be better than 2022 but there are still a number of challenges the sector faces.

“There will be many businesses facing real challenges due to various supply side constraints either in their own business or in other sectors of the tourism ecosystem that they rely on.

“You don’t need me to tell you about the unprecedented rise in operating costs that every tourism business is experiencing: energy, labour, insurance, food and drink, linen etc. These rising costs are putting huge pressure on all operators and many businesses are struggling to maintain margins.

“Fáilte Ireland is engaging with all stakeholders to ensure that there is a full understanding of these cost pressures and to push for any actions which can be taken to help businesses manage this.” 

The tourism body said that its 2023 plans will focus on seven key areas which include business recovery, tourism careers, domestic marketing, opening the outdoors, industry digitalisation, destination development, and climate action.

Mr Kelly said: “These are driving sustainable recovery at the level of individual businesses; supporting employers and employees in making tourism an attractive long-term career; accelerating growth in domestic tourism; enhancing our outdoor tourism product and the quality of visitor experiences in destinations; building the digitalisation of the industry and driving climate action.”