Tourism will be imperilled if state keeps hoovering up hotel rooms

Tourism has seen strong numbers this year but supply is compromised and rising costs of business threatened profitability. Pic: iStock

The national economic dialogue in Dublin Castle last week brought together business representatives and social stakeholders to discuss directly with ministers their key concerns and hopes for autumn’s budget.

It is a credit to the political system that this type of engagement and constructive debate can happen.

Few other countries allow for such an open and consultative forum with government leaders. Ministers faced a dilemma. The economy is in a healthy state with a strong surplus expected by year-end. Yet they are anxious to convey that the risks are on the downside and that the nation’s finances are being buoyed by windfall corporation tax receipts which could not be relied on in future years.

Governments of yesteryear may well have been tempted to splash the cash but the current coalition seems intent, and rightly so, on prudently managing the national budget.

Ireland’s tourism industry is also facing a dilemma. Demand is certainly strong with air access particularly buoyant but supply is compromised and rising costs of business and inflation have all threatened business profitability.

Eoghan O'Mara Walsh ITIC: 35% of all tourism beds in regional areas are contracted to the Government for humanitarian reasons.

No sooner had covid retreated in the rearview mirror than Russian aggression in the east of Europe began. It is widely understood that the Ukraine war has had an inflationary impact on the whole economy but Ireland’s tourism industry has had an even more debilitating shock due to the Government’s over-reliance on hotels and guesthouses to accommodate refugees.

Latest departmental data shows that 35% of all tourism beds in regional areas are contracted to the Government for humanitarian reasons. Of course, hotels and guesthouses receive remuneration from the State for the important service they provide to refugees but the impact on downstream tourism businesses — pubs, restaurants, cultural experiences, retail offerings — is profound.

Research shows that for every euro a tourist spends on accommodation, €2.50 is spent on ancillary tourism services. This summer there will be tourism towns without adequate tourism beds and therefore with very little tourism activity.

Indeed, the State agency for tourism, Fáilte Ireland, has estimated that the Government’s over-reliance on hotels and guesthouses will cost the broader tourism industry €1.1bn. A mitigation fund for downstream tourism businesses is going to be needed very soon.

The State needs to urgently publish a comprehensive plan as to how refugees and asylum-seekers are to be housed and all forms of accommodation need to be explored. Modular housing, vacant buildings, unused dwellings, and State institutions, as well as tourism accommodation stock, must be used.

And of course, this is not just a summer crisis but instead a two- to three-year challenge.

Should the Government not change course and continue to hoover up hotel bedrooms then Ireland’s proud tourism industry will be imperilled.

At the national economic dialogue, tourism and hospitality leaders were calling on a whole-of-government approach and Department of Taoiseach-led response to this crisis.

It is clear minister Roderic O’Gorman and his officials are overwhelmed and a new strategy and new accountability is needed.

In such a context the plan to increase the tourism Vat rate on 20,000 tourism and hospitality businesses at the end of August would be both inflationary and nonsensical.

Eoghan O’Mara Walsh is Irish Tourism Industry Confederation chief executive