Tourism and hospitality sector facing €1.4bn in extra payroll costs by 2026 

The report on behalf of the Irish Tourism Industry Confederation also argues for the return of the 9% Vat rate

The sector criticised the State’s over-reliance on the hotel sector for humanitarian purposes such as supporting Ukrainian refugees.

The tourism and hospitality sector could be facing €1.4bn in additional payroll costs by 2026 as a result of employment changes introduced by the Government, a new report has found.

The report was conducted by economist Jim Power on behalf of the Irish Tourism Industry Confederation (ITIC). The ITIC has claimed that mitigation measures are needed to ensure the competitiveness and viability of the industry.

Since the start of the year, the national minimum wage increased to €12.70 an hour — with further increases expected in the coming years. There have been increases in employer PRSI contributions, while statutory sick pay has increased to five days from three.

In addition, the Government is also seeking to introduce a pension auto-enrollment system in the second half of this year.

According to the report, all these changes will add 6.6% to the tourism and hospitality sector's total payroll costs this year alone and 19.4% by 2026.

Mr Power said that Governments need to be “very mindful” that tourism and hospitality businesses operate with “very thin margins and mitigation measures will be required to counter the cost increases”.

The report also argues for the return of the 9% Vat rate for the sector which was removed in September last year. It is also seeking changes to employer PRSI rates and an annual enterprise support package.

“Without these measures, businesses will be under severe pressure,” Mr Power said.

Chief executive of the ITIC, Eoghan O’Mara Walsh, criticised the State’s over-reliance on the hotel sector for humanitarian purposes such as supporting Ukrainian refugees.

“Over 20% of all tourism beds nationally have been taken out of the tourism economy at this stage by the Government. That is having a hugely destabilising effect,” he said as he called on the Government to make alternative arrangements to house refugees.

Mr O’Mara Walsh also said that the passenger cap at Dublin Airport — which limits annual passengers to 32 million — could jeopardise future tourism numbers.

Following the resignation of Taoiseach Leo Varadkar on Wednesday, chair of the ITIC Elaina Fitzgerald Kane said the new Taoiseach should look to move the tourism portfolio into the Department of Enterprise as it is a “vital economic engine for the country”.

“With St Patrick’s weekend behind us we’re now into the tourism season proper and it is clear that the industry is at a tipping point. North America looks strong but other source markets are soft and there is an enormous cost burden being imposed on businesses which is threatening the viability of many,” Ms Fitzgerald Kane said.