BUDGET 2016: Dublin hotels warned 9% Vat depends on room rates

The tourism industry has broadly welcomed the retention of the 9% Vat rate for the sector — but has been warned that rising hotel prices in Dublin meant the case for maintaining it is “diminishing”.

In a shot across the bow of the hospitality sector, Finance Minister Michael Noonan said:

“The 9% Vat rate is a major benefit to the tourism sector and is much sought after by other sectors in the economy.

"While the case for retaining the measure for the hotel sector in Dublin is diminishing each year with room rates rising particularly during major events, the case for retention of the measure for the rest of the country remains.”

However, Tourism Minister Paschal Donohoe said the rate could not be limited to certain parts of the country and, if it was changed, this would apply nationally.

“It is based on there being affordable and competitive prices for tourists right across the country. It’s maintenance cannot be assumed or taken for granted,” he said.

However, chief executive of the Irish Hotels Federation (IHF) Tim Fenn said it would be a mistake to consider dropping the rate for the hotel sector in Dublin.

“There is a compelling economic argument for retaining the 9% Vat rate as a long term measure.

"It has brought Ireland’s Vat rate in line with those of our European competitors and is resulting in increased revenues which are being invested back into the sector — creating further growth and employment.

"While hotel capacity is an issue within Dublin city centre at certain times of the year, Dublin remains one of the most competitively priced cities in Europe,” he said.

Mr Fenn pointed to a report from PricewaterhouseCooper which showed that of 20 major European cities surveyed, two thirds had higher average daily room rates than Dublin.

Fáilte Ireland’s CEO Shaun Quinn also welcomed the reduction of the 9% Vat rate, saying it would help deliver more jobs in the next year.

“The lower Vat rate allows Irish tourism to compete aggressively with competing overseas destinations and to provide our visitors with the good value to match the quality of our welcome.

"The continuation of this measure will help sustain growth and deliver more jobs in the year ahead,” he said.

The chief executive of the Restaurants Association of Ireland (RAI), Adrian Cummins, said the Government had taken the correct decision in retaining the measure.

“The retention of Vat at 9% into 2016 is crucial to not only the sustainability of restaurants and businesses in the tourism sector but also to job creation and the continued growth of our economy.

“This is the correct decision by the Government, it keeps Irish tourism competitive, attracts overseas visitors and most importantly allows for the creation of a further 50,000 jobs in the tourism and hospitality sector in the upcoming years,” he said.