Cost bill 'frightening': Cork hoteliers seek VAT reduction to battle rising costs

THE reputation of Ireland’s tourism industry and its future growth are at risk if the Government doesn’t reduce VAT to the “correct rate of 9%”, take measures on employers’ PRSI, and widen the scope for Government support for tourism and hospitality businesses, the Cork-based president of the Irish Hotel Federation has said.

The comments from Michael Magner, the owner of the Vienna Woods, came as a new report from the Irish Tourism Industry Confederation says there is a need for Government measures to support the industry which is “at the tipping point” due to cost increases and capacity constraints.

“If your business has to absorb costs and you absorb those costs without passing them on to your customer, you’re going to put yourself in the situation you may not be able to trade,” Mr Magner said.

“The Government have it in their gift to rebalance these challenges. There’s no doubt about it, Ireland is not a low-cost international destination, but equally there’s a point that people will be dissuaded from visiting Ireland above other destinations if costs aren’t controlled,” said Mr Magner, who pointed out that Ireland’s VAT rate was one of the highest in Europe.

“While businesses in Europe have seen the same inflationary pressures, their cost base is an awful lot lower and that, in itself, gives them a competitive edge.”

Mr Magner said that no hotelier objected to increases in the minimum wage, but pointed out that some relief could be allowed in terms of employers’ PRSI, and he also called for the loosening of criteria to qualify for support through an enterprise support package introduced last year.

Gougane Barra Hotel proprietor Niall Lucey said that while the business already booked for 2024 would sustain him for this year, the bill for costs the hotel would incur during the coming season was “frightening”. He expressed a fear that the increased costs, through the VAT hike, would have a sharp negative impact on business for next year.

“All the work we have coming in this year is from sales that were made last year and the year before — 2024 is OK, we can do it, we can get through, but 2025 is the one the tour operators are saying will be the major concern because of the impact of what they did over the winter - the increase of VAT and the living wage which has a knock-on effect up the line. The impact of this on an Irish, European or global competition set means next year is the one we’re going to have be careful about.”