Hospitality industry representatives tell Pavel Barter what they would like to see,and what they would prefer not to see – in the October budget 2027.
Hospitality industry representatives have called on government to reject a “tourism tax” in Budget 2027. The visitor levy, imposed on paid overnight accommodation and adjudicated by local authorities, is commonplace in some European cities.
Eoghan O’Mara Walsh, CEO of Irish Tourism Industry Confederation (ITIC), said his members were not in favour of the proposed levy, describing it as “additional taxation on a sector already heavily taxed. Fáilte Ireland data tells us 29% of every euro a tourist spends already goes back to the Exchequer. In Dublin alone, the average hotel bedroom pays about €1,000 in commercial rates.”
The technical aspect of processing a tourism tax would cost hotels severely, noted Paul Gallagher, Chief Executive of the Irish Hotels Federation (IHF). “We don’t have [software] programs at the moment to deal with this, so we would have to either invest in new software or it would be manpower driven. The real worry is that all of the money from tourists would go into the day-to-day budgets of local authorities and there’d be no additional funding in terms of new infrastructure, events or tourism attractions.”
The tax threatens investor confidence, suggested Alva Pearson Downey Inbound Tourism Operators Association of Ireland (ITOA) “Whether these measures happen or not, they cause uncertainty and affect investment decisions. We want the Department [of Enterprise, Tourism and Employment] to take positive action in this regard.” Minister Peter Burke has expressed concerns about the levy. “He said publicly and privately to us the bed tax is a bad idea and something he is not in favour of,” said O’Mara Walsh. “Our fear is that if the idea of a bed tax happens in Dublin, suddenly there will be a bed tax in every local authority.”
Prospects look better in the run-up to Budget 2027 than they did last year, following a permanent reinstatement of the 9% VAT rate. ITIC want to see the 9% rate go further than foodservices and be applied to attractions, activity providers, and camping sites. An economic study, which ITIC undertook with economist Jim Power, found that introducing a 9% VAT rate for the attraction and activity sector would cost €17m: a modest investment, perhaps, considering the potential return.
Come budget day on October 6, cost of business is likely to be foremost on the minds of hospitality operations. “The CSO is recording double-digit tourism growth year-to-date and that’s not felt by hotels or airlines or tourist attractions,” said Eoghan O’Mara Walsh. “They’re seeing single-digit growth.” Energy is a major cost in 2026, according to Paul Gallagher. “We are the second most expensive destination in Europe for energy. The cost components in our transmission and generation network are out of kilter.” The IHF chief wonders if demanding data centres are putting a disproportionate strain on the entire system.
The solution, he suggested, is to reform the system through “massive” investment. “There is a strategic interest that the country develops good water and energy networks. Infrastructure jobs require state funding because they position the whole economy into the future. Businesses are paying a disproportionate amount to bring investment into the networks.” According to the IHF, 50% of a hotel’s energy invoice is not for energy – it’s for the network charges that accompany it. So Budget 2027 should address energy network charges.
Costs of employment are an ongoing concern. The National Minimum Wage (NMW) increased by nearly €3.95 per hour since 2021 from €10.20 to €14.15: an increase of nearly 39%. A recent RAI member survey found that rising labour costs are threatening business viability for over 90% of restaurateurs. 75% stated they have reduced or will reduce staff hours due to rising labour costs. And 56% of businesses now report labour costs exceeding 40% of turnover. This “negates the win we had with the 9% VAT,” stated Adrian Cummings, CEO of Restaurants Association of Ireland “We’ll be lobbying on this issue quite aggressively over the next five years.”
The minimum wage represents a small portion of the IHF’s workforce. Data shows that only 20% of staff in Irish hotels are on NMW – and these employees are typically college or school students working part-time or across summer seasons. However, NMW increases also impact higher pay grades, creating unaffordable margins in the current climate. ITIC and the RAI contend the minimum wage should be aligned with inflation. IHF is cautious about this approach. “Linking to inflation is a great idea when you have a stable inflation horizon,” said Paul Gallagher. “But not when the inflation horizon is unstable.”
Hoteliers and restaurateurs both want to see a lower PRSI rate for employers. RAI’s pre-budget submission includes a request for a no-tax policy on customer tips and gratuities, which Cummings described as a “double taxation for restaurant owners”. RAI also want a reform of Benefit-in-Kind rules, which dictate that non-cash perks provided to staff (such as free meals, tips, and vouchers) are treated as taxable income. Restaurateurs are also calling for a reduction in excise duty and increased investment in hospitality skills, apprenticeships and workforce development. They are not alone in this regard.
“We need to upskill the industry, particularly around AI and sustainability,” remarked Paul Gallagher of the IHF. “We don’t put enough weight into tourism and hospitality careers. A lot of practical training centres for culinary skills are being mothballed around the country.” Gallagher called for the release of money from the National Training Development Fund, “so we can put apprenticeship training on an equal footing with construction and other trades.” IHF also want greater funding for Skillnet, the national workforce development agency of Ireland, in order to create targeted and timely training programmes.
In 2027 Ireland is set to introduce strict curbs on short-term letting agencies in an effort to force holiday lets into the private rental market. ITIC believe this will exacerbate a lack of hotel stock in regional Ireland. “Tralee, Kilkenny, Gorey, Athlone, are going to lose thousands of tourism beds,” said O’Mara Walsh, “We need additional hotel stock around the country. A pipeline of new construction in Dublin is welcome. But outside of Dublin we have a problem. There’s a lack of economic viability for investors and developers and hoteliers to extend or build new properties. That’s going to put a handbrake on tourism growth.”
ITIC called for an initiative in Budget 2027 that will stimulate hotel expansion in regional Ireland. Alva Pearson Downey at ITOA recently raised the topic with Minister Peter Burke. “The budget must address Ireland’s tourism accommodation deficit to acknowledge that we have a serious issue,” she said. “We need accommodation delivery to become a national priority and we need clarity on how the beds will be delivered. We need government intervention that looks at fiscal opportunities for regional Ireland.”
Most stakeholders believe continued investment in tourism must be a priority in Budget 2027. For the RAI this means support for the development and delivery of the forthcoming Culinary Tourism Strategy (outlined within A New Era for Irish Tourism – the new National Tourism Policy). Alva Pearson Downey wants to see investment increases for Tourism Ireland (“so that investment remains focused on mainland European market diversification, North America and Canada”) and Fáilte Ireland (“for destination experience development programmes [DEDP] which provide regional destination development, a framework for visitor experiences, regional tourism infrastructure and destination readiness.”)
ITIC want an additional €50m allocated in the Budget to Tourism Ireland and Fáilte Ireland (on top of the current €240m of government budget expenditure allocated to the bodies) “to help the sector market diversify, help us face the challenge of AI and become more sustainable. It’s going to be important if we’re going to future proof the sector.”
Despite the reinstatement of the 9% VAT rate, it’s a volatile situation as we advance through 2026. The Iran war is ongoing (at the time of publication of this article) and jet fuel prices remain high – which will depress demand. Aer Lingus’s decision to cut back on routes will also impact confidence in their sector. But indigenous industries like tourism and hospitality, unlike FDI and multinationals, are controllable. These businesses cannot be outsourced or moved to a different country and deserve investment in Budget 2027.
Hospitality businesses are encouraged by the publication of the government’s Cost of Business Advisory Forum Report, which may encourage relief for beleaguered businesses. “We hope there are recommendations in the Report that will translate into reductions in costs for industry,” noted Paul Gallagher. “Not just for our sector; for all sectors.” Eoghan O’Mara Walsh added: “We’d like to see some of the recommendations within the Report implemented in Budget 2027. “It’s a direction I’m happy with. Government is finally recognising business costs for what they are: a handbrake on the Irish economy.”
