Irish Tourism Entering Perfect Storm with Brexit and Cost Increases
The Irish Hotels Federation (IHF) has criticized Government’s decision not to reverse the tourism VAT hike, which came into effect following last year’s budget. Michael Lennon, President of the IHF said the increase in VAT from 9% to 13.5% has seriously undermined Irish tourism’s international competitiveness and the ability of tourism enterprises such as hotels to re-invest in their business and local economy.
Mr Lennon states: “Budget 2020 is heralded as a Budget for Brexit. Despite the serious challenges facing tourism, Government has failed to recognise the importance of competitiveness and its role in the ever increase in the cost of doing business in Ireland. This is a missed opportunity to rebalance the tax take from tourism at a time when economic indicators provide significant warning of a change in outlook”.
“Our industry has been one of the great success stories of the economy in recent years, supporting 270,000 jobs and promoting balanced regional growth across the country. It is therefore disappointing that the Government has failed to recognise the exceptional challenges now confronting tourism businesses. A rate of 9% VAT is the appropriate level for Ireland and would put us mid-range in a European context. This is what the Government should be looking at to ensure long-term sustainable growth of our industry.
“Ireland is already a very high-cost economy by international standards which adds to the challenges of an indigenous export industry and this is being made worse by the higher 13.5% VAT. We are now in a situation where we have a higher rate of tourism VAT than 27 European countries with which we compete. Add to this the challenges around Brexit and the 27% drop in the value of Sterling in recent years and you have a perfect storm.”
Mr Lennon states that the impact is being felt on the ground by tourism businesses with 57% of hotels having seen a fall in overall business levels this year according to recent research by the IHF. The UK market is very challenging with 78% of hotels having seen a fall-off in business from Great Britain and 60% reporting a decrease in business from Northern Ireland. Some 64% report that the drop in the value of Sterling has had a negative impact on business levels while 73% say they are now re-examining investment plans and taking a more cautious approach for next year.