By Sean Moriarty

Bernadette Randles, the chair of the Kerry Branch of the Irish Hoteliers Federation (IHF) has warned that business “will fold” as a result of this week’s budget.

Budget 2023, which was announced Tuesday afternoon by Minister for Finance Paschal Donohoe, and Minister for Public Expenditure and Reform Michael McGrath, confirmed that the VAT rate for service industries like hotels and guesthouses will increase from 9% to 13% on March 1.

This is on top of rising energy costs and the general increase in doing business in Ireland as a whole.

Ms Randles said the Government does not understand the hospitality industry.

"The tourism sector will be disappointed with the Government’s decision to increase the Tourism 9% VAT rate by 50% from March 1 next year and that the Government has not fully recognised the importance of the tourism industry to every town and every county in Ireland," an IHF statement said.

Busy hotels in Killarney and other tourist towns lead to busy town centres as guests visit other hospitality and non-related businesses.

Difficulties in the hotel industry affect everyone in Kerry; in pre-COVID times the sector supported 15,700 jobs and generated €592 million in local tourism revenues annually.

“You are going to see businesses folding,” Ms Randles told the Killarney Advertiser.

“It is hard to see how the smaller person will survive.”

Plans to add 11 new bedrooms to the Dromhall Hotel could be put on hold following this week’s budget.

“This was already on hold for three years but now I am going to seriously look at it and where it goes.”

Nationally, the industry employs 230,000 people, a drop from 330,000 in pre-pandemic times but these latest cost increases will further delay the industry’s full recovery.

Denyse Campbell, President of the Irish Hotels Federation, said that while elements of the Budget will help hoteliers, the sector feels that the Government have missed an opportunity to continue support for employment recovery and growth in tourism.

Ireland’s tourism VAT rate is the second highest in the European Union, and far above other European countries where tourism is a significant part of their economies, such as Portugal (6% Tourism VAT), Turkey (8%) and Malta (7%).

“Hoteliers and the tourism industry believe that 9% is the right VAT rate for long-term sustainable growth. Our industry has made great progress on restoring over 230,000 tourism jobs since the depths of the pandemic. We will continue to advocate for the retention of the 9% VAT rate beyond March 2023 and make the case for a labour-intensive industry that employs people in all parts of Ireland, including 70% outside Dublin,” said Campbell.

Hotels and other businesses will benefit from the Temporary Business Energy Support Scheme aimed to offset the cost of rising energy bills.

Ms Randles said that will only go so far.

“One Kerry member has seen an increase from €121,000 in his annual ESB bill to €375,000, that's over €1,000 a day to keep the door open.”

She was also critical of the national media who consistently ran price gouging stories throughout the summer.

“You never hear of them reporting on the good side of hotels, the people that stay and have great experiences, the GAA clubs we support, the charities we give to, free meetings rooms if community groups want them.”