THE bounce-back for the hospitality sector post-Covid has been incredible, but issues such as flight capacity, the use of hotels and guesthouses to house International Protection Applicants, spiralling costs and higher interest rates, not to mention international events in Ukraine and Gaza, are all causes of great concern for the hospitality sector.
Doing business in an increasingly competitive international tourism market is definitely a prime concern for the Irish tourism industry.
The rise in the Minimum Wage to €12.70 on January 1 this year, along with an increase from three to five days for paid Statutory Sick Pay, and the pension auto-enrolment coming in late 2024, will all combine to increase costs across the sector, and it is inevitable that these will be passed on to the consumer.
The Irish Tourism Industry Confederation (ITIC) recently reported that the extra labour costs alone for Irish businesses could amount to an eye-watering €4 billion annually.
According to a recent survey by consultants Deloitte, 12% of tourist beds are under contract to the State for Ukrainians fleeing war or International Protection Applicants, and this has put an enormous strain on down-stream businesses such as restaurants and cafés in tourist locations, as they are not getting the footfall that was once attributed to these now unavailable bedrooms.
Another factor which has hurt the sector is the hybrid working culture which became the norm for many office workers during the pandemic.
This trend has continued and many workers are only attending the office a few days a week, while working from home the other days, meaning that there are large voids in morning and lunch-time trade for cafes, and restaurants in particular.
The issues of increased labour cost, the high cost of energy, continually high insurance premiums and a huge increase in food and linen costs have all combined to create a perfect storm, and this is all while hoteliers and restauranteurs worry about the looming May 1 deadline for Tax Warehousing, where they will have had to put a plan in place to repay the Government the VAT and PRSI payments they were allowed to postpone in the pandemic.
Minister for Finance, Michael McGrath, has recently stated that there is €1.75 billion currently owed by 57,000 businesses under this scheme and that they are seeking to introduce “flexibilities” for businesses who are suffering cash-flow difficulties and who will struggle to pay this money back to the Exchequer. On February 5 Minister McGrath announced that the interest rate on warehoused debt would be reduced to 0% and any interest paid on warehoused debt would be refunded.
Difficulties sourcing staff such as chefs is also a major problem in a country where unemployment is at 4.5% and this skills shortage has proven particularly difficult in the hospitality sector.
The lack of available accommodation to house these staff in prime tourism locations and cities is also proving to be a huge stumbling block when it comes to employing staff.
The re-introduction of a 13.5% VAT rate (up from the 9% rate brought in as a special pandemic measure) has really put a strain on all food service businesses. This increased price, when passed on to a consumer already struggling with high inflation, has meant that discretionary spend such as dining out is simply something customers have to forego.
Since the beginning of this year, household hospitality names such as Nash 19, Tung Sing, Pigalle Kitchen and the White Rabbit, all synonymous with food, family events and entertainment, one for the last 33 years, have now sadly closed their doors in Cork.
And it is not just in Cork that the effects are showing, in Killarney prime town-centre premises such as Garret’s Restaurant, Wild Café and Bake My Day all announced their closures recently, while in Kilkenny The Cutting Vedge, located in the heart of the city, has done the same after six years in business.
In fact, the Restaurant Association of Ireland (RAI) has put the number of closures in the last six months at higher than 280 businesses!
Adrian Cummins, Chief Executive of the RAI, has said that the first step the Government needs to take is the reintroduction of the 9% VAT rate for food businesses, which will go some way towards addressing their spiralling costs.
The flexibilities to the warehoused tax announced by Government, along with some stabilisation in energy costs, which in turn should lead to a decrease in areas such as food cost, will help in some way.
In the meantime, small hospitality businesses need to just try and hold on, and in quieter times like the month of February before the sector gets anywhere near the tourist season, they need all of our support to simply stay alive!
Dr Donagh Davern FIHI is a former Hotel General Manager & is a Lecturer in Hospitality Management at MTU.
More in this section
Cork lecturer: Strains on hospitality sector are on the rise
10
0
20.02.2024
THE bounce-back for the hospitality sector post-Covid has been incredible, but issues such as flight capacity, the use of hotels and guesthouses to house International Protection Applicants, spiralling costs and higher interest rates, not to mention international events in Ukraine and Gaza, are all causes of great concern for the hospitality sector.
Doing business in an increasingly competitive international tourism market is definitely a prime concern for the Irish tourism industry.
The rise in the Minimum Wage to €12.70 on January 1 this year, along with an increase from three to five days for paid Statutory Sick Pay, and the pension auto-enrolment coming in late 2024, will all combine to increase costs across the sector, and it is inevitable that these will be passed on to the consumer.
The Irish Tourism Industry Confederation (ITIC) recently reported that the extra labour costs alone for Irish businesses could amount to an eye-watering €4 billion annually.
According to a recent survey by consultants Deloitte, 12% of tourist beds are under contract to the State for Ukrainians fleeing war or International Protection Applicants, and this has put an enormous strain on down-stream businesses such as........
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