The Irish Hotels Federation (IHF) have expressed serious concern for the future of the industry following recent comments by Minister for Finance, Michael Noonan which have led to uncertainty surrounding the tourism VAT rate.
In its recent industry survey, hoteliers nationwide attributed their optimistic outlook for the tourism industry, in part, to the VAT stimulus introduced in 2011.
The Government’s decision to reduce tourism VAT to 9% in the Jobs Initiative 2011 has provided a vital stimulus for hotels and guesthouses according to the survey with 99% of hoteliers saying the measure has had a positive effect on their business. Similarly, the reduced PRSI rate for employers was also a helpful initiative for members nationwide with almost 87% of those surveyed indicating that it has had a positive impact on their businesses.
However, the majority (88%) of members surveyed indicated that any withdrawal of the tourism VAT rate would result in decreased staffing levels over the next year.
Mr Tim Fenn, Chief Executive, Irish Hotels Federation, urged that the VAT rate be retained to allow for further growth in the sector.
“The 9% tourism VAT rate initiative allowed tourism businesses to survive and create thousands of additional jobs at the first sign of an early and fragile recovery. We’re very concerned regarding comments by the Minister in recent days and urge him to consider the net benefit to the Exchequer of such an economic stimulus for our industry which has created vital jobs in towns and villages throughout the country.”
He said, “The retention of this rate is vital to the stability of the already fragile economic recovery and any attempt to withdraw this support will only serve to reverse the current momentum.”
The IHF noted that a series of pro-tourism measures by the Government over the last two years have been important in allowing Ireland to recover some of its competitiveness when marketing Irish tourism internationally.
Overall, confidence levels are up on last year with 71% of respondents indicating a positive outlook for trading conditions for their business over the next twelve months.
The number of hoteliers concerned about the viability of their business is still high at 63% but the number who are very concerned has reduced from 28.1% (October 2012) down to 6.5%.
Most of the respondents (in excess of 90%) are concerned that the Government may not retain the reduced VAT and PRSI rates in 2014.
Hoteliers cite excessive local authority rates (49%) and high utility costs (44%) as the most pressing issues stifling cost competitiveness within the sector.
Accessing standard/normal credit facilities from their banks during the last year is still an issue for 29% (compared 36% 2012) of respondents. .
On a national basis, almost 78% of hoteliers saw an increase in business levels during the summer months compared to the same period last year (8% report a decrease and 14% report no change). 63% of respondents indicated an increase in business levels from US visitors. Great Britain continues to lag behind with mixed results; 37% of those surveyed reported that business was up, 26% reported that business was down and 37% experienced no change. The Island of Ireland levels of business were up on the back of the good weather this summer and Continental Europe also showed signs of improvement.