Tourism and hospitality groups last week warned that businesses in the industry are facing a 'perfect storm' as they grapple with an increasingly challenging operating environment due to rising costs, falling food sales and very tight margins.
In a joint statement, they warned that this is being further compounded by the increased 13.5% VAT rate, which came into effect in September 2023.
Government Meeting
The group were speaking in advance of a meeting with Minister Jack Chambers and Minister Paschal Donohoe this week.
Tourism and hospitality groups have reiterated their call on the government to reinstate the 9% rate of VAT for hospitality food service businesses.
Negative Outlook
This comes after findings from recent industry research looking at over 700 hospitality food service businesses, show that over three quarters (77%) now have a negative outlook for trading conditions over the next 12 months with businesses reporting a 9% average drop in the value of their food sales so far this year.
Virtually all hospitality businesses surveyed (96%) say they are being negatively impacted by the 13.5% VAT rate while some 68% say it is having a very negative impact on their business.
Severe Challenge
The chief executives of the Irish Tourism Industry Confederation (ITIC), Restaurants Association of Ireland (RAI), Vintners Federation of Ireland (VFI), Irish Hotels Federation (IHF) and Licensed Vintners Association (LVA) called on the government to act decisively to address the challenges facing food service businesses.
'Our sector is at a crossroads with hospitality businesses struggling to deal with the increased 13.5% VAT rate alongside very tight margins, falling food sales and significant increases in operating costs,' they said.
'However, despite reassurances that it understands the financial challenges facing our sector, we have yet to see a meaningful government response to the severe challenge facing hospitality businesses.'
Reduced Hours
The research found that some 46% of businesses say they have reduced their opening hours while over a quarter (26%) say they have reduced the number of days they open. Meanwhile, 59% of those surveyed said they had cut back on the range of their food offering.
Nine out of ten (91%) respondents report a fall in profitability for food-related services year to date.
'Downstream Business'
'As we look to develop and grow our hospitality and tourism product, the focus should be on making us more attractive as a destination and enhancing the range and availability of tourism and hospitality services,' said the group.
'However, the combined effect of the 13.5% VAT rate and additional government-controlled costs is having the exact opposite outcome by seriously undermining our tourism food offering and the viability of downstream businesses.'
