A leading hotelier claims the Government has a “complete lack of understanding of how business works” and is turning Ireland into another Switzerland in terms of prices.
Des O’Dowd, the owner of Inchydoney Island Lodge and Spa in west Cork, said Government policy over the past number of years had made Ireland “a very expensive place to live and holiday”.
He claimed the reason why Dublin and Cork airports were experiencing record passenger numbers was not because of an increase in inbound tourists but because Irish people “are finding it better value to holiday abroad”.
“There hasn’t been a hotel bedroom built in west Cork in 20 years and it’s difficult to see that changing,” he said.
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Mr O’Dowd, who has operated the hotel since it opened in 1998 and owned it since 2008, estimated that prices across the hospitality industry here had gone up by more than 10 per cent since last year principally because of the return to the higher 13.5 per cent rate of VAT and because of increased payroll costs.
Higher prices are because of Government policies and “not because people are trying to rip you off”, he claimed while suggesting Ireland was ceding a competitive advantage to other European countries and was fast becoming comparable to traditionally high-cost locations like Switzerland.
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Instead of addressing the underlying reasons for higher costs, Mr O’Dowd said Government parties were now trying to woo business with grants and “sweeteners”, which he described as “quick-fix” solutions.
He dismissed recent Fine Gael proposals to allow the hospitality sector to pay a reduced rate of VAT on energy to ease the pressure on cafes and restaurants in the face of mounting business closures.
“The VAT charged on energy is recoverable by businesses, so an increase or decrease does not affect the profitability of a business,” Mr O’Dowd said, suggesting this showed the Government had no idea what was driving business costs.
He noted his hotel’s electricity bill in 2023 was €386,487, more than double what it was in 2019.
“I don’t really want a grant from the Government. I want them to address why we have the most expensive electricity in the EU,” he said.
The hotelier also claimed the Government’s refusal to reduce the rate of VAT on hospitality in the budget, in the wake of advice from the Department of Finance’s Tax Strategy Group (TSG) which claimed it would constitute “an enormous transfer of taxpayers’ money to the sector”, showed “a basic lack of understanding of how VAT works”.
“VAT is paid by the final consumer. As a business, I collect VAT on behalf of the government, but it is the consumer who pays it,” he said.
“When VAT rates go up, I increase my prices accordingly and when they go down I also decrease my prices. If the Tax Strategy Group don’t understand how VAT works, then it’s going to be very difficult to advise on good tax policy,” he added.
Mr O’Dowd also disputed a claim by the TSG that Ireland’s 13.5 per cent rate was in the middle of European VAT rates, claiming instead it was one of the highest.
The Department of Finance declined to comment but insisted the VAT rate for hospitality here was not out of kilter with other European jurisdictions.
“If the Government were able to say, these are complex issues and we’re going to spend the money on fixing them rather than giving you a little sweetener, I think people would buy into that,” Mr O’Dowd said.
“But they don’t have any vision for trying to resolve these issues, they have too much easy money and they’re looking for quick fixes,” he said.
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