As our political leaders engage in government formation talks, the incoming administration must adopt a new approach to secure the long-term future of our industry. A fundamental change in focus is required to put Irish tourism and hospitality on a more stable footing.
One important first step the next government must take is to reposition tourism and hospitality; move it from its current department and situate it within an economic portfolio within a reconfigured Department of Enterprise.
Applying more of an economic lens to our country’s largest indigenous employer would allow for a more joined-up and coherent approach to best support the industry. It would ensure a greater focus on creating the optimum conditions for business viability and maximising our potential as a key driver of growth and prosperity.
This makes sense from a policy planning perspective given the vital role tourism and hospitality enterprises play in sustaining employment and local economic activity, particularly throughout the regions.
We face many risks as an industry. Those posed by external economic and political developments outside of our control are always a concern, particularly international events that affect travel. These can have a disproportionate impact on our sector given the discretionary nature of tourism and hospitality. However, as we have seen in recent years, more often than not it is the measures that are within our government’s control that trip us up. Ultimately, this stems from insufficient vision and priority for our sector.
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For this week’s episode, host Ciarán Hancock was joined by a stellar panel to look forward to 2025. They tried to predict what would happen with foreign direct investment with Donald Trump back in The White House, a new coalition government is to be formed but will it solve the decade-plus housing crisis, and they consider the impact of artificial intelligence – can it live up to the hype of the last two years? The panel comprises Feargal O’Rourke, the former PwC managing partner, who now wears many corporate hats, including as chairman of IDA Ireland, Marian Finnegan is Managing Director of Residential at Sherry Fitzgerald, the country’s biggest firm of estate agents, while Chris Horn is a tech entrepreneur and columnist at the Irish Times.Produced by John Casey with JJ Vernon on sound.
For example, an analysis by the department revealed that a small hospitality business could see a 14.5 per cent increase in payroll cost in 2024, largely due to the Government’s own policies, including a series of employment-related measures. The impact for the sector as a whole is estimated to be more than €450 million in additional costs this year alone and €1.4 billion by 2026.
These are additional costs for businesses to contend with, not to mention a 50 per cent increase in our hospitality VAT rate going to 13.5 per cent from 9 per cent. The VAT increase is having a significant impact on food-led businesses, whose margins have been decimated.
As a business owner, I know the impact of these and other exorbitant cost increases. My own business will contend with a 14 per cent increase in coffee by year-end while our recent electricity bill was just shy of €20,000 — the same bill in 2019 was €7,500. And that’s just two examples.
The government mustn’t take its eye off the ball regarding the risks posed to our tourism offering, in the immediate and longer term. Most at risk is the range, quality and availability of food experiences for domestic consumers and overseas visitors. This is a key element of our tourism product and must be nurtured. Failure to do so would inevitably lead to declines in tourism activity across several fronts with significant negative impacts on downstream business.
As we look ahead to 2025, the high costs of doing business, reduced consumer demand, squeezed disposable income, rising food costs, utilities and housing shortages are all weighing on the minds of those working in the sector.
Add to this the Dublin Airport passenger cap and you would be forgiven for thinking that we are being forced to operate and compete with one hand tied behind our backs. Enhanced air access and connectivity are vital for the long-term development of the economy, particularly at Dublin Airport, which accounts for more than 85 per cent of air passenger travel. This ill-conceived cap is jeopardising future growth and requires an urgent intervention by government.
Moving tourism and hospitality to an economic portfolio and approaching the industry through this lens would go a long way to bringing the pieces together to allow the industry to grow and increase its contribution to the exchequer.
We are by far the State’s largest employer, responsible for 270,000 livelihoods and generating some €10 billion in tourism revenue annually. Our industry is a key enabler for diversified and balanced regional economic development. It should not be taken for granted.
As someone who has worked in tourism and hospitality for more than three decades, operating a successful, regional family-run hotel, I know first-hand the positive contribution our industry makes and its future potential. By the end of this decade, tourism and hospitality are aiming to achieve a 50 per cent growth in revenue to more than €15 billion per year, employing over 350,000 people. It’s an achievable goal, and one the industry is capable of realising provided all the dots are joined up. This requires a renewed focus and vision from the incoming government.
Michael Magner is president of the Irish Hotels Federation
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