Some overseas friends planning a visit to Dublin next month asked my advice about hotels. They want to stay over for two nights, Friday to Sunday. Would I check availability and prices for them, somewhere around the city centre? What I found made it difficult to respond without embarrassment. They could stay at The Westin, with breakfast included, mind you, for €913. The Westbury could put them up for €780, but, alas, without breakfast. The Conrad was offering a double room with breakfast for €760. The Shelbourne came in at €576 — no mention of breakfast. They could, it appears, go for an upgrade there with a Heritage Junior Suite on offer for €3,200.
Well, that’s the city centre and these are, after all, five-star establishments. So, I decided to broaden the search and drop down a star or two. The Clayton, on Burlington Road, is asking €448, including breakfast. Jurys, in Parnell Street, is looking for €538 — no mention of breakfast. Jurys Inn, at Christchurch, is coming in at €648 — you get breakfast. The Maldron, in Smithfield, is something of a bargain at €418, without breakfast.
On the same dates in Brussels, the five-star Warwick on the Grand Place is €232, without breakfast. In Amsterdam, the five-star Hyatt Regency is €486, without breakfast. In Paris, the five-star InterContinental Le Grand is €600. All these prices are as quoted on Thursday on booking.com and are for refundable reservations for standard double rooms for August 18-20.
“Full restoration to 13.5% would yield €500m to the exchequer next year
These comparative figures need to be taken into account as the annual argument about the VAT rate for the hospitality sector gets under way. Originally introduced in 2011 by the finance minister at the time, Michael Noonan, it was billed as a temporary measure aimed at stimulating growth and creating jobs. VAT on hotels, restaurants, licensed premises and even cinemas was dropped from 13.5% to 9%. Domestic demand picked up as people chose to holiday at home and dine out more. Tourism from abroad increased. Employment in the sector picked up dramatically. In 2015, economist Alan Ahearne concluded that more than 30,000 new jobs had been created.
It was a clever decision by Noonan, not enthusiastically supported by all of his officials at the time. With the economy in recovery, albeit slowly at first, he came under pressure annually to review it. Last year he seemed to wobble, saying that he could not promise to sustain it. with intensive lobbying from the sector, however, he left it untouched. It is unlikely that it will survive into an eighth year.
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Nor does it need to. I defended the 9% VAT rate in the years of struggle and recovery — but the figures quoted above tell their own story. And they are mirrored across the country, even in locations that do not have the tourism draw or the critical mass of the Dublin market. Hotels in the other principal cities are operating at near-maximum capacity. The restaurant trade generally is booming, although much of the traditional licensed trade in towns and villages is, admittedly, on the ropes. All credit to the hoteliers, the restaurateurs and the progressive publicans who have raised their game, taking advantage of the tax break and adapting to changing market tastes. Supported by Failte Ireland’s marketing, the result is an instructive example of what can be achieved when the state and business go hand-in-hand, with common purpose and a clear vision.
According to a briefing paper recently prepared in the Department of Finance for Paschal Donohoe, the new minister, “the measure has done its job with robust growth in visitors and employment in the tourism area. The general recovery in the economy and increasing prices in the sector raises questions about its future”.
The department calculates that a full restoration to 13.5% would yield €500m to the exchequer next year. And it warns that if the government wants to follow through on its undertaking to reduce the universal social charge, alternative sources of revenue will have to be found. The belief is that the tourism business is now at a sustainable level and can continue to grow, provide employment and pay its way along with every other industry.
One would not expect those within the industry to agree. A former president of the Irish Hotels Federation has warned that raising the VAT rate could damage the economy and cause job losses again. There has already been a significant drop in the numbers of UK tourists since the Brexit referendum. Further drops in sterling will make us less attractive as a holiday destination for our neighbours.
There won’t be a lot of traction for that argument with jam-packed hotels and restaurants charging at rates comparable to, or higher than, many other places in Europe. A great many state services, cut to the bone in the recession, are still limping and remain severely under-resourced. For example, a third of the extra VAT that could be recouped from the hospitality sector could fund the national cancer strategy, for which there doesn’t appear to be any money. In truth, government doesn’t have a choice here any longer.