With overseas visitors down more than a quarter and increases of 300% in energy bills compared to before the pandemic, now is not the time to hike VAT rates for hospitality.

That is the plea from the chairperson of the Galway branch of the Irish Hotels Federation (IHF), John Ryan, who is urging the Government to keep the 9% VAT rate for the tourism and hospitality sectors indefinitely.

The Government delayed the introduction of a 13.5% rate until March 1 at a cost of €250 million to help the sector get back on its feet after Covid.

Minister for Public Expenditure Paschal Donohue referred to price gouging in hotels over the summer as one of the key reasons he was upping the rate.

Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media Catherine Martin last week stated that it was no secret she had sought the retention of the 9% rate in negotiations for the 2023 Budget and “will continue to seek it”.

The lobby group for small to medium business, ISME, has called for the reduced VAT rate to be brought in for the entire services sector.

The owner of the Ardilaun Hotel in Taylor’s Hill said the average price of a hotel room was €167 last year. With 4,000 rooms in Dublin booked out to accommodate refugees, the price of the remaining stock was at a premium.

“You could find a couple of examples all over the country where people were charging unfair prices and were wrong. There were a few serious spikes – maybe 1% of overall accommodation stock in Dublin did that. If I was a customer I wouldn’t pay it,” Mr Ryan said.

“But they shouldn’t penalise the entire sector because of that 1%. The 9% is the right one. We would be the same as other countries where tourism is a key industry. If we went up to 13.5%, we’d be the second highest after Denmark.

“We couldn’t absorb that. We have already contracted our foreign business for 2024/25 – we’d have to go out and tell suppliers we are putting up rates. That’s just not on.”

With almost all key tourism markets experiencing a cost-of-living crisis, the last thing the industry can cope with is a tax jump.

Of 27 EU countries, the VAT rate on accommodation is 9% or lower in 16 countries.

Tourism supports 22,000 jobs throughout Galway, generating €910 million in tourism revenues annually for the local economy.

Last year the average room occupancy levels were 69% for the West, just 1% lower than national rates. Over the same period in 2019, however, room occupancy was at 78% nationally.

This is largely due to a shortfall in overseas visitors to Ireland, with numbers still down more than 25% last year compared to 2019.

A recent survey found that hotels and guesthouses were reporting reduced levels of forward bookings compared to the same time in 2019.

Some 57% report reduced bookings from Great Britain, 48% say bookings are down from Northern Ireland, while 37% record fewer bookings from the rest of Europe. US bookings are down 41%.