Bookings for hotels across Galway are strong for the summer period, but hoteliers are warning that there may be trouble ahead as room shortages and a possible VAT increase pose threats to the industry.

In a letter to local Oireachtas members, the Galway Branch of the Irish Hotels Federation has come out fighting against a proposal to hike the reduced VAT rate for tourism and hospitality by 50% to 13.5%.

Chairperson of the Galway Branch and owner of the Claregalway Hotel, Paul Gill, told the Connacht Tribune that should this tax increase go through, it could prove fatal for the industry.

“This is coming on top of 15% food inflation and 30% energy inflation. The minimum wage increased by 8% at the start of the year, and I have no issue with that but people forget that all the rates above that went up as a result.

“Our cost base has seriously gone up in the last year and if this VAT increase comes in, we have no option but to pass it     on to the consumer – there is no room left to absorb these increases,” he said.

The effect would be reduced competitiveness in the international tourism market which would drive down demand, said Mr Gill, risking jobs not only in hotels but in the countless spin-off businesses that benefit from international visitors.

“We have been lucky this year in that our bookings have remained flat on 2022 numbers – they haven’t gone down but they’re not going up either. But our cost base is up by around 17%.

“At the same time, consumers are feeling the pinch and disposable income is getting tighter. People are looking for value and while there was a pent-up demand in 2022 and 2023 after Covid, I can definitely see numbers going backwards in 2024,” he said.

With soaring mortgage interest rates at home and abroad, and an inflation crisis that showed no signs of abetting, holidaymakers were likely going to rein in their spending, he added.

The shortage of available rooms was exacerbating the problem, said Mr Gill, with significant numbers of hotels being used as emergency accommodation for refugees and asylum seekers.

“It’s more acute in seasonal hotels. City centres wouldn’t be as affected by seasonal changes because they have year-round business. But places that are seasonal are taking it up because they are being offered guaranteed revenue [from the Government].

“When a hotel is closed to tourists, it has a knock-on effect on the local coffee shops, restaurants, pubs and craft shops. The figures show that international tourists, versus domestic tourists, spent three times as much money,” said Mr Gill.

A number of tour operators who struggled to secure accommodation for this year and next year were looking at other destinations for 2024, he continued.

Responding to criticism that some hotels were ‘price gouging’, he said in many cases, the prices being shared online did not reflect a true picture of what was being charged.

“For most hotels, the booking windows are only opened around 90 days in advance, so for bookings further out, many hotels will just stick the price at €1,000 in the knowledge that nobody will book it,” said Mr Gill. “If they checked back twelve weeks later, they might get great value.”

The industry was still feeling the effects of the staff shortage that has plagued hospitality since Covid restrictions lifted last year.

“When hotels are used for emergency accommodation, that has an effect on staff because these places don’t need as many staff. But that’s juxtaposed with a position where we can’t get staff and there is no accommodation available to house our staff in,” he said.

Meanwhile, domestic tourists have been turning their attention to foreign holidays in search of better value.

A survey carried out by the Irish Travel Agents Association (ITAA) for the first half of this yar showed the majority of operators have experience an increase in bookings compared to 2019 – the last year before Covid-19.

In comparison to the same period in 2019, almost 70% of travel agents reported a 10% or higher increase in bookings.

Top destinations included Spain, Portugal, France and Italy, with the Algarve, Canary Islands and the Costa del Sol all remaining popular with Irish holidaymakers.