The Budget 2022 package for tourism and hospitality has received a mixed reaction from different quarters of the industry. The decision to extend wage subsidies to the end of
next April was welcomed, as was a package of spending tourism and hospitality spending measures of more than €100 million.
However, the failure to extend beyond the end of next summer the special 9 per cent VAT rate for the sector was labelled a “disaster” by Adrian Cummins, ceo of the Restaurants Association of Ireland.
Meanwhile, the wider tourism industry welcomed €89 million in business continuity grants and extra marketing funds, as well as €60 million to extend to the end of the year a waiver on commercial rates for hospitality tourism and arts.
The Restaurants Association of Ireland (RAI) said the budget was “disastrous, [with] no ambition to stimulate and revitalise the tourism industry”, which has been one of the worst hit by the pandemic.
Eoghan O’Mara Walsh, the chief exethe Irish Tourism Industry Confederatioutive of ITIC, said it was “very disappointing” that the VAT rate had not been extended: “It damages our competitiveness when industry will be in fragile recovery phase. Ireland to have one of the highest tourism Vat rate across European Union. ”
Mr O’Mara Walsh welcomed a further €50 million announced by Minister for Public Expenditure Michael McGrathin business continuity grants that will be administered by Fáilte Ireland, expressing the hope they will be paid “promptly” in the first quarter of the year.
Mr McGrath also announced €39 million in enhanced funding for tourism marketing. Mr O’Mara Walsh said the split between extra marketing funding for domestic and international tourism would be “crucial”. Minister for Tourism Catherine Martinlater said that €35 million of the funding would go on international marketing.
She also signalled a further €10 million in funding for industry skills training, digital technology, and financial support for the Aer Lingus US College football classic, due to be held in the Aviva stadium next year.
The Vintners Federation of Ireland, which represents pubs outside of Dublin, welcomed the extension of wage subsidies and the industry’s financial supports as “meaningful”, but said it was “disappointed by the VAT decision.
The tourism industry also welcomed a €90 million package of spending measures for aviation, to help boost connectivity to the State. The restoration of key airline routes after the lifting of public health restrictions has been a key industry demand to help reboot the tourism and hospitality sector, which employed 265,000 before the pandemic.
The €60 million which is being allocated to extend the commercial rates waiver for the last quarter of this year is a positive move for businesses. However, we had hoped to see a guarantee in place for businesses across all sectors, with today’s announcement of the waiver applicable only to businesses in the hospitality, arts, and certain tourism related sectors.
Welcoming the additional funding allocated to Tourism Ireland in Budget 2022, Niall Gibbons, Chief Executive of Tourism Ireland, said: “We very much welcome the additional €39 million which has been allocated to tourism marketing and product development in Budget 2022, which demonstrates the Government’s continued commitment to Irish tourism in these extraordinary times. As we restart tourism from overseas, this additional funding will allow Tourism Ireland to ‘put our best foot forward’ and roll out a really strong programme of promotions throughout 2022.
“We know from our research that there is significant pent-up demand among travellers in our overseas markets to return to the island of Ireland as soon as possible. However, we also know that there will be significant competition in the marketplace; every destination across the globe has experienced the impact of COVID-19 and will be seeking its share of the recovery. This additional investment will allow us to upweight our new campaigns in our international markets, punch through the noise and convert ‘lookers’ to ‘bookers’.
“Aviation has been particularly hard hit by the pandemic, so we also welcome the announcement of a separate fund of €90 for aviation recovery. As an island, direct, convenient and competitive access services will be critical to restarting and rebuilding inbound tourism. We look forward to working with our airport and airline partners, to build a long term sustainable recovery for our tourism industry.”
Hotels and guesthouses across the country have cautiously welcomed the range of measures and supports announced today by Ministers Paschal Donohoe and Michael McGrath. Irish Hotels Federation (IHF) Chief Executive, Tim Fenn, said the extension of employment supports and the rates waiver scheme are a welcome recognition of the challenges still being faced by tourism and hospitality businesses.
Mr Fenn however expressed serious concerns about the December cliff edge in the EWSS employment support scheme which would impact on hospitality businesses that may experience a seasonal Christmas uplift, thereby excluding them from further support during the bleak months of January to April when business levels fall off dramatically. He urged the Government to provide a sector specific exemption for hospitality businesses. Additionally, he said that the lack of commitment to a rates waiver beyond December 2021, when the industry enters its quietest business period, is also a source of significant concern and must be reconsidered by government as part of tourism recovery measures.
Mr Fenn also welcomed the additional targeted supports announced for the wider tourism, culture and arts sectors including €39m in enhanced tourism marketing and product development, €90 million to rebuild air connectivity and €50m in business continuity supports.
Calling on the Government to reconsider its position on the 9% VAT rate, he said this vital measure should be extended until after 2025 in order to safeguard overseas tourism recovery and competitiveness. He said: “Failure to commit to an extension of the 9% VAT in this Budget is deeply regrettable and does not take account of the scale of decimation experienced by our industry. The Government is failing to recognise the importance of this measure as a contributor to international competitiveness and to the Irish tourism business model. In the aftermath of the last recession, the 9% VAT rate was an important enabler in job growth and created 90,000 tourism jobs – one of the most successful job support measures introduced in the history of the State.”
“Our competitiveness is also being seriously hampered because of the high cost of doing business here in terms of insurance, local authority rates and energy costs amongst other factors. This lack of competitiveness has been compounded by the decision not to retain the 9% rate putting Ireland in a situation where we will have the second highest rate of tourism VAT in Europe. This must be reviewed at the earliest opportunity,” stated Mr Fenn.
The IHF Chief Executive added: “Tourism is Ireland’s largest indigenous industry, accounting for one in ten of all jobs, 70% of which are outside of Dublin. Government supports have been important to restoring employment and will continue to be going forward, helping to support the viability of individual businesses and the wider sector until business levels recover. In the summer months, the hotel sector alone recovered almost 30,000 jobs – bringing the total number of livelihoods supported by the sector to 57,000. While that is still some bit short of the 65,000 it supported in 2019 it is still a remarkable achievement.
While tourism performed well during the summer months in some regions, hotels and guesthouses now face an uncertain period until the 2022 summer season. Booking levels have fallen sharply in the absence of overseas visitors. Meetings and events which would normally sustain the sector during the off-peak season are also below expectation. Under the most optimistic scenario for the remainder of 2021, average occupancy is projected to reach 32% for the year as whole – a significant collapse in activity compared with 2019, when room occupancy was 73% and only a modest increase on the all-time historic low of 30% reached in 2020.
Hotels and guesthouses will have seen a combined €5.3bn drop in revenues across 2020 and 2021 as a direct result of this crisis with overall revenues dropping 68% in 2020 and 55% this year. Expectations are that overseas tourism into Ireland will remain severely constrained next year and is unlikely to recover to pre-Covid levels until 2024/2025. “Budget 2022 didn’t go far enough to address this,” said Mr Fenn.