The July Stimulus Package – a tourism perspective

The COVID-19 pandemic has triggered an unprecedented crisis in the global tourism economy. The situation in Ireland is even more severe, with Fáilte Ireland describing the impact as catastrophic. The sector was the first to close, has been impacted the most and will take the longest to recover.

Ireland’s tourism sector is heavily dependant on international travellers for revenue (79% of total tourism revenue). The collapse in international travel leaves the sector in an extremely vulnerable position. While there has been much confusion over the recently announced “green list” of locations, as more countries are added to the list over time it should open up tourism opportunities.

In the absence of international visitors, the tourism sector is wholly reliant on the domestic market for demand. Social distancing restrictions for sporting, cultural and entertainment events, means that these normal demand drivers do not exist at the moment. Corporate events such as conferences and training have all moved on-line, further reducing demand. Because of these circumstances the leisure market will be the mainstay of the market for the short-term.

The government has announced a number of measures to support the tourism sector as part of the July Stimulus Plan, which are summarised below. While the measures introduced are a welcome first step in the road to recovery, more significant support will be required to ensure the long-term viability of the sector. 

Tourism is vital to employment and is the fabric of local communities across the country and for this reason deserves special attention. The six-month reduction in the standard VAT rate, falls short of what operators were hoping for. By contrast, the UK (which is much less reliant on international tourism because of the large size of the domestic market), has reduced the VAT rate for hospitality and tourism from 20% to 5% for six months until January 2021. A more significant and meaningful VAT reduction targeted at tourism is required, given the challenges being faced by the industry and concerns over short-term viability.

Among the measures which will benefit the hospitality and tourism sector are:

• Stay and Spend tax rebate worth up to €125 to individuals (max spend €625), which will run during the off-peak months of October 2020 to April 2021.
• A new Employment Wages Support Scheme will replace the Temporary Wage Subsidy Scheme and will run from September to April 2021. This will be available to businesses that have seen a 30% reduction in turnover. The scheme provides €203 per week per employee and will apply to new and seasonal employees. 
• The standard rate of VAT will be cut from 23% to 21% for six months from 1 September, which will be a boost for beverage sales.
• A waiver of commercial rates for the six months to 30 September 2020 (with limited exceptions).
• A €10m Restart Fund will be made available to tourism sector.
• €10m pilot Performance Support Scheme for culture sector to assist with event planning.
• The Restart Grant has been increased from €10k to €25k, with the minimum grant amount increasing to €4k. The scheme has been opened up to more SMEs, which will benefit hotels in particular, as well as now including B&Bs.
• The €2bn Credit Guarantee Scheme, first announced on 2 May, has been modified to provide for terms of up to six years with a capital and interest repayment moratorium of up to 12 months. While take up of the existing scheme has been relatively low, these new changes should make the scheme more attractive for viable tourism businesses.

The COVID-19 pandemic has resulted in unprecedented change for tourism businesses. Managing the crisis requires leadership, vision and foresight. At Crowe we understand the obstacles, the challenges and the risks and are ideally placed to help you adapt and create lasting value for tomorrow. 

For further information on how Crowe can support your business please contact a member of our Hotel, Tourism and Leisure team.