Rising costs put pressure on Irish hospitality

Hospitality has become a major pressure point in the Irish economy with a spate of high-profile restaurants forced to close because of higher running costs.

The 2025 Programme for Government promised to “bring forward measures to support SMEs, in particular the retail and hospitality sectors, acknowledging the increased cost pressures on these sectors and this will entail changes to VAT, PRSI and other measures.”

While a return to the reduced 9 per cent VAT rate for food-led hospitality businesses is not directly mentioned in the Programme, it is understood there was political agreement for the measure in the next budget. Department of Finance officials previously described such a move as “unjustified” and too costly.

Speaking about the VAT rate increase in January 2024 during Crowe’s Annual Irish Hotel Market Briefing, Aiden Murphy noted the impact it would have on the momentum of growth in average room rate, with the last such adjustment leading to a fall in rates as the higher VAT take for the Government outweighed what could be passed on to customers. A return to 9% would be a significant lever the Government could use to provide relief for the hospitality sector against current headwinds.