Mr. Eoghan O'Mara Walsh:

I thank the committee for the invitation to be with members today to talk about the current challenges facing tourism accommodation providers in Ireland. ITIC is the umbrella representative group for the tourism sector in Ireland. We represent 20,000 businesses.

As the committee will know, tourism is the State's largest indigenous industry and is the biggest regional employer, with 70% of the jobs being outside Dublin in regional Ireland. Covid walloped the sector with no international tourists allowed into the country for a two-year period. We are joined today by Mr. Paul Kelly, the chief executive officer at Fáilte Ireland. Fáilte Ireland estimates that, net of very generous Government supports, the tourism industry lost €6 billion as a result of the pandemic.

Thankfully, recovery has been strong over the past 12 months. ITIC estimates that 2022 saw a 73% bounce-back in the inbound tourism number by comparison with the number for 2019, prior to the pandemic. Having said that, there is a feeling of nervousness and apprehension about 2023, with soaring costs of business, a weakening economy here and overseas and, crucially, the impact of Government contracts with tourism accommodation suppliers.

I am here to talk about the current challenges facing tourism accommodation providers. While demand is strong, supply is compromised, and this – allied with business inflation – is posing the tourism industry significant challenges. It is crucial that Irish tourism maintain its value proposition. The experience that the domestic or international tourist gets must continue to be of very high quality.

The cost of running a tourism accommodation business continues to rise. Figures from EUROSTAT show that our minimum wage is 70% above the EU average, that electricity prices are 14% above the EU norm and that we have the second-highest cost of credit across the EU. These undoubtedly find their way into the price charged to the consumer. There is often talk in the media about high tourism accommodation prices. Undoubtedly, a small number of tourism operators charge excessive prices, but these are not reflective of the broad tourism industry. It is important to stress this. The vast majority of the 20,000 businesses I referred to charge fair and reasonable prices.

It is important to always revert to data in these discussions. Fact, rather than anecdote, should drive this debate. The latest available independent data for February show the average daily rate of a hotel room in Ireland was €143. This rises to €150 for Dublin. This is 26% above the amount for the same month in 2019. The increase is significant but we should remember it is over a four-year period and with inflation running at a very high level. I do not need to tell members about energy, labour and insurance cost increases, to name but a few over this period.

A key factor this summer that is likely to affect price concerns Government contracts for Ukrainian refugees and asylum seekers. The associated demand seriously compromises tourism accommodation supply. Currently in regional Ireland, 32% of all tourism beds have been given over to the Government for non-tourism purposes. This will have a serious impact on price because demand and supply will be completely out of sync. Imagine if the Government removed a third of all cranes from construction sites or a third of all tractors from farms. Such actions would have a profound impact on the supply and price of buildings and farm produce. How could tourism be any different?

If the Government's over-reliance on tourism accommodation stock continues, there will be few tourism beds in tourism towns up and down the country and thus little tourism activity. Consider County Donegal, for example, where over 50% of tourism beds are contracted to the Government. The proportion is 40% in County Clare and 37% in County Kerry. Undoubtedly, this will affect the price of the remaining tourism beds; however, worryingly, downstream tourism businesses, including restaurants, attractions, inbound operators and activity providers, will all miss out on the tourism dollar.

There has been a supply shortage across Irish tourism accommodation for some time. This has now been compounded by the humanitarian crisis. Tourism operators are prepared to play their part but cannot be asked to be the primary accommodation provider to the detriment of a broad industry. There needs to be a much more balanced approach to housing refugees, including through the use of vacant dwellings, unused buildings and State institutions, as well as hotels and guest houses.

ITIC welcomes the Government's recent decision to extend the 9% tourism VAT rate until the end of the summer, but this is only one factor in managing prices. Moderating inflation, increasing supply and, crucially, enabling competition are all critical. Ireland will never be the cheapest destination and we have a very high cost-base by comparison with European peers, but we always need to be mindful of value. Industry operators and Government policy must work tirelessly to protect our reputation in this regard.

I thank the members for their time. I will be happy to answer any questions they may have.