Cost Competitiveness a Serious Concern for Irish Hoteliers


·   Hoteliers calls for a 30% reduction in local authority rates

·   Concerns over duplication and potential wastage at Irish Water

·   National competitiveness strategy needed for all Government-controlled business costs


Monday 24th February 2014: The high cost of doing business in Ireland is the single most pressing issue for Irish hotels and guesthouses according to an industry survey* carried out by the Irish Hotels Federation (IHF). Speaking on the eve of the IHF’s 76th Annual Conference, Michael Vaughan, President called for immediate and radical Government action to tackle public sector costs, including local authority rates, water charges and energy-related levies. He called for a clearly defined national competitiveness strategy for all business costs under the control of the Government.


The survey, which was carried out earlier this month, cites excessive local authority rates as the most critical issue facing hoteliers in terms cost competitiveness. The IHF stresses that this is stifling Irish tourism’s ability to compete more effectively for domestic and overseas tourists. 


“The hotels sector stabilised in 2013 largely as a result of the relentless work of hotels and guesthouses to slash costs where there was any level of flexibility. We have brought costs down by a massive 24% since 2008. Hotels are now much leaner, having restructured their business models throughout the downturn, improved their products and lowered prices. There is nowhere else for hoteliers to go to cut cost and increase our competitiveness.” says Mr Vaughan. “Government determined costs on the other hand have not changed to adapt to the new economic reality.”


Call for 30% Reduction in Local Authority Rates

The biggest single cost that hoteliers have no control over is local authority rates. Hotels make a disproportionate contribution to local authority funding, with many hoteliers being levied rates of up to €3,000 per bedroom and average local authority rates equating to €1,500 per bedroom, regardless of occupancy rates. It is effectively a stealth tax on tourism equal to approximately 7% per room per night before all other costs and taxes are taken into account.


“It’s now over a decade since the 2001 Valuation Act came into force and yet over two thirds of hotels are still waiting to have their rates reviewed by the Commissioner of Valuation. Those that have been revised saw reductions of over 30%,” says Mr Vaughan. “The time for waiting is now over. The Government needs to step up to the plate and take immediate action. We’re calling on Minister Phil Hogan to instruct the remaining local authorities to introduce the same reduction as an interim measure while we wait for revised valuations to be completed across the rest of the country.”


In many cases the lack of action on local authority rates has affected hotels located in rural areas that are at the same time overly exposed to weak domestic consumer demand. Mr Vaughan says: “This double blow is having a detrimental impact on hotels and creating a vicious circle by forcing them to significantly cut back on essential investment in marketing and refurbishment – thereby threatening their viability.”


Urgent Need to Tackle High Utility Costs – Water and Energy

An area of deep concern for hotels and guesthouses is the enormous level of duplication involved in setting up Irish Water. Mr Vaughan states: “It is very difficult to see how this new structure will result in a more cost effective national water services unless substantial cost efficiencies are achieved. The initial signs are not at all promising and there is real risk that businesses will end up paying higher water charges than those we currently pay as a result. This would be entirely unacceptable to hotels and guesthouses.”


Mr Vaughan cited energy-related levies as another area of contention, in particular the decisions by the Commission on Energy Regulation (CER)** to impose additional levies on electricity customers at a time when businesses are facing a difficult economic environment.


He stated: “We are very concerned about future levels of the PSO levy and are calling for a fundamental review of the scope and burden of the PSO, including the projected burden in the coming years. The Government needs to address this urgently with the Commission for Energy Regulation.”





Eoin Quinn / Siobhan Molloy                         Dublin office: 01 6798600

Weber Shandwick                                                                                    Mobile: 087 233 2191 / 086 817 50 66



*Survey based on responses owners and general managers of hotel and guesthouse businesses across the country and conducted during February 2014.


**The Commission on Energy Regulation’s Decision Paper on the Public Service Obligation (PSO) levy for 2013/14 can be found at: http://www.cer.ie/GetAttachment.aspx?id=17786c98-2fea-4ea8-8ec5-6e4623d7269e


Background on Local Authority Rates

In Ireland, the Valuation Office operating under the Valuation Act 2001 assesses the level of rates that local authorities can charge businesses. Prior to the enactment of the Act, businesses could seek a revision of their rateable valuations on a number of grounds including deterioration in the profitability of the business. The 2001 Act removed this method of seeking relief on the basis that the legislation envisaged that every rateable property in the country would have its valuation revised every five to ten years.


To date, only a quarter of properties have had revisions carried out by the office of the Commissioner of Valuation. The revisions that have been completed have resulted in the local authority rates liability of hotels being reduced by on average more than 30 per cent. Based on this experience, it is reasonable to suggest that similar results would be achieved if revisions were completed in the remainder of the country. 

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