Amendments Nos. 1 to 3, inclusive, are related and may be discussed together.
Finance (Covid-19 and Miscellaneous Provisions) Bill 2022: From the Seanad
The Dáil went into Committee to consider amendments from the Seanad.
Seanad amendment No. 1:
Section 7: In page 15, line 29, to delete “and” where it secondly occurs.
The amendments refer to the Government decision with regard to the 9% VAT rate. The House will be well aware of the challenge that sector has faced during a prolonged period of the implementation of public health measures, due to which restaurants and hotels had to be closed for so long. I am also conscious that we are now in a position where, at the end of this month, the employment wage subsidy scheme, EWSS, that has provided large and much-needed support to the hospitality sector will no longer be available. Therefore, it is appropriate to give certainty and clarity to the hospitality sector on where it stands. It is especially important to see the hospitality sector have a good summer and then a successful off-shoulder period between November and February. I hope hotels, in particular, will be in a position to be able to give clear pricing to tour operators and that restaurants in the run-up to the Christmas period will be able to give certainty regarding the price on their bookings throughout that period. For all of those reasons, this extension is merited. I look forward to a discussion in the Dáil on it and, I hope, the support of the House.
These are three amendments that have been returned from the Seanad with regard to the Finance (Covid-19 and Miscellaneous Provisions) Bill 2022. We will support them. As the Minister said, they provide for an extension of the 9% VAT rate for the tourism and hospitality sector until 1 March 2023. It is worth pointing out that since this initiative was reintroduced in budget 2021, to run from 1 November 2020 until now, wherein it will now expire on 1 March 2023, it has come with a price tag of €902 million. That is a large price tag but we also have to recognise that the hospitality sector has been hit hard during the pandemic. It has a longer tail in terms of recovery. This 9% VAT rate will benefit a considerable number of areas, including restaurant supplies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks and hairdressing, to name but a few. It is there to support the sectors that have been disproportionately impacted as a result of the pandemic and to support employment and business survival into next year.
It is clear that the hospitality and tourism sectors have been considerably impacted but it should be noted that they have also received a large financial support from the taxpayer. Accommodation and food services have received more than €2 billion in subsidy payments through the employment wage subsidy scheme and warehoused nearly €500 million of tax through the tax warehousing scheme. They will now benefit from an extended reduction in the VAT rate. While this reduction will benefit sectors and big businesses that are genuinely struggling to enjoy pre-pandemic levels of trading, it will also benefit sectors that deserve greater scrutiny, especially the hotel sector in this city.
According to Fáilte Ireland's February 2022 hotel survey, hotel room occupancy jumped from 33.9% in January to 53.6% in February and demand is continuing to pick up due to relaxing Covid-19 restrictions. Bed space occupancy, the proportion of available bed space sold during February, was also well above January's rate of 24.3%, at 38.6%. However, room occupancy continued to lag behind pre-pandemic levels. In relative terms, room occupancy was nearly 17% below February 2019. Nonetheless, as has been the current trend, hotel room rates have surpassed those recorded before Covid-19. We see from the consumer price index that the price of hotel accommodation went up by 8.3% in April alone. Already in March, it had increased by 5.5% and it has gone up 20% in the past year. As we see real-time prices in May, the price is obviously increasing again.
It is clear that Dublin hotels have bounced back from the pandemic, with prices bouncing back even higher, as has been described by Conor Pope in The Irish Times. High hotel room prices have a serious impact on domestic tourists, those who need to come to the city for hospital appointments and others. It also has the impact of discouraging foreign tourists from visiting the capital and it has a knock-on effect on the other hospitality sectors that depend on those tourists. Given the significant State largesse distributed to the hotel sector at the taxpayer's expense, it is galling to hear some in the sector complain that hotels cannot compete with the social insurance system.
My suggestion is they should compete by increasing pay and improving workers' terms and conditions, which is a good start. There have been unprecedented State supports during the pandemic. It has been a form of corporate welfare which was necessary at the time. For the sector to call for cuts to social welfare will not cut it. Hotels are the beneficiaries of this 9% extended VAT rate, which will cost a total of €902 million since its introduction. There is a clear need for the Minister, on behalf of the Government, to outline the expectation of this VAT extension and how it will be passed on to customers. It is hard for many people to take. I know one cannot differentiate between the hotel sector and other sectors involved in tourism. I just went on to booking.com to look at hotel prices for the weekend after next. One night, which is in the Shelbourne, in fairness, costs €1,067. One night in another hotel costs €579. I am reading these out as they appear. Others cost €580, €516, €495, €499, €314 or €1,840 to stay in the Clarence for one night. Others cost €518, €634 and €441. These are rates that nobody can pay.
Hard cases come to our constituency offices involving young children who may have had to go to Temple Street hospital or Crumlin hospital and people ask if we know anybody in Dublin who will open their house to them. They cannot afford these rates of €400, €500 or €600 to stay in hotels that have benefited massively from taxpayers' money over the past two years. I am taking this opportunity, because I think it is appropriate, since the hotel sector will benefit from the 9% extended VAT rate, to ask the Government to intervene on the price gouging I believe is taking place in the sector. There is no way that hotel rooms should cost that amount. That will impact our tourism sector. We are not even into peak season. It will impact our tourism product and it will have a serious impact on individuals. As I have mentioned before, many people are impacted who were considering holidaying in Ireland and looking at short stays here in the city.
Hotel costs are not just high in this city. People on local radio stations have said they have gone to London instead. A woman called Marian was on Ocean FM. She said that on a Saturday night, she was going to be charged €888, €900 and €999 for one night in Dublin at three hotels. She did not go. She went to Britain instead. This is a trend that needs to be dealt with. The Minister of State said the 9% extension is a two-way street. The hotel sector needs to meet taxpayers mid-stream, because the taxpayers have supported this sector over a long time, particularly during the pandemic.
I thank the Deputy for the points raised. I differ with him about the description he used for the support for the hospitality sector. He described it as a form of corporate welfare. Nobody is no more aware than I am of how much support went to that sector, though I know the Deputy is aware of it too. He is right that it is the largest beneficiary of the employment wage subsidy scheme. It also benefited from the Covid restrictions support scheme. It received those funds and support because it is a huge employer in our country and we asked it to stay closed. That support was needed. It was not corporate welfare. It was put in place for a particular reason and at a significant cost. When I see restaurants and hotels that have reopened and are employing significant numbers, I see that it was a support that worked.
The Deputy makes a valuable point, which I communicated when this measure was announced, that we expect that the measure will be used in a way that delivers competitiveness to those who are staying in hotels and using businesses and allows these businesses to ensure that, after what I hope will be a good summer, they have a good run of trade and viability as well as being able to offer pricing that will give confidence to consumers to use our hotels and restaurants. I also want to say that hotels in Dublin that take the period ahead to charge prices that are just too high will ultimately lose out from that. Tourists both here at home and internationally will go elsewhere and we will end up with the kind of risks and challenges we faced in the past. We see a risk of Dublin tourism and hotels becoming unaffordable and uncompetitive. It is bad for them and for other businesses across our country that need Dublin as an entry point into the rest of Ireland's tourism offering.
As the Deputy was speaking about Dublin, I looked at the prices of hotels, bed and breakfast accommodation, and apartments in Donegal tonight. I can see that excellent value is available, with prices of €80, €95 and €85 to stay in good businesses in a beautiful part of our country that needs a good summer and a successful part of the year. Those are the businesses I have in mind when bringing forward this 9% extension. Businesses outside Dublin need a period of certainty to ensure they can have a successful period of trading, especially as they exit the employment wage subsidy scheme. As Deputy Doherty knows, though in fairness he did not suggest otherwise, I do not have the ability to differentiate the VAT rate between hotels, restaurants and different parts of the country.
I appreciate that Sinn Féin is supporting the extension we are making here. It is the right thing for the tourism sector overall. I emphasise that if good value and affordable prices for hotels are not offered over the summer period, it will ultimately unravel the ability of Irish tourism to grow and make progress again after two difficult years. It will ultimately also show why this 9% VAT rate should be temporary.
I have two brief points to make. With respect, I do not know why the Minister took issue with the term "corporate welfare". It was not used in a derogatory way. Just as we have an obligation and responsibility to support people who find themselves unemployed with welfare supports, as the Minister knows, I supported measures to support the corporate sector because of the restrictions and the pandemic. We wanted to make sure the employees were supported and that businesses were alive and able to continue to trade. It was not said in a derogatory way but said as acknowledgement of the support provided to the sector. The Minister made the point for me that I focus on Donegal. I support the extension of the 9%. That does not absolve the Government from dealing with the issue, which requires more than just the Minister for Finance telling the sector it will shoot itself in the foot by continuing to do this.
This is having a real-time impact on people in the middle of a cost of living crisis. People find it difficult when they come overnight for hospital appointments. Tourism is affected when people come to the city for major events and so on. I would like to see the Government be more proactive and to sit down with the industry and call it out in those meetings to make it clear. While there cannot be differentiation with VAT, there are other tax tools. Many other countries have bedroom taxes and so on. I am not suggesting the Minister go down that road, but there are options relating to this industry. More engagement with the sector is needed. The hotels that appeared randomly on my phone cost between €500 and €1,000 for a Saturday night in Dublin two weeks from now.
They are going to benefit from this measure. The least we could expect from Government is for it to sit down with them and tell them to cut this out. It is gouging. I would like to see the Government call the industry in, speak to the Irish Hotels Federation and deal with the issues that are arising, particularly in this city.
The time allotted for this debate having expired, I am required to put the following question in accordance with an Order of the Dáil of 24 May: "That Seanad amendments Nos. 1 to 3, inclusive, are hereby agreed to and agreement to the amendments is accordingly reported to the House."
Question put and agreed to.
A message will be sent to the Seanad acquainting it accordingly.