Increases of up to 200 per cent in hotel and guesthouse insurance premiums this year have resulted in the profits of some operators being completely wiped out, the Irish Hotels Federation (IHF) claimed yesterday, writes Eithne Donnellan.

The federation called on the Government to address the problem of soaring insurance costs immediately. It also expressed serious concern at other increased costs facing the sector, including a VAT rate that is the second highest in the euro zone.

IHF president Mr Jim Murphy urged the Government to cut the 12.5 per cent VAT rate on hotel and restaurant services to bring it more in line with the rate in other EU countries.

"Our rate compares with Portugal at 5 per cent, France's rate of 5.5 per cent, the Netherlands and Belgium are at 6 per cent and Spain is 7 per cent. This places the Irish hotel industry at a distinct disadvantage from the outset," he said.

The rising costs are, according to Mr Murphy, set against "a very patchy year" for the sector, which directly employs almost 60,000 people.

"The sector has seen a sharp decline in the number of overseas tourists from all markets, with the US market alone down 29 per cent on the 2000 figures.

"Fifty-one per cent of our sector say business is down on last year - an extremely poor year given foot-and-mouth disease and September 11th," he said.

"It has been a very difficult year - more especially for those small family-run properties, many of which are located along the west coast," he said. "Since 2001, the sector has also witnessed wage-cost increases of between 8 and 15 per cent and electricity increases of 14 per cent with a further 9 per cent upcoming."

Mr Murphy also said reports of gross overcharging by Irish hotels and guesthouses were "largely unfounded" and had not helped an already difficult situation.