Editorials

The Irish Times view on crisis in the hospitality sector

Just as the pandemic storm began to clear, restaurants, pubs, cafes and hotels have been swamped by spiraling inflation and soaring energy prices.

President of the Vintners’ Federation of Ireland Paul Moynihan has said he is looking at everything that is using electricity in his bar in Donard, Co Wicklow, to see if it can be curtailed.
Thu Oct 13 2022 - 19:00

The hospitality sector was brought to its knees by Covid-19, with enforced closures, social distancing rules and the effective emptying of cities and towns posing an existential threat. It was propped up in those hard times by expansive State supports. However, just as the pandemic storm began clearing last spring, restaurants, pubs, cafes and hotels were swamped by another potentially more devastating tempest in the form of spiraling inflation and soaring energy prices.

While few have been left untouched by the cost of living crisis, hospitality faces particular challenges with rigidly fixed costs, a reliance on under pressure suppliers, and a need for customers to have the wherewithal and the willingness to spend whatever discretionary income they have on what is, essentially, an unnecessary expense.

Talk to any business owner in the sector and they paint a bleak picture of what is happening and what is to come as they face unpalatable choices. They can try to absorb spiralling costs, they can pass them on to consumers struggling financially themselves or they can simply give up. Many are choosing the latter, with industry voices warning of a wave of closures to come. Many businesses are still going only because of State support offered during the pandemic including wage supplements, the VAT cut and tax warehousing.

Those wage supports are fading into memory now, the 9 per cent VAT rate is on the way out, tax warehousing is ending and the debt ceiling at which businesses can be forced to wind up will be lowered from ¤50,000 to the pre-Covid level of ¤10,000 in the new year. All of this leaves many businesses increasingly vulnerable.

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It has become a ministerial mantra that the hospitality sector was not propped up during Covid times just to watch it collapse now but words need to become actions. Energy credits are a much needed start but an extension of tax warehousing and debt management rules are essential, if only until next spring to help businesses – many of which are the lifeblood of local communities – to weather a vicious winter.