Tourism from Ireland's largest markets is down substantially on pre-pandemic levels as the industry learned last night that the VAT rate will remain at 9% until the end of August.
The tourism rate was cut to 9% in an effort to support hotels, restaurants and other hospitality businesses hit during Covid. Government sources said last week that the 13.5% rate will return when the temporary measure lapses at the end of this month.
Ministers believed that funding needs to be set aside for further cost-of-living measures later in the year, while concerns over "price-gouging" by some hotels remain. But ministers last night signalled they had listened to the industry's concerns and was keeping the VAT at 9%.
It comes as Fáilte Ireland yesterday published worrying figures that show "substantial decreases in visitors".
Compared to pre-pandemic levels in 2019, tourism from Britain was down 21%, North America was down 20%, mainland Europe dropped by 8% and other long destinations were down 15%.
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Irish Hotels Federation (IHF) President Denyse Campbell had earlier said a return of the 13.5% VAT rate would be a "50% increase in consumer taxes for Irish tourism".
"With Failte Ireland reporting that our largest tourism market Great Britain was down 21% last year compared with 2019, what possible justification can there be for the Government to increase Ireland's tourism VAT rate, making it the third highest in Europe?" she asked.
"A tourism VAT rate of 13.5% would undermine our competitiveness and result in people paying an additional €400m more in taxes each year on everything from the price of a cup of coffee, to the price of a meal out, a stay in a hotel and the cost of a wedding."
Still, Ms Campbell added: 'Hoteliers and tourism operators are particularly concerned about the UK market for 2023 and beyond, with the country facing a bleak economic outlook, with inflation hitting a four-decade high and the country heading into a prolonged economic slowdown and possible recession." The falling visitor numbers match the decline in flights to Ireland, which have not fully returned from the pandemic lockdowns.
Travel industry expert Eoghan Corry explained: "It's reflected in the aviation figures. We've lost loads of flights to Britain. If you go back to 2019 before the pandemic we had 20, 21 flights a day to Heathrow - it's down to about 14 now."
"It's not just pandemic related, a lot of it is Brexit related as well, and the way that the shape of aviation has been changed by Brexit."
The IHF is particularly concerned about the fall in British visitors as the UK faces severe economic headwinds. This is despite efforts to promote Ireland as a destination, most recently by Line Of Duty star Adrian Dunbar - who has fronted two series of a documentary exploring the best the island has to offer. The programme Adrian Dunbar: My Ireland saw the Co. Fermanagh man return to his native Enniskillen, before travelling to Co. Donegal to visit Slieve League and Glenveigh National Park.
Elsewhere, efforts are underway to capitalise on the success of the Oscar-nominated The Banshees of Inisheerin, which was filmed on the Aran Islands, off the Galway coast.
