Has Ireland become too pricey for tourists? An economist and a tourism industry representative debate

Irish Times

5 hours ago

David W Higgins: Ireland's hotel and restaurants prices are almost 30% higher than EU average
When
tourists
travel there are a mix of costs. This can include flights, car rental, souvenirs and guided tours. High on the list is the cost of
restaurants
and
hotels
. It's basic. Tourists need somewhere to stay at night and eat throughout the day. The
prices
set for these items can decide if their trip happens or not.
It's therefore disappointing to continually find that Ireland compares poorly across Europe when measuring these costs.
Eurostat recently compared
countries for the mix of prices on hotels and restaurants in 2024. It found that Ireland was 29.3 per cent higher than the EU average. The only country higher than us was Denmark on 47.6 per cent.
There's a silver lining in being second because it means the Danes can feel rich travelling here. I once met a Dane who said coffee in Dublin was really affordable. You can imagine the raised eyebrows and blank stares from anyone who heard this. With a population of just six million, Denmark won't be enough to keep Ireland a vibrant tourist destination going forward.
The years emerging from the Covid pandemic saw countries around the world rattled by supply chain disruption and an emergence of meaningful price jumps for the first time in decades. Consumer prices in Ireland are up 25 per cent across the board since 2016.
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As wages have also risen here and elsewhere, we can assume this first 25 per cent move isn't an issue. It's price growth above these levels that should worry us. That's where restaurants and hotels continue to sound alarm. Prices linked to restaurants and hotels are up 39 per cent on 2016, according to Eurostat.
What's worse is that this masks the underlying mix of the two parts. Inflation data is compiled with the Irish consumer in mind. In a given year, many of us spend sizeable amounts with local cafes, pubs and restaurants. Our spend on hotels is a much smaller fraction.
Inflation among accommodation providers is up a seismic 77 per cent. It's manageable for locals and sometimes unnoticed because domestic travel is less frequent than our visits to restaurants. Now put yourself into the shoes of international travellers. Their mix of spending is heaviest on accommodation. It's the main plank of their trip.
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The hospitality sector has admittedly faced rising input costs. All sectors have. We can give further allowance to policy changes such as higher minimum wage levels. This has notched up wages across hospitality at a pace higher than in other sectors. You can understand how restaurants, cafes and pubs have had to pass on higher costs. It's just hard to feel sympathy for hotels.
But how is this possible? Surely a competitive market will attract new hotels, B&Bs and other sources of supply? The opposite has taken place. The surge in migration sent the Government scrambling for beds. Hotels were offered safe contracts which guaranteed income, instead of the precarious fluctuations they normally face from tourism.
Even with
International Protection Accommodation Services
numbers falling, the latest data shows 7 per cent of hotel rooms are still used for this purpose. Releasing these rooms would mean a welcome easing to price pressures.
It's all the more essential given the clouds that now hang over the tourism sector. The latest CSO data on international arrivals showed a 10 per cent decline in May, compared with the same month last year. Travellers from continental Europe are down 21 per cent.
You might have expected travellers from America to be down, given the moves in the dollar this year. Numbers are actually up 11 per cent. But this is only cause for more alarm. As the tariff story unfolds, we may also see a turn. Americans are on course for a big inflation development of their own.
Something's gotta give somewhere, because international tourists will only keep giving so much.
David W Higgins is an economist
Eoghan O'Mara Walsh: Nearly two-thirds of all holidaymakers rate us as 'very good' or 'good' value
Now that we are in the peak summer tourism season, a question often asked is if Ireland is still a value-for-money destination? In my opinion, the answer is yes – and crucially it is not my opinion that counts. Fáilte Ireland, the State agency for tourism, carries out annual surveys with tourists as they are holidaying here. One of the key responses that is closely monitored by industry leaders is the value-for-money question. The latest available research shows Irish tourism is doing pretty well: 63 per cent of all holidaymakers report Ireland as being 'very good' or 'good' value, with a further 32 per cent rating us as 'fair' value and only 5 per cent rating us as 'poor' value. US visitors, buoyed by a relatively strong dollar were most positive; cash-strapped British and price-conscious Europeans a little less enthusiastic.
The truth is that Liveline anecdotes about how expensive Ireland is as a holiday destination are often more of a domestic concern, whereas the international visitor tends to be a little more insouciant. The three primary reasons visitors come to Ireland after all are low-cost to no-cost: the friendliness of the people, the stunning scenery, and our culture and heritage.
That's not to say Ireland isn't a northern European destination in terms of costs and prices. Last month, as noted above, Eurostat ranked Ireland as the second most expensive country in the EU, with prices 38 per cent higher than the average. That is bound to find its way into the pub, restaurant and hotel bills that consumers pay. There is a huge onus on tourism and hospitality businesses to continue delivering a compelling experience for visitors. If the quality of the Irish tourism product drops then we certainly will have a problem.
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How Irish tourism is faring this summer depends on who you talk to. National Central Statistics Office numbers indicate a double-digit tourism decline for the first half of the year, whereas industry data is less alarmist, pointing to a flat year.
Consistent feedback, though, from all quarters is that escalating costs of business continue to squeeze already tight profit margins. Many of these business costs are of course State-induced and tourism chiefs are rightly pressuring Government to row back on some of these impositions. That is why industry leaders are pushing for Government to deliver on its commitment to restore the 9 per cent VAT rate for hospitality on budget day.
My economics lectures may have been some time ago but even I remember that adding supply to meet demand helps moderate prices. So as well as curbing costs of business, the Government should be working to attract additional capacity into the market. Instead it seems to be doing the opposite. Tourism chiefs are mystified with the proposed draconian clampdown on short-term rental tourism properties. There is widespread agreement urban centres need more long-term rentals but the blunt way the legislation is currently designed means there is a real risk that rural and coastal Ireland will be denuded of holiday homes and self-catering properties, a staple of Irish tourism for decades. Taking so much stock out of the market is going to do nothing to support our value proposition. And why hasn't the passenger cap at Dublin Airport been lifted by this stage? It has been debated ad nauseam. More air access into the island's main gateway would lead to greater competition and better value for visitors coming to our shores.
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Tourism and hospitality is the country's largest indigenous industry and biggest regional employer. There are more than a quarter of a million people employed in the sector across 20,000 businesses. Put simply, tourism matters. Minister for Tourism Peter Burke is set to unveil a new national tourism policy this autumn. Hopefully it will match the ambitions of the industry. But sustainable growth can only be enabled by pro-tourism and pro-enterprise policies. Competitiveness is all-important. Let's curb additional business costs and facilitate extra supply into the market. That will be a win for the visitor, for industry, for the exchequer and for the communities across swathes of regional Ireland where tourism is the only show in town.
Eoghan O'Mara Walsh is chief executive of the Irish Tourism Industry Confederation