Hotel room rates in Dublin will return to their 2007 peak of €109 a day next year on the back of growing demand and a lack of new supply, a report published today predicts.
The news comes just days after the Irish Hotels Federation (IHF) called on the Government to maintain the special 9 per cent tourist industry VAT rate it introduced in 2011 to aid recovery in the sector by allowing it to cut costs and compete with the rest of Europe.
The report by PricewaterhouseCoopers (PwC) predicts the average hotel room in Dublin will cost €109 a day in 2016, “back to the 2007 peak”.
PwC's yearly European Hotel Forecast shows that, in 2014, guests paid an average of €95 for a room. This year they can expect to be charged €102. If the rate climbs to €109 next year, costs will have risen by almost 15 per cent between 2014 and 2016.
The average revenue hotels earn from each room is also on the rise. Last year, it was €75, this year the consultants expect it to be €81 and it is set to rise to €88 in 2016. The figure was just €57 in 2011. Dublin will have the highest revenue growth rates in Europe in 2015 and 2016, say PwC.
At its annual conference last week, the IHF published a report by economist Prof Alan Ahearne claiming the 9 per cent VAT rate created 30,000 jobs and was a "highly cost-effective way to boost competitiveness". The federation argues the reduced levy will remain critical to the industry.
The Government cut the rate from 13.5 per cent in 2011 to support job creation in tourism, which had endured a downturn that began in 2007, the year PwC says room rates in Dublin peaked.
Fáilte Ireland figures show the number of visitors to the Republic fell 4 per cent in 2008 to 7.4 million. They dropped to 5.9 million in 2010. In the same period, the numbers for all Ireland fell from nine to 6.6 million.
In 2008, tourism was down 2 per cent globally. Niall Gibbons in Tourism Ireland acknowledged the country had lost competitiveness.
Minister for Finance Michael Noonan has warned he would consider re-introducing the 13.5 per cent rate if the industry is not passing on savings to consumers.
