Five organisations representing businesses in the hospitality sector have written an open letter to the three coalition party leaders urging the Government to take action to stave off a growing commercial crisis within the sector before it is too late.
The groups say firms in the industry are facing a perfect storm as they grapple with rising costs, falling food sales and very tight margins.
"This crisis is largely being driven by the Government's own economic policies including a series of employment-related cost increases coming into effect in close succession," the letter to Simon Harris, Micheal Martin and Roderic O'Gorman states.
"The impact of these measures has been particularly acute for hospitality businesses given the labour-intensive nature of our industry."
The five signatories are the Restaurants Association of Ireland, Vintners Federation of Ireland, Irish Tourism Industry Confederation, Irish Hotels Federation and Licensed Vintners Association.
They claim businesses in the sector are predicting further cost rises over the next year, at levels significantly above inflation.
"This is on the back of a period of unprecedented operating cost increases in recent years," they write.
"Meanwhile, businesses are struggling to deal with the impact of the VAT increase coupled with the impact of significant pressures on consumer finances - all of which continue to reduce profitability and erode competitiveness."
The hospitality sector has been lobbying hard for the reintroduction of the 9% VAT rate on food related businesses in the Budget.
However, Government figures have expressed doubt about the possibility, because it is estimated that it would cost around €500m in a full year, which would be a big chunk of the €1.4 billion in tax cuts planned for Budget 2025.
The five organisations say the increase of the VAT rate back to 13.5% last September is seriously called into question by the damage done to businesses in the sector in the interim.
"Irish hospitality businesses now face a very stark reality in which Government policies are fundamentally at odds with the long-term interests of our sector and wider tourism industry," the letter says.
"We are facing a perfect storm, largely as a result of a raft of recent policy decisions. While we have been repeatedly assured by the Government that it understands the extent of the challenges facing hospitality businesses, regrettably this has yet to translate into a meaningful policy response," it states.
"Further inaction would be detrimental to the long-term prospects of our sector. It is now vital that the Government does everything possible to help put our sector and wider tourism industry on a more stable footing," the letter adds.
