THE return of the 20% VAT rate for hotel businesses from tomorrow (April 1) will mean higher prices for customers, a leading figure in the hospitality industry has warned.
Janice Gault, who heads the Northern Ireland Hotel Federation (NIHF), said there was “huge disappointment” within the industry at the decision to bring back the full rate for the new financial year.
The impact of Covid-19 on the hospitality sector saw the UK government introduce a temporary reduced VAT rate of 5% in July 2020.
The reduction rate, which applied to hospitality businesses and hotels, lasted until October 2021, when it was increased to 12.5%.
But Janice Gault said the Omicron surge ahead of Christmas, which led to tighter restrictions and temporary closures, meant businesses here weren’t reaping the full benefits.
“The reality of a return to the 20% rate was met with dismay,” she said.
“It’s a cost that will have to be passed on to the customer.
“Costs for food, utilities and staff are increasing at a phenomenal rate.”
The Hotel Federation boss said: “There is a delicate balance between covering costs, making a profit and continuing to provide guests with an affordable and valued experience.
“Hotels need to make profits to invest, grow and evolve. It’s a balancing act that proves increasingly difficult to walk.
“Raising the price of a service is never easy and can test customer loyalty. Adding to the hotel experience can increase costs, but helps attract and retain customers.
“However, a punitive VAT increase, without recognition of the challenges faced and the commitment shown, is a reckless and ill-thought-out action with repercussions that can hinder restoration.”