Killarney, Co. Kerry – Mounting business costs are emerging as a primary concern for Ireland’s hotel industry, even as the sector demonstrates cautious optimism for the year ahead. The challenges were laid bare at the start of the Irish Hotels Federation (IHF) annual conference today, February 23rd, with nearly all hoteliers expressing worry over the broader economic climate. The conference, taking place at the Gleneagle Hotel & INEC, brings together over 300 hotel and guesthouse owners and managers from across Ireland to discuss the future of tourism and hospitality.
According to new research conducted by the IHF, 92% of hoteliers are concerned about the impact of global economic uncertainty and political instability in key international markets. Simultaneously, 76% expressed concerns about the Irish economy over the next 12 months, citing pressures on consumer finances and potential risks from international developments. This comes despite a generally positive performance in 2025, with average national hotel room occupancy reaching 76%, a 1% increase from the previous year.
Cost Pressures and Competitiveness
Ireland’s cost structure is a significant factor driving these concerns. IHF President Michael Magner stated that Ireland “is an outlier in terms of costs, particularly in the area of energy and insurance, and generally across all services.” Speaking on RTÉ’s Morning Ireland, Magner emphasized the require for a “renewed, national focus on cost competitiveness” within both the tourism sector and the wider economy.
Data from Eurostat confirms Ireland’s position as one of the most expensive destinations in the European Union for hotels and restaurants, second only to Denmark. This high cost of doing business inevitably presents pricing challenges, Magner acknowledged, though he maintained that Ireland continues to offer a high-quality hospitality product.
Investment and Sustainability
Despite the headwinds, the industry is not standing still. The IHF survey revealed that 75% of hoteliers plan to increase capital investment in the coming year. A majority of this investment – 61% – will be directed towards guest bedroom refurbishment, while 47% will focus on upgrading restaurants, bars, and common areas.
Notably, sustainability is also becoming a key priority. 53% of hotels indicated plans to increase investment in sustainability initiatives in 2026, with an additional 32% actively exploring options for improvement. Key areas of focus for these investments include renewable energy and energy efficiency solutions (60%), food waste reduction (33%), and water conservation measures (26%).
Regional Disparities in Occupancy
While national occupancy rates are encouraging, significant regional variations exist. In 2025, occupancy levels ranged from 70% in the border region to 83% in Dublin, highlighting the uneven distribution of tourism demand across the country. This disparity underscores the need for targeted strategies to support hotels in regions lagging behind.
Cautious Optimism and Government Support
Despite the challenges, a cautiously optimistic outlook prevails within the industry. Over half (51%) of hoteliers reported a positive outlook for trading conditions over the next 12 months, compared to just 13% with a negative outlook. Forward bookings suggest that business levels will remain stable in 2026, according to the IHF president.
The government’s recent decision to restore the 9% rate of VAT on hospitality food services from July is expected to provide some relief to businesses operating on tight margins. This measure, Magner said, will “partially offset these increases for food-led businesses operating on some of the tightest margins of any sector.”
The IHF’s 88th annual conference continues tomorrow, February 24th, with a closing address from actor and musician Martin Kemp, in conversation with broadcaster Claire Brock. Discussions will also focus on engaging Gen Z, navigating the future of hospitality, trends and AI, and global tourism outlooks.
Looking ahead, the industry will be closely monitoring economic developments and advocating for policies that address the cost competitiveness challenges facing Irish hotels. The next key checkpoint will be the implementation of the restored 9% VAT rate in July, and its impact on the sector’s financial performance.
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