Growing Concerns Over Tourism Demand

The study, conducted by business group Ibec in advance of the October Bank Holiday and mid-term break, indicates that seven in ten businesses are concerned about Ireland’s position as a strong tourism destination. This represents a significant increase from 57% six months prior. Ibec attributes this rise to a noted reduction in demand from overseas travelers.

The experience economy, which includes retail, travel, tourism, food, drink, entertainment, the arts, sports, and events, is a ample contributor to the Irish economy, generating €4 billion annually and employing over 330,000 people, according to Ibec.

wage Growth and Economic Pressures

Despite expectations of stable sales, eight in ten businesses surveyed anticipate continued wage growth consistent with 2024 levels. This expectation comes amidst a backdrop of increasing operating costs, inflation, and recent labor policy changes. These factors have collectively created a “precarious position” for the sector, leading to business closures, according to Avine McNally, Ibec’s Head of Membership.

McNally highlighted that events like the Dublin Marathon and Halloween family activities will provide a “welcome boost” during a period of declining confidence. the Dublin Marathon, for example, typically attracts over 50,000 participants and generates an estimated €25 million for the local economy [Dublin marathon Economic Impact].

VAT Rate Reduction and Future Outlook

While the research doesn’t fully reflect the impact of the Government’s decision to permanently reduce the VAT rate for the hospitality sector to 9% beginning in July 2026, Ibec acknowledges its importance. The reduced VAT rate is intended to support the sector’s recovery and competitiveness. [Irish Government Press Release on VAT Reduction]

McNally emphasized that the experience economy remains “under substantial pressure,” and suggested that additional measures, such as a targeted PRSI (Pay Related Social Insurance) rebate, may be necessary to further alleviate cost burdens. PRSI is a social insurance contribution paid by employers and employees in Ireland.

Ibec anticipates that a strong festive period will lay the groundwork for a more optimistic outlook in 2026.