Irish hospitality sector shows resilience amid cost pressures and shifting visitor trends, says Gerardo Larios Rizo, head of Hospitality Sector at Bank of Ireland.
The Irish hospitality sector has delivered a mixed performance in the first half of 2025, with strong summer demand helping offset a slow start to the year.
According to Bank of Ireland’s latest sector insights, good weather in July and August supported a surge in hotel bookings, with most regions reporting occupancy and room rate growth compared to 2024.
“Large investment projects including new development and refurbishments are taking place in multiple locations across the island of Ireland”
While hotel performance has been strong, food and beverage services have faced headwinds. The Central Statistics Office reported a 7.6% decline in service volumes in the first half of the year, although price increases helped limit the drop in value to 3.8%. Rising costs continue to pressure margins, prompting calls from industry bodies for a reduction in VAT rates, currently at 13% in the Republic of Ireland and 20% in Northern Ireland.
Evolving accommodation trends
The report highlights evolving accommodation trends, including increased planning applications for glamping pods, huts, and caravan pitches. Hostel developments are also gaining traction due to lower operating costs and limited supply, particularly in Dublin.
Gerardo Larios Rizo, head of Hospitality at Bank of Ireland, note: “Occupancy and average room rate statistics to the end of July show robust performance across most locations. All key sample areas, with the exception of Belfast, are trading ahead of last year.”
Inbound tourism has shown uneven recovery. North American visitors accounted for 24% of inbound trips to July, up from 21% last year. However, EU visitor numbers were down 18% and Great Britain visitors declined by 9%. Domestic travel also softened, with Irish residents taking 2.8 million trips in the first quarter, down 8% year-on-year. Despite this, increased spending helped offset the decline.
The sector saw notable investment activity, including the €15m upgrade of the Killarney Park Hotel and a £20m transformation of Roe Valley Resort by the Galgorm Collection. The pending €1.4bn sale of Dalata Hotel Group to Pandox and Eiendomsspar marks a major milestone for the industry.
Looking ahead, the report outlines cautious optimism. “Business on the books remains healthy for most hotels,” the report states. “Large investment projects including new development and refurbishments are taking place in multiple locations across the island of Ireland.”
However, concerns remain around rising costs, minimum wage increases, insurance expenses, and overreliance on the US market. A modest rise in unemployment, now approaching 5%, may also impact domestic discretionary spending.
With autumn beginning, Rizo advises hospitality businesses to closely monitor costs and prepare for the winter period, which traditionally marks the beginning of the cash burn cycle for seasonal destinations.
Image at top: Photo by Point3D Commercial Imaging Ltd. on Unsplash
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