Air access growth and resilient demand support performance, reports Bank of Ireland’s head of Hospitality Sector Gerardo Larios Rizo, but operators tighten focus on margins and efficiency.
Ireland’s hospitality sector is entering the peak 2026 season with steady demand fundamentals, supported by growing air access, strong overseas visitor spending and resilient domestic tourism, according to the latest Bank of Ireland sectoral analysis.
Air connectivity continues to expand, providing a key tailwind. Winter air seat capacity into Ireland rose by 15% following the temporary removal of Dublin Airport’s passenger cap, while summer 2026 capacity is expected to run 3% ahead of last year. Growth is particularly strong from core markets, including Britain and the United States.
“Ireland benefits from a well‑diversified demand base across the EU, North America and the UK, while strong domestic tourism provides a natural buffer should international travel soften”
International visitors remain central to the industry’s performance. Overseas tourists account for around 60% of all tourism spending in Ireland, with US visitors alone representing roughly 40% of inbound tourism expenditure, underlining the importance of transatlantic demand.
Domestic tourism continues to play a stabilising role. Spending on domestic trips by Irish residents has risen sharply in recent years, up 65% compared with 2019 levels. While overall domestic trips eased slightly last year, the decline was largely linked to fewer visits to friends and family, leaving core holiday and business travel demand largely intact.
The report points to a balanced demand mix across international and domestic segments as a key strength.
“Ireland benefits from a well‑diversified demand base across the EU, North America and the UK, while strong domestic tourism provides a natural buffer should international travel soften,” noted the report’s author Gerardo Larios Rizo.
Employment remains high as cost pressures intensify
Tourism continues to play a central role in the Irish economy, employing approximately 229,400 people, or 9% of the national workforce. However, the pace of employment growth is slowing as operators respond to rising costs and reassess staffing requirements.
Labour remains one of the most significant pressures on margins. Wage costs as a share of turnover have continued to climb, reaching an average of 39.5%, reflecting both pay increases and broader inflationary dynamics.
Operators are also awaiting policy support. The planned reintroduction of the 9% VAT rate for food services, expected in July 2026, is seen as a critical measure for a sector that has experienced sustained margin pressure over the past three years. “This rate reduction will be welcomed by the sector which has experienced a sustained squeeze in margin,” said Larios Rizo.
Hotel performance holds steady across most regions
Accommodation performance data indicates a solid start to the year, particularly in the Republic of Ireland. Most regions recorded positive revenue per available room trends in the first quarter of 2026.
Dublin led occupancy levels at 75%, reflecting strong demand flows into the capital, while Kilkenny achieved the highest average room rate at €165, representing a 4% increase year on year. In many regional markets, gains were driven more by pricing than occupancy, highlighting ongoing pricing power outside the capital.
Performance in Northern Ireland was softer by comparison, with Belfast and Derry reporting slight declines in revenue metrics.
Investment activity remains active but more selective
Investor confidence remains evident in the hotel sector following a record 2025, when transaction volumes exceeded €1.7 billion. While activity levels are expected to moderate, deal flow is continuing, supported by improved debt conditions and demand for high-quality assets.
The report highlights a shift in investor focus. “Entering 2026, investment momentum is still positive but perhaps more selective,” Larios Rizo said, with increased interest in value-add opportunities and well-positioned regional properties rather than large portfolio transactions.
Development activity also reflects continued confidence in Ireland’s tourism fundamentals. Several new hotel openings are planned or underway, including major projects in Dublin and Belfast, alongside regional additions such as The Grace at Westport Estate.
External risks remain under close watch
The sector is monitoring global developments closely, particularly the potential impact of geopolitical tensions on travel behaviour and operating costs. Fuel prices and broader inflation remain key variables, although airline hedging strategies have helped limit immediate cost increases.
Despite these risks, the report highlights underlying resilience. “Strong sector savings, robust domestic tourism and stable operating costs position Ireland to absorb short‑term disruption effectively.”
There is also some expectation that shifting global travel patterns could benefit Ireland. Analysts suggest that demand redirected towards Western Europe could provide a modest boost to visitor numbers.
Focus shifts to margins, efficiency and data-led decisions
Looking ahead, operators are increasingly focused on controlling costs and improving operational efficiency rather than relying solely on revenue growth.
“Operators are increasingly focused on controlling input costs rather than relying on top‑line growth,” Larios Rizo notes, pointing to measures such as energy efficiency, tighter workforce planning and more disciplined food and beverage operations.
There is a growing emphasis on yield management and profitability per room, with hotels encouraged to refine their demand mix and pricing strategies. Regional hotels offering higher-quality experiences are continuing to demonstrate pricing strength, though execution remains critical.
Technology is also playing a greater role. Data-driven decision-making and the selective adoption of artificial intelligence tools are emerging as differentiators, particularly in areas such as pricing, demand forecasting and operational planning.
A sector defined by adaptability
The overall message is one of cautious confidence. Demand fundamentals remain supportive, but profitability depends on disciplined management and strategic investment.
In her foreword to the report, Paula Feehan, Head of Sectors at Bank of Ireland Corporate and Commercial, emphasised the broader context facing Irish businesses.
“Bank of Ireland understands that Irish businesses are facing an ever-changing economic and trading environment, particularly in the wake of enduring global events, supply chain disruptions, increased costs and changing consumer behaviours,” she said.
Feehan also highlighted the importance of adaptability at sector level. “Our Sector Specialists work closely with key industry stakeholders and have a deep understanding of the challenges and opportunities that you face,” she added, noting that tailored strategies will be essential as conditions evolve.
Read the full report on the various sectors including Retail, Agriculture, Manufacturing, Healthcare, Technology & Telecoms and Food & Drink:
Top image: Photo by runnyrem on Unsplash
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