Mounting costs ‘a major challenge’ for hotel industry

Mounting costs ‘a major challenge’ for hotel industry

February 23, 2026 discoverhiddenusacom Business

Irish hoteliers are bracing for a challenging year ahead, citing rising business costs and global economic uncertainty as primary concerns. These challenges emerge following what the Irish Hotels Federation (IHF) describes as a “robust performance” for the sector in 2025, with average national hotel room occupancy reaching 76% – a 1% increase from the previous year.

Mounting Costs and Economic Headwinds

According to new research from the IHF, 92% of hoteliers are worried about the international economy and potential political instability in key markets. A significant 76% also expressed concern regarding the Irish economy over the next 12 months, citing pressures on consumer finances and the risks posed by international developments.

Did You Know? Ireland is the second-most expensive country in the EU for hotels and restaurants, surpassed only by Denmark, according to data from Eurostat.

IHF President Michael Magner stated that Ireland is “an outlier in terms of costs,” particularly in areas like energy, insurance, and general services. He emphasized the need for a “renewed, national focus on cost competitiveness” across the economy.

Regional Disparities in Occupancy

While national occupancy averaged 76% in 2025, the IHF data revealed a “significant regional disparity.” Occupancy rates ranged from 70% in the border region to 83% in Dublin. This suggests varying levels of demand and economic activity across different parts of the country.

Expert Insight: The combination of high operating costs and global economic anxieties creates a precarious situation for Irish hoteliers, potentially impacting investment decisions and pricing strategies. Maintaining a competitive edge will require careful management and a focus on value for customers.

Cautious Optimism and Investment Plans

Despite the challenges, the industry maintains a “cautiously optimistic outlook.” Over half (51%) of hoteliers reported a positive outlook for trading conditions in the coming year, while only 13% expressed a negative view. Forward bookings suggest business levels may remain stable in 2026, according to Mr. Magner.

Looking ahead, 75% of hoteliers plan to increase capital investment in the next year. The primary areas for investment include guest bedroom refurbishment (61%) and upgrades to restaurants, bars, and common areas (47%).

Sustainability is also a growing priority, with 53% of hotels planning increased investment in this area in 2026, and a further 32% actively exploring new sustainability options. Key targets for sustainability investments include renewable energy and energy efficiency solutions (60%), food waste reduction (33%), and water conservation measures (26%).

The Government’s decision to restore the 9% VAT rate on hospitality food services from July is expected to partially offset rising costs for food-led businesses.

Frequently Asked Questions

What are the biggest concerns for Irish hoteliers?

Mounting business costs and global economic uncertainty are the primary concerns, with 92% of hoteliers worried about the international economy and 76% concerned about the Irish economy.

What was the hotel room occupancy rate in Ireland in 2025?

The average national hotel room occupancy rate in 2025 was 76%, up 1% from the previous year, though rates varied regionally from 70% to 83%.

Are Irish hoteliers planning to invest in their businesses?

Yes, 75% of hoteliers plan to increase capital investment in the next year, focusing on areas like refurbishment, upgrades, and sustainability initiatives.

As the Irish hotel sector navigates these economic headwinds and investment opportunities, how might a focus on sustainability and cost management shape its future competitiveness?