Is the hospitality sector crisis as bad as it's claimed?

"This is all I dreamed of."

Ever since he was 18-years-old, William Monaghan's life-long ambition had been to own his own restaurant.

After doing a business degree, he initially spent time in retail and sales, before taking the plunge in 2018.

Located on Gardiner Street in Dublin, his One Society eatery is primarily an Italian style pizza and pasta focused offering, with a menu based around taste, quality and health.

As he talks, it is clear William is passionate about what he does. But it is also apparent that recently he has found doing it a growing struggle.

"One Society is unfortunately doing January figures at the moment which is scary," he said, adding that July's revenue was 15% less than the same month a year earlier.

"July is what keeps us going and covers a bad September," he explained.

"September looks like it was one of the worst months of the year."

Rising costs are the main problem facing One Society, the same complaint that is emanating from so many similar hospitality focused businesses across the country.

Its staff costs, which are a large chunk of the overall costs bill, are up 9% year on year, while other costs like energy, insurance, ingredients etc are 15-18% higher.

The restaurant boss is trying to manage the situation as best he can, but with a raft of further increases coming in the form of sick pay changes, a minimum wage rise and the introduction of pension auto-enrolment, it is not easy.

A further problem is that footfall is also lower, William said, despite a boost around special events including the four Coldplay gigs at Croke Park.

Prices cannot be increased any further, without threatening the value proposition of the restaurant, he added.

So in an effort to deal with the challenges, William decided to take what he described as a "huge gamble" and opened a second outlet in Smithfield, in the hope that quieter periods in one of the restaurants might be offset by busier times in the other.

Hidden by One Society, as it is called, only began trading three weeks ago and although it is still loss making, William is confident still that the gamble will pay off in time, though he admitted the overall situation is "hanging in the balance".

Government assistance is required, he added, if food service outlets like his are to survive.

"Small independents like us that run on tiny margins are not able to absorb anything else," he said.

William was among the hundreds of owners and workers from the hospitality, retail, childcare and wider small business sector, who brought that message loudly and colourfully to the doorstep of Government, when they marched to Leinster House on Tuesday.

Still smarting from the Budget decision not to lower VAT for the tourism and hospitality sector to 9%, despite an intense lobbying campaign, the protestors who came from all over the country were angry, worried and at the end of their tether.

The event was organised by the Restaurants Association of Ireland (RAI) and Vintners Federation of Ireland, supported by other groups such as Retail Excellence Ireland and the Irish Small and Medium Sized Enterprises association.

Many attendees spoke about the daily challenge of making ends meet, of how their firms are on the brink, of how they are often the last to get paid, meaning sometimes they receive nothing at all.

Among the marchers was hospitality sector entrepreneur and executive, Brian Goff, who co-founded Insomnia Coffee.

"I've been in this business for 30 years and I've never felt such a sense of foreboding about the industry," he said.

"The costs that have been piled on, it feels like we are part of a social experiment, the Government keeps putting cost upon cost upon hospitality and retail.

"We've got to the point where we can't make any money and continue to stay in business unless something is done for us."

While Jane Cathcart, a former restaurant owner for many years who now specialises as an accountant for the hospitality sector, was also present.

"I am on the coal face of it. And I cannot believe how many restaurants have closed down in the last few weeks," she said.

"This is untenable at the moment. And we have an awful lot more restaurants to go. I spend my time encouraging restauranteurs to stay in business. Because even if you are busy this is soul destroying. It is absolutely soul destroying."

She said the main issues of concern remain the VAT rate, the minimum wage, the upcoming sick leave changes and the introduction of pension auto-enrolment.

"All these things are coming up against us," she said.

"How can these restaurants survive? They are small businesses, they are not multinationals. This is a very, very serious situation."

The RAI has said that between the time the VAT rate returned to 13.5% from 9% in September of last year, and September of this year, there have been 612 closures.

Anecdotally, that trend seems to have continued since, with several high-profile establishments shutting their doors in the last number of weeks, including several in the last week.

Insolvency figures appear to bear out the claims, with the hospitality sector disproportionately affected by the high costs of doing business, according to Deloitte.

It said that 108 hospitality sector businesses have failed so far this year, up 61% on the same period last year and significantly higher than the same period in 2021 and 2022 when government Covid schemes were keeping the sector on life support.

"SMEs are generally owner managed business and are often reliant on funding from their owners to both start out and meet working capital challenges," said James Anderson, head of restructuring for Deloitte in Ireland.

"Higher costs across energy, staff, insurance, rates are eroding profit margins meaning that SMEs in hospitality and other industries like retail are being disproportionately affected.

"This problem is not confined to hospitality. SME insolvencies in the retail sector accounted for 74 or 11% of total insolvencies in the first nine month of 2024 … with the high cost of doing business and profit margin erosion being cited as a similar problem.

"Based on the insolvency activity levels for the first nine months of this year, 2024 is forecasted to be at least 30% higher … than 2023 and SMEs in the hospitality ànd retail sectors are likely to continue to be disproportionately affected."

An uptick in failures had been expected this year as the sector had to once again stand on its own two feet following the removal of Covid assistance, and the crunch of the ending of the Revenue debt warehousing scheme.

By June, a month after the deadline for firms to have either repaid warehoused debt or agreed a repayment plan, 1,820 taxpayers employing 41,062 workers in the accommodation and food industry were in phased payment arrangements with Revenue, owing a combined €180 million in tax.

That was 15% of the total debt outstanding, with around a quarter of those firms owing over €100,000 - a considerable burden for a small business to carry.

Indeed, analysis by PwC recently found that of the hospitality companies liquidated in the past 21 months, the average total liabilities left behind per hospitality company was around €380,000.

And of the 110 hospitality insolvencies recorded so far this year, 98 of those were liquidations and they left behind total liabilities of around €37.2m.

"From speaking with business owners, aside from the VAT rate, insurance costs and commercial rates are something which SMEs feel are too high and where further tailored supports would be welcomed," said Mr Anderson.

It isn't all one-way traffic, though. While there have been many closures, an unknown number of new firms in the sector have opened.

The most recent data from CRIF VisionNet shows the number of startups in the hospitality sector rose by just 1% in the third quarter of the year.

And speaking recently following the announcement of the Budget, Minister for Enterprise Peter Burke said he had seen many coffee shops and restaurants opening around the country over the same period, though he said he did not hear anything at all in discourse about that.

His department also pointed this weekend to what has been provided to help small retail and hospitality firms, including €170m for a €4,000 per business "Power Up" grant.

That is coming on top of the Increased Cost of Doing Business scheme, which delivered payments of up to €10,000 to 38,000 SMEs in the sectors.

There was also a raft of other measures announced in Budget 2025 designed to help businesses.

"There remains a strong pipeline of new company incorporations across most sectors, including hospitality and retail indicating a healthy level of corporate activity," a spokesperson said.

"The Government is very conscious of the importance of the tourism sector right across the country and has been active in the support of the sector over the last number of years."

They added that funding of €226m had been allocated to the tourism sector for next year, while a new tourism policy framework is being finalised for the period to 2030.

Tánaiste Micheál Martin acknowledged last week that the Government needs to look at the cost base of the hospitality sector.

But none of that is now cutting it with those working in the industry, where concerns remain immediate and the mood defiant.

The pre-Budget VAT campaign may have come to nought, but now they are eyeing the general election.

RAI chief executive, Adrian Cummins, told the protestors on Tuesday that Government policy is hammering small businesses "day in, day out".

"I want to make this very very clear," he told the assembled masses.

"We are watching every manifesto that is being published. If we don't see hospitality, small business, recognised in those manifestos, and a programme of action for delivery, well, you know what happens then.

"I'm sure our members will make their own minds up at the ballot box."

A pointed warning which politicians will be no doubt be mindful of as a possible election date comes much closer into focus.