Hospitality: A Value Chain Analysis 2021

This chapter describes the producers of services in the Hospitality sector. The output, costs, sales and turnover of hospitality are measured with data from the Supply & Use Tables, the Annual Services Inquiry and National Accounts data, emissions and energy use data for the sectors are measured using Environmental Accounts data and the Business Energy Use survey. 

Supply Table

The Hospitality sector generated output of €6.8 billion in 2021. The Accommodation sector accounted for 36% of this output (€2.5 billion) while Food & Beverage Service Activities accounted for 64% (€4.4 billion). Table 3.1 below shows a summary of the 2021 Hospitality Supply Table. This breaks down the total supply of Hospitality Services into domestic production, imports and taxes. 

The Accommodation sector generated €1.4 billion (56%) of output from its core activity with a further €1.1 billion (44%) from the bars and restaurants operating as ancillary services. The small remainder was made up of own account production of electricity. 

The €4.4 billion output from the Food & Beverage services sector was nearly all comprised of its core activity. Accommodation services accounted for €58m of this sector's output in 2021. This includes pubs with rooms or accommodation available. There was also a small proportion of own account production of electricity. This own account production of electricity relates to businesses with solar panels or wind turbines used to generate electricity for their own power requirements.

The domestic supply table also shows the output of Accommodation and Food & Beverage Services from other industries. The Agriculture sector had output of €23m of Accommodation services, such as B&Bs and farm holidays, in 2021. The Retail Trade sector had output of €194m of Food & Beverage services. This includes shops and garages serving food and coffee for immediate consumption. 

The Supply Table also shows imports. This represents personal and business expenditure abroad by Irish residents. Expenditure abroad on Accommodation services was €747m, and expenditure on Food & Beverage Services was €679m in 2021. This made up most of the tourism expenditure. 

Product taxes were worth €515m for Accommodation services and €1.5 billion for Food & Beverage Services. Product taxes are mostly comprised of VAT and excise.

Combined, this led to total supply of Accommodation services of €2.7 billion and total supply of Food & Beverage services of €7.7 billion in 2021. 

Gross Value Added

Gross Value Added (GVA), intermediate consumption and output in current prices for Accommodation and Food & Beverage Services are shown in Figure 3.1 and 3.2 respectively. As expected, both sectors experienced exceptional losses in output and GVA in 2020 and 2021: GVA fell by 58% in Accommodation and by 45% in Food & Beverage Services sector in 2020. An upward trend towards recovery began in 2021 but it was not until 2022 that GVA and output exceeded pre-pandemic levels. By 2022, the GVA of the Accommodation sector was 28% higher than in 2019, likewise, GVA of Food & Beverage Services was 19% higher than in 2019.

Figure 3.3 shows the percentage of enterprises in each GVA or employment size category (large 250+ persons engaged; medium 50 to 249; small 10 to 49; micro <5). The predominance of micro enterprises was a notable feature across all eight sub-sectors. Large enterprises were notably absent from nearly all sub-sectors, aside from Hotels & Similar Accommodation, where they comprised of 1.6% of all enterprises. Medium sized enterprises also only appeared in significant numbers in the Hotels & Similar Accommodation sub-sector. 

The split of output by foreign-owned MNEs and domestic companies for the three largest sub-sectors is shown in Figure 3.4. The output of these sub-sectors was overwhelmingly domestic. In total, domestic output accounted for 86% of all output produced by the Hospitality sector and indicates that Hospitality is, by and large, an indigenous industry. Hotels & Similar Accommodation had the largest proportion of foreign output of all sub-sectors in 2021; 15% of all output was generated by foreign companies and points towards the presence of larger, multinational hotel chains. Foreign output of Restaurants & Mobile Food Service Activities accounted for 11% of all output and less than 4% of output from Beverage Service Activities came from foreign businesses. 

Producer Costs and Sales

Figure 3.5 below graphs costs and total sales for the Accommodation sector. The impact from COVID-19 restrictions on the sector is seen, total sales dropped to below €2 billion for the first time since 2015. Sector recovery is also shown, with total sales in 2022 rising to €4.9 billion, €381m above pre-pandemic levels. The gap between total costs and total sales has remained relatively consistent over time, until 2022 when total sales rose at a faster rate than total costs.  

Figure 3.6 below shows costs and total sales for the Food & Beverage service sector. The graph shows the impact of COVID-19 restrictions on the sector, as well as its recovery. Total costs for the sector in 2022 doubled since 2020 and were €1.4 billion greater than pre-pandemic levels in 2019. The sector has seen a rise in all costs over time, most notably labour costs which amounted to €3 billion in 2022 and purchases for direct resale which amounted to €3.5 billion in 2022. This increase in costs coincided with a price increase for the sector and as a result a rise in total sales. While total sales rose to €9.7 billion in 2022, the gap between costs and sales remained mostly unchanged.

Figure 3.7 below shows cost breakdowns for the three main sub-sectors in the hospitality industry in 2021. The Hotels & Similar Accommodation sub-sector spent the largest proportion on personnel costs, at nearly 40%. This differs slightly to Restaurants & Mobile Food Service activities, at 32%, and the Beverage Service sub-sector at just under 30%. For restaurants and bars, their largest spending item was purchases for direct resale, at 37% and 41% respectively. Purchases for direct resale are goods which are bought wholesale by the industry and sold without any change taking place, for example, a bottle of wine sold in a restaurant. The breakdown shows other differences between the industries: rent is a higher proportion of total costs for restaurants at nearly 6% versus 1% for hotels. 

Emissions

Figure 3.8 below shows emissions for the Hospitality sector with 2017 taken as a benchmark year and set to 100. Establishing a benchmark year can help identify trends in a time series more clearly. Both the Accommodation and Food & Beverage Service sectors are showing strong downward trends in CO2 emissions. Emissions in Accommodation have declined at a fast rate since 2020; the decline in Food & Beverage Services has been more staggered, reflective of the widespread partial opening of restaurants, bars and food service during COVID-19. 

It also must be noted that electricity consumption does not contribute to a sector's overall emissions. The emissions created as part of electricity generation are already counted in NACE sector D: electricity, gas, steam and air conditioning supply, and are therefore not counted in the sector where the electricity is consumed. For hospitality, emissions are measured against the consumption of energy products such as natural gas, petroleum fuels and road transport fuels, as shown in Figure 3.9. 

Energy Products

The consumption of energy products by sector for 2021 is shown in Figure 3.9. Electricity was by far the largest component of energy consumption for both sectors. Accommodation consumed a significantly larger proportion of natural gas (35%) compared to Food & Beverage Services (22%). Aside from electricity, the consumption of other energy products by hospitality has been declining.