€10 hotel room charge floated to boost local councils

Fine Gael councillor John Kennedy has called on the government to introduce a €10-per-room hotel levy as part of Budget 2026, a measure he believes could offer vital funding for local authorities while sidestepping complications around proposed VAT changes in the hospitality sector.

The Dún Laoghaire-Rathdown councillor made the proposal amid ongoing discussions about reducing the VAT rate for restaurants and cafes from 13.5 per cent to 9 per cent.

Cllr Kennedy argues that hotels, particularly in Dublin where occupancy is currently around 85 per cent, are not in the same need of support as other parts of the hospitality industry.

He said the government appears to be exploring ways to differentiate how the lower rate might apply to restaurants and cafés, but not to hotel accommodation.

He noted that applying different VAT rates for meals and overnight stays could prove complicated, especially where hotels bundle accommodation with food offerings.

As a solution, he is proposing a flat-rate levy of €10 per hotel room.

This, he says, would provide clarity, maintain revenue streams, and avoid the logistical headaches of split-rate VAT treatment.

Cllr Kennedy said the combination of a 9 per cent VAT rate and a €10 room levy would represent only a marginal tax increase overall.

“Effectively, hotel room taxation and room levy application taken together would mean an increase of just one half of one per cent more than the current VAT rate of 13.5 per cent,” he said.

“The hotel sector would still save tax revenues overall due to the lower VAT on meals served within hotels.”

He also emphasised that any hotel levy introduced should benefit local authorities directly.

“The prevailing expectation within the local government sector is that this bed levy would be largely siphoned off for additional revenue for councils,” he said.

“For instance, the newly released Fine Gael Dublin Plan highlights that a hotel room levy should be actively considered as a future funding source for the four Dublin local authorities, including Dún Laoghaire-Rathdown County Council.”

While some have suggested that a hotel levy be considered as part of a longer-term strategy through a new Dublin City taskforce, Cllr Kennedy believes the government can act far sooner.

He said the Minister for Finance has the authority to introduce a new levy in Budget 2026, with emergency legislation if necessary, and that Revenue could collect and ringfence funds for redistribution to local councils.

The proposal comes as many cities across Europe continue to use hotel levies as a source of local revenue, particularly in areas with strong tourism sectors.