The Government’s new tourism strategy aims to increase tourism revenue by 50 per cent out to 2031. Yet a fundamental question remains unanswered: where will all those visitors stay? Tourism business chiefs have been broadly happy with the intent and direction of the current Government. The 9 per cent VAT rate for food services is being brought in next month, legislation is being introduced to the Dáil to lift the Dublin Airport passenger cap, and a new national tourism policy sets ambitious sectoral growth targets out to 2031. The latter includes no less than 71 recommendations and has the laudable goal of growing tourism revenue by half over the next five years. So far, so good. But as ever, the devil is in the detail. Bold and bullish demand targets are one thing, but working out whether Irish tourism has the right supply capacity is quite the other. Or put another way: will the country have enough tourism beds to meet the planned growth in domestic tourists and international visitors? Evidence suggests not.Minister for Tourism Peter Burke has committed to developing a Tourism Accommodation Strategy, which indicates there is a tacit acknowledgment by his department that there is a shortfall in hotels, guest houses and self-catering properties. Industry leaders have taken the initiative and commissioned consultants Crowe to do a deep-dive economic study into Irish tourism’s accommodation-carrying capacity. The resulting report estimates that Ireland is short 10,000-15,000 hotel bedrooms nationally to cater for future anticipated growth. Previous challenges for Irish tourism have been demand-led ones. Despite very real cost-of-business concerns, Irish tourism is now clearly wrestling with a supply challenge. In many ways, boosting demand is an easier fix through increased air access or enhanced marketing campaigns. Stimulating supply – with all the ensuing planning, financial and construction headaches – can be much more difficult. Policy levers will need to be deployed in October’s budget. Demand is materially outpacing supply. Arguably this is a good problem to have, particularly as tourism is the largest indigenous industry in the country and biggest regional employer. Look across swathes of the Wild Atlantic Way, from Dingle to Donegal, where tourism is the main economic show in town. However, the current tourism accommodation system is operating at or near capacity, thereby limiting growth potential. Hotel occupancy levels are consistently high, particularly in urban markets, with Dublin operating at a remarkable 84 per cent occupancy year-round. [ Doubling of hotel development levy will hit tourism targets, Irish Hotels Federation warnsOpens in new window ]This means limited headroom to absorb further demand, particularly in peak season. If demand and supply are so out of sync, this only puts upward pressure on pricing, thereby risking Ireland’s value proposition. At least in Dublin, there is a pipeline of new hotel construction to relieve pressure on capacity – although the pipeline has been jeopardised by Dublin City Council’s recent decision to double development levies. Outside of the capital, however, there is little to no new accommodation activity. The Midlands, which is getting millions of euro in tourism public investment in greenways and attractions through the EU’s Just Transition Fund, is a prime example. Take Longford, where Fáilte Ireland records that there are just 116 registered hotel bedrooms in the whole county. Not a single new hotel bedroom is in the planning process, let alone under construction. This, by definition, puts a sharp handbrake on tourism’s growth potential. Although tourism may be one of the few sectors to provide regional economic balance, such ambition can evidently only be met if there is somewhere for visitors to rest their heads. Put simply, Irish tourism ambitions are at risk of being hamstrung from the get-go by accommodation capacity constraints. The situation will be further compounded next year by the restriction in short-term rentalsIn a functioning market when demand is confidently projected, the private sector will rise to the challenge. Regrettably, this is not the case for Irish tourism. The Crowe report identifies that the delivery of new accommodation in regional Ireland is severely constrained by high construction and financing costs, planning complexity, and sharply weaker viability. There is clear evidence of market failure. Economics 101 suggests that when this arises, Government needs to step in with policy intervention. Should there be no action, the worthy visitor growth targets for regional Ireland simply won’t materialise, and parts of the country, most notably the midlands and the northwest, will continue to fall behind. Government intervention will be required to stimulate new builds and extensions to existing hotels in regional Ireland. These measures should be geographically targeted and time-bound to effectively support activity in the areas that need it most. Put simply, Irish tourism ambitions are at risk of being hamstrung from the get-go by accommodation capacity constraints. The situation will be further compounded next year by the restriction in short-term rentals. The annual National Economic Dialogue took place last week and Ministers heard directly from business representative groups, NGOs and social partners. The tourism industry made the case for competitiveness, connectivity and capacity. Industry and Government are ad idem in terms of buying into the new national policy, but the latter must enable growth through sensible and brave policies to stimulate new visitor accommodation supply. Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation