Tánaiste Leo Varadkar has warned hotel operators not to price gouge customers or they may face a higher rate of VAT.
His warning comes as reports emerge of hotel room shortages and price hikes in some towns across the country.
Mr Varadkar admitted there is a shortage of hotels in some places including Dublin but warned that price increases for rooms will not help.
“One thing I would say to hoteliers in the meantime is there might be a shortage of space and accommodation in your hotels but don’t engage in overcharging,” Mr Varadkar said.
“The Government took a decision not to put the 9pc VAT rate back up – when we come to look at that again next year, we don’t want to have to put it back up again, and how customers are treated will be a factor that we will take into account,” he said.
“Also bear in mind what happened 10 or 15 years ago when the Irish tourism industry got a bad reputation internationally for overcharging, a price was paid for it a few years later.
“Perhaps there are more profits to be made long-term in not having such high prices and treating people fairly.”
He rejected suggestions that Ireland’s humanitarian response to the Ukraine war is responsible for the surge in hotel and holiday prices.
Domestic and international holidaymakers have complained over recent weeks about spiralling hotel prices.
Mr Varadkar said it was a capacity issue as the world experienced a surge in travel after the Covid-19 pandemic.
“There is a shortage of hotels in Ireland particularly in Dublin and our cities and I don’t think the fact we are accommodating so many people from Ukraine really is the cause – it’s only about 5pc in Dublin and 9pc around the country,” he said.
“It wouldn’t be fair to put it all down to the war in Ukraine – there is a general shortage of hotel accommodation in Ireland. It wasn’t that long ago people were saying that we shouldn’t build any new hotels in Dublin – they were wrong.”
“It’s important that we continue to increase the supply of hotels around the country – some of it though is this pandemic phenomenon of demand snapping back.”
The Tánaiste warned the hospitality sector against overcharging after multiple complaints from domestic and overseas visitors about the scale of the recent price spiral.