Business Irish

Tuesday 19 September 2017

Bank exit puts thousands of hotel workers at risk

Anne-Marie Walsh and Laura Noonan

THOUSANDS of hotel jobs are at risk due to Bank of Scotland Ireland's decision to pull out of the Irish market.

The future of up to 10,000 workers may be under threat following the bank's shock announcement that it is to exit by the end of the year.

The Irish Hotels Federation (IHF) is asking taxpayers to stake as much as €6.3bn on guaranteeing loans for struggling businesses in the aftermath of the BOSI pullout.

The hotels are among the 5,000 businesses using BOSI for their current accounts and short-term working capital facilities, all of which will be suspended from December.

"There's a huge possibility that some of our members won't be able to get current accounts elsewhere," said IHF president Paul Gallagher.

The hotel lobby group wants the taxpayer to guarantee 50pc of loans of up to €150,000 for Ireland's 84,000 SMEs.

They would pay a 2pc interest premium for the benefit , but leave the State with a potential liability of up to €6.3bn should the businesses default.

"We're not asking anyone to pump money into hotels," Mr Gallagher stressed. "All we're asking for is a guarantee." The IHF is planning to put the proposals to the Department of Finance over the coming weeks.

But a department spokesman last night pointed out that a credit review office already offered an appeals mechanism "so that viable businesses can get finance".

Sources pointed out that the Government was already guaranteeing billions of the banks' assets and would be reluctant to guarantee €6.3bn of loans as well.

Mr Gallagher said hotels were in a particularly difficult situation because of the "enormous amount of distressed property" in the sector and the fact that BOSI's December withdrawal comes at a seasonally-weak time of year, when hotels need extra working capital.

"The Government must move quickly to introduce additional measures to support otherwise viable businesses," he stressed.

Last night, the IHF estimated that up to 100 hotels are likely to be in receivership by the end of the year, up from 30 at the moment.

The hotels federation was unable to provide exact data on the number of jobs that may be in jeopardy at the affected hotels. But based on an average of 45 workers per hotel or guesthouse, 6,750 workers could be affected.

However, hospitality sector expert Aiden Murphy, partner at business consultancy and chartered accountancy firm Horwath Bastow Charleton, estimated that the figure could be as high as 10,000.

"There is certainly a threat to jobs and huge uncertainty," he said. "Many of these hotels have seasonal cash flows and need additional working capital to get over the winter months and to pay basic bills like heat."

SIPTU branch organiser Paul Henry said it would adopt a "wait and see" approach, but was concerned at the threat to jobs. "Nobody bar the federation knows who the loans are with and we have no way of knowing how many employees may be affected," he said.

Hotel owners have warned that competitors taken over by the National Asset Management Agency (NAMA) are damaging the industry.

John Brennan, managing director of the Park Hotel, Kenmare, said some hotels should never have been built and estimated that there is an excess of 62,000 hotel rooms countrywide.

Sensitive

In a statement, NAMA confirmed yesterday that 17 hotels were transferred to its portfolio as part of the first tranche of loans earlier in the summer.

It is understood that the number of NAMA hotels will rise to around 45 -- 30 of which are in Ireland -- once the second transfer is completed this weekend. Unlike hotels in receivership, the NAMA properties continue to be run by their owners, although NAMA may ultimately force the sale of some.

"NAMA is very sensitive to the particular challenges facing the hotel sector over the coming years and has engaged in constructive dialogue with various interests from the sector in recent months," a spokesman said yesterday.

"The agency has recently recruited a hotel specialist to develop an informed strategy for the sector and looks forward to further dialogue continuing over the months ahead."

Irish Independent

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