Hoteliers check out options as 12,000 rooms lie vacant
THERE are currently 12,000 more hotel bedrooms in the country than needed as the Government was urged to allow lossmaking hotels close down without having to pay back capital tax breaks.
The Irish Hotels Federation (IHF) held an emergency meeting in Dublin yesterday to discuss the measures needed to save the sector, which has been hit by a massive decline in visitor numbers.
They made the unusual step of calling for government intervention to allow hotels to close by ending the clawback mechanism for tax breaks, which would see hotels having to pay back up to €20m each to the Revenue if they close within seven years of being built.
IHF Chief Executive John Power said that while it might seem unusual to advocate closing hotels down, it was clear there were too many operating for too little business, but the clawback of tax breaks was acting as a "barrier to exit" because some operators were keeping loss-making hotels open to avoid a huge tax bill.
"The reality is that the sector is in such bad shape some hotels are going to have to close anyway, so it's about managing that instead of letting it happen in an uncontrolled way," he said.
Mr Power said that with 61,000 hotel rooms in the country, there was overcapacity of 20pc, and around 60 to 70 hotels would have to close to allow the remaining ones stay in business and continue to be employers and contributors to the economy.
The IHF also called for hotels to be allowed to take part in the government's new Employment Subsidy Scheme, which is only open to exporting firms, arguing that the tourism industry makes a similar contribution bringing in 7.5 million overseas visitors and €4.8bn in foreign exchange spending in 2008.
And with many hotels in crisis talks with the banks over borrowings, they also called for the Government to guarantee annual credit of up to €150,000 for viable hotels.
They also want a new tax incentive to encourage investment in hotels that need to reduce their debt burden, although they would not be allowed to use this to expand as that would compound the existing oversupply.
Public sector charges should also be reduced by 10pc immediately and local authority rates need to be cut by 30pc, as happened in south Dublin recently.
Around 200 hoteliers attended the meeting at the Grand Hotel in Malahide yesterday, noting foreign visitor numbers were down 15pc in June 2009 over June 2008, with British visitors down 20pc.
IHF President Matthew Ryan said that with banks already taking control of some hotels, without urgent action to restructure the sector and support hotel finances, there was going to be a high casualty rate even among otherwise viable hotels and guesthouses.
However, a Department of Finance spokesman said that while the IHF proposals were being studied, no decisions on tax changes would be taken in advance of the December Budget.
- Aideen Sheehan
