Hoteliers worried NAMA could skew competition
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THE Irish Hotel Federation (IHF) has warned that the likely inclusion of hotel assets into the National Asset Management Agency (NAMA) will skew competition in the market, further damaging an already troubled sector.
The warning is contained in a document, seen by the Irish Independent, that contains proposals to Government to deal with the angst-ridden industry. According to the IHF, the introduction of NAMA into the banking system would mean that the agency could operate hotels at market distorting prices or sell hotels off at very low prices.
While the National Asset Management Agency Bill 2009 said the valuation methodology, which will not be available until September, would recognise that the current market for property-backed loans was weak, the plans would not require the banks to accept "fire-sale" values.
However, the Department of Finance, which last week produced the draft legislation for the agency, also said NAMA would not be guided in its pricing "by the property prices and expectations regarding property prices that underpinned the original lending decision"
The IHF said: "NAMA should be explicitly required to operate in a manner which does not distort markets, does not support unfair competition against existing operators in a market (either through the management of assets within its control or through the letting or disposal of assets) and does not provide state aids to specific enterprises or entrepreneurs (either directly or indirectly through its activities and mechanisms)."
A slew of hotels have gone into examinership, receivership, and in some cases liquidation, in the past few months as commercial property prices continue to drop, overcapacity in the market increases and tourism numbers dry up.
It is estimated that 4,500 jobs will be lost in the sector this year, matching last year.
Figures in a recent Central Bank quarterly report showed that hotels owed the banks €7bn in 2008 including lending for overseas property.
The IHF, which is holding an emergency meeting of its members on August 12 at the Grand Hotel, Malahide, Co Dublin to discuss the troubled sector, also recommended other steps to deal with hotel financing, excess capacity and market distortions, including an adjustment of the tax allowance provisions which, in many cases, drove the boom in the sector.
Other recommendations include the provision of adequate levels of credit on a risk- sharing basis with the banks and new tax incentives to support new equity investment in existing hotel businesses.
- Ailish O'Hora
