Wage hike could hit investment, hotel chief warns
Published 13/06/2016 | 02:30
The boss of Ireland's biggest hotel group, Dalata, has warned that the company could divert more investment to the UK if the minimum wage here rises 25pc.
Speaking to the Irish Independent, Pat McCann said that if minimum wage rises to €11.50 an hour, that it would have a knock-on effect across the hotel group, and would ultimately affect future investment decisions.
A weekend report suggested that the Low Pay Commission (LPC), which is preparing a recommendation for Government, could be preparing to back a 25pc rise in the current €9.15 per hour minimum wage.
While unions are supportive of the move, businesses are concerned of the impact such a hike would have on Ireland's competitiveness, as well as their operations.
Mr McCann said increasing the minimum wage would impact Dalata's entire wage structure, and that coupled with high rates and other costs, it could impact the group's overall investment strategy.
"Everyone would love to pay more, but that becomes very difficult when you consider that it would come on top of all the other costs," he said.
He pointed out that there's a shortage of hotel rooms in Dublin, for instance, and that deciding where to build or buy hotels involves an investment analysis. Higher wage costs could tip the decision "one way or the other", he said.
"The reality is that you have a responsibility when you have to invest other people's money," he added.
He pointed out that if an investment case for properties in Ireland couldn't be justified, then the group would look at targeting more properties in the UK.
Dalata is listed on the stock exchange. It currently owns and manages more than 40 hotels in Ireland and the UK. It has bought 19 hotels since 2014.
Last year, it generated revenue of €225.7m, and adjusted earnings before interest, tax, depreciation and amortisation of €62.6m.
Last month, the group announced plans to build a €26m hotel on Dublin's Kevin Street. It paid €8.1m for the site on which the property will be developed. Dalata also paid €10m last month to buy a partially completed hotel in Cork.
Dalata told investors last month that it has no current intentions to expand further in Northern Ireland, but has identified a number of expansion opportunities in Britain.
It said that it currently hopes to open two to three more hotels in Britain in late 2018, and another three or four in 2019. It said that opportunity exists in the upper three- and four-star markets in large provincial cities there.
The LPC has not yet determined what its final recommendation to the Government will be when it delivers its report towards the end of July.
Ireland's current minimum wage is already the second-highest in the EU, exceeded only by that of Luxembourg.