'Worse to come' when NAMA steps in
Published 21/08/2010 | 05:00
HOTELIER John Loughran said family businesses are under threat from bank-controlled 'zombie' hotels.
And he warned there's worse to come when NAMA take over many of these empty hotels.
His family has run the Mount Herbert Hotel in Dublin's Sandymount for more than 50 years, but he said business had never been as tough.
The opening of the Aviva Stadium beside their hotel should represent a golden age for the long-established hotel.
But instead they have slashed rates and are working flat out to stay afloat in the face of cut-price competition from debt-ridden hotels.
"Even during the recession of the 1980s there was a manageable level of competition, but then during the boom you got all this government interference in the market to create tax breaks for hotels that never looked sustainable," he said.
Mr Loughran added that with competitors such as D4 hotels -- the former Jurys Hotel now owned by property developer Sean Dunne -- just around the corner, there was ferocious downward pressure on price.
"We get people ringing up saying 'why are you charging €69 when we can get a room there for €49?', but that's not a sustainable price."
Their average room rates dropped by 20pc in the past year, yet still they had their worst July ever. He said hotel prices here were now the lowest in western Europe, even though wages were among the highest.
"If you have one hotel with €50m in debts, and another beside it that owes €4m, the bank and eventually NAMA is going to keep the one that owes €50m open, because they see that as the only way to get something back.
"The hotel that owes just €4m will probably be forced to sell, because the bank knows it'll get most of that back on the property, and that enhances the value of the heavily indebted hotel because it's one less competitor," he said.
His parents, George and Rosaleen, started the hotel with four bedrooms in 1955, growing to 168 rooms over the years.
Mr Loughran and his siblings grew up working in it. His son Gerard has continued the family tradition and employs 70 staff.