Business Irish

Wednesday 24 January 2018

Bank-run zombie hotels 'threaten entire sector'

Brian McDonald

HOTELS which are being propped up by banks are a threat to the entire sector, economist Dr Peter Bacon warned yesterday.

Dr Bacon told more than 400 hoteliers that the failure to foreclose on insolvent hotels was the biggest threat to the livelihoods of 54,000 hotel workers countrywide.

He insisted that hotels in receivership and effectively run by the banks, or where the ownership had been taken over by banks or their nominees, were causing problems by the deep discounting of prices.

A survey carried out by the Irish Hotels Federation revealed that 70pc of hotels and guesthouses had experienced unfair competition from these 'zombie' hotels being supported by banks.

And Dr Bacon's report for the Hotels Federation, published late last year, identified that there were up to 15,000 excess guest bedrooms -- the equivalent of 150 hotels.

Dr Bacon told the annual conference of the Irish Hotels Federation in Galway that banks should fully recognise bad loans within the hotel sector. Unless all bad loans were clearly identified and written down with foreclosure if necessary, the financing and stability of the entire industry would remain unstable, he predicted.

He said: "We are living in a fool's paradise if we believe that the offering of deeply discounted and below-cost hotel room prices will be a long-term benefit to the economy. The industry will not survive in such circumstances.

"Businesses which could be viable, even with a struggle, are being driven into insolvency by the facilitation of the continuing trading of competitors who are not meeting the basic requirements of covering their costs and servicing their debts.

"This is resulting in hotels being unable to invest in maintaining standards and the Irish tourism industry will suffer irreparable damage if these conditions are allowed to prevail."

Dr Bacon called for all barriers to exit from the hotel sector to be removed. Banks should be forced by the regulatory system to recognise the losses on loans to insolvent hotel properties and should also be forced to foreclose on such hotels if necessary.

He stressed that Ireland had one opportunity to rectify the banking crisis. Over-lending and an irresponsible level of bank debt made available to part of the hotel sector would have to be addressed, he said.

One of the country's best known hoteliers told of the toll that the recession was having on his business and personal life.

Brian McEniff, who owns six hotels in Donegal, Dublin, Sligo and Mayo, said that he had come through the recession of the 1980s, the Northern Troubles and difficulties arising from proximity to the Border, but the downturn in tourism and the wider economic crisis was the greatest problem he had faced.

Mr McEniff said that newer hotels, especially in Dublin, who were making rooms available at rock-bottom prices were a "great problem" for the industry.

"It's impossible to compete. D4 Hotels started it last year at €20 a room--you couldn't service a room for €20 at any time of the year. That knocked the stuffing out of us throughout the country," he said.

Mr McEniff admitted that the banks had him up against the wall and there was no point saying otherwise, even though he was not overly-borrowed.

He added: "I'm on the edge. I was in for tests in Dublin and I can say it's all down to stress and that's where it's at. I've been a hotelier all my lifetime and I've never come across anything like it."

Irish Independent

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