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Loss-making hotels 'will shut for winter without State help'

Profitability is expected to be hammered by reduced trade with 10 million fewer tourists due to visit Ireland this year

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(stock photo)

(stock photo)

(stock photo)

Swathes of the hotel and restaurant industry will shut when the summer season ends unless the State underwrites loss-making business through autumn and winter, a senior adviser to the sector has warned.

Turnover in the hospitality sector is expected to be down at least 40pc for 12 months after it is allowed to reopen, according to Aiden Murphy, partner at accountancy firm Crowe who advises companies across the sector.

In January, he correctly predicted a swathe of liquidations in the restaurant sector having observed stress from rising taxes, rents and competition.

Now, he says hotel and restaurant operators are seeking advice on potentially closing their doors from September 2020 until March 2021, in effect going back into a voluntary lockdown to reduce what they see as inevitable trading losses. Businesses are also examining options like weekend-only opening.

Profitability is expected to be hammered by reduced trade as 10 million fewer tourists visit Ireland this year and social distancing limits numbers on premises, and also because of rising costs including extra cleaning and compliance.

The effect will drive staff costs relative to revenue to levels where businesses are loss making, he said.

"Payroll costs will jump to 55pc to 60pc of turnover once the busy summer season is over - it will be cheaper for business not to trade."

A Government-funded payroll support of around 33pc of wage bills would keep businesses open until they are viable again, and would cost significantly less than unemployment benefits, which otherwise will spike, he said.

The call for a bailout of the hospitality sector for potentially a year beyond the end of the Covid-19 lockdown highlights the scale of economic disruption the crisis has caused.

The Irish Fiscal Advisory Council acknowledged that in a report yesterday, anticipating a requirement for extra Government spending over years rather than months to counter the economic damage, and pushing out action to address the ballooning national debt.

"In the second "recovery" phase, most countries would have fiscal space to launch a sizeable temporary fiscal stimulus," acting head of the Fiscal Advisory Council Sebastian Barnes and chief economist Eddie Casey wrote in an article on Vox, the online portal for the Centre for Economic Policy Research.

A third phase of tackling the resulting debt would come later, they said.

Irish Independent