The Great Southern Hotel chain is set to run out of cash in the first quarter of next year if current poor trading continues, it has emerged. Emmet Oliver reports.
The hotel chain is also in danger of doubling its trading losses to €4.4 million for 2005, according to a source close to the company. The nine-strong hotel group is continuing to lose money despite investment in some of the properties in recent years.
Losses to date this year are believed to top €3.2 million.
The current trading position of the hotels was discussed by the board of the Dublin Airport Authority (DAA) last week. Several directors expressed anxiety about the continuing losses and said that if the DAA were a private concern, the hotels would have been sold by now.
Some directors are believed to have voiced the view that putting more money into the hotels would be pointless, unless the investment generated extra sales. Up to now, the DAA has not provided day-to-day funding to the hotel group, but this may arise in the new year.
Some directors advocate selling the hotels one by one, starting with the serious loss-makers like the Great Southern Rosslare and the Great Southern in Eyre Square, Galway. But with an election due next year or in early 2007, the political climate may not be right for a sell-off.
The DAA declined to comment yesterday on the current performance of the hotels.
A business plan is currently being put together for the chain and cost control has improved in the last year under chief executive John Mahoney.
Since November 2004 several leading DAA directors have joined the hotel board, including Ray Gray, the finance director, company secretary Oliver Casein and head of human resources Damian Length.
The chairman of the DAA, Gary McGann, has spoken on several occasions about his desire to exit loss-making businesses.
But the Taoiseach and particularly the Minister for Arts, Sport, Tourism and the Gaeltacht, John O'Donoghue are strong supporters of the company. Two of the group's hotels are in Mr O'Donaghue's constituency.
The main problem, according to sources involved with the chain, is high wage levels compared to other hotel groups. In the last set of accounts attention was drawn to "unsustainable operating costs".
Over the last year there has been a sharp fall in the number of visitors going to traditional Irish destinations, although the number of short stay visitors has risen, especially in Dublin.
The Great Southern chain is facing competition from several international operators, including the Radisson SAS Group. Even at Dublin airport competition is fierce, with the Holiday Inn and the Hilton trying to take market share from the Great Southern Dublin airport property.
The property in Eyre Square, Galway was hit this year by disruptions caused by the renovations taking place in the area.
