Sean Dunne, the insolvent developer, used to brag that he had "balls of steel".
Perhaps he did. You would want a hardy set of cojones alright to pay €375 million, as Dunne did in 2005, for the Jurys and Berkely Court hotel sites in Ballsbridge.
Either that or Dunne wasn’t the kingpin he thought, which is also a strong possibility.
Accounts filed this month for Zrko and Qulpic, the Ulster Bank and ACC-controlled entities that seized the two Dublin 4 hotels from Dunne, show just how outlandish the valuation really was, even for those mad times.
According to the accounts, the properties were valued by their owners at the end of 2013 at a combined total of €64.9 million, or less than one-fifth what the developer paid for them.
How are those steel stones doing now, I wonder.
Of particular interest in the Zrko and Qulpic’s accounts, however, is that the hotels’ valuations are once again on the rise – and fast. Over the 12 months to the end of December, they rose in value by more than 41 per cent.
Since then, the Dalata hotel group, which operates them (they're now known as the Ballsbridge and Clyde Court), agreed a deal with a unit of Blackstone to buy its quarter of the two operations for almost €22 million.
That deal, which was scuppered last month by the banks exercising pre-emption rights, valued the hotels at about €88 million – another 35 per cent rise in value since last December.
Such rapidly rising hotel valuations on a prime site in the most sought after postcode in Dublin are an extreme example that can’t be fairly applied across the rest of the sector nationwide. Hotel values may be rising at 35 per cent annually in Ballsbridge, but most likely not in Ballycotton or Ballybofey, where things are remain altogether tougher.
Still, taken together with recent positive industry growth reports, the Zrko/Qulpic figures are a pretty good indicator that the hotel sector is well and truly out of its sick bed and racing off down the hospital corridor, whooping and hollering on its way to the pub.
Which only serves to emphasise that the industry is extremely lucky to have retained State aid in the form of the 9 per cent tourism VAT rate in Tuesday’s budget.
The tourism industry, with hoteliers lobbying hardest, claims the reduced VAT rate has led to the creation of 33,000 jobs since it was introduced by Minister for Finance Michael Noonan in 2011.
It is facile to attribute all the new jobs to the lower VAT rate – drastically improved economic conditions in our source visitor markets of Europe, Britain and the US were a much bigger factor. Still, it undoubtedly helped.
Warning on prices
Noonan sounded a warning to the hospitality industry in his budget speech that he would restore the VAT rate back up to 13.5 per cent if “recent reports” about price rises for customers continued.
“Let me be very clear,” he said. “the taxpayer cannot be the only stakeholder keeping costs down in the sector.”
Ireland has the best hotel stock in Europe, and some of the best hoteliers.
Here’s hoping they recognise their good fortune with Noonan’s largesse on Tuesday, and pass all the benefits on to bargain-hunting consumers.