CREDIT CRUNCH:BANKS ARE effectively managing 30 hotels, in order to keep capital allowances alive and minimise losses, it has been claimed.
John Brennan, owner of The Park Hotel Kenmare, said banks are propping up hotels by hiring management teams to sell five-star rooms at two-star rates.
“Thirty hotels have been built in unsuitable locations by egos on the crest of a wave driven by a tax incentive scheme that was not policed. These hotels have no commercial future,” he said.
Eight years ago there were 24,000 hotel beds; today there are 62,000. The Republic has 36 five-star hotels, whereas Belgium has only nine. “It doesn’t add up,” Brennan said.
Government funds are propping up banks, which are in turn propping up tax haven hotels. “I don’t think that this is what the country had in mind when it backed the banks. This has not happened in any other industry.”
Effectively, Nama could end up with the one of the largest hotel portfolios in Europe.
Established “iconic” hotels such as The Park Hotel, Kelly’s in Wexford and Aghadoe Heights, as well as traditional small hotels, have had to compete, develop and market without the benefit of capital allowances, and in a hostile lending climate.
Hotels owe banks €7 billion and could see revenue fall by 70 per cent this year.
Brennan said the Park Hotel is just two per cent down on occupancy this year, while revenue is down 18 per cent and 20 people have been laid off. Seventy per cent of the guests are Irish, a reversal of the 1990s when 80 per cent were from North America.
