Failure to close insolvent or so called “zombie hotels” is damaging the long-term interests of the tourism and hotel sectors, economist Peter Bacon has said.
Addressing the annual conference of the Irish Hotels Federation (IHF) in Galway today, Dr Bacon said the lack of “foreclosure against fundamentally insolvent hotel businesses” was now undermining the remainder of the sector, including businesses which are fundamentally competitive and sound.
“Hotels that are in receivership and are effectively run by banks, or where the ownership of the businesses has been taken over by banks or their nominees are, through their practices of deep discounting of prices, undermining the long term viability of an industry which employs about 54,000 people,” he told delegates.
Dr Bacon said there is excess capacity in the hotel sector of between 12,000 and 15,000 rooms. This was brought about by the construction of an additional of 27,000 new hotel bedrooms between 1999 and 2008, bringing to the total hotel bedroom capacity of the sector to 60,000.
Dr Bacon urged the banks to “fully recognise” bad loans within the hotel sector.
Unless all bad loans are clearly identified and written down with foreclosure if necessary, he said, the financing and stability of the entire hotel sector will remain on an unstable foundation.
“We are living in a fool’s paradise if we believe that the offering of deep discounted and below cost hotel room prices will be a long term benefit to the economy,” he said.
Addressing the conference earlier, Taoiseach Brian Cowen acknowledged the difficulties facing the sector but the downward pressure on prices was helping to restore the economy’s competitiveness.
Mr Cowen said:“Reducing these costs is part of the difficult adjustment the whole Irish economy faces.”
“The fact that consumer prices in Ireland have now fallen back to 2006 levels shows that we are responding flexibly to the crisis,” he said.
Mr Cowen also acknowledged the difficulties relating to the lack of credit. He said, however, the Government’s strategy for National Asset Management Agency (Nama) was centred on the goal of restoring a stable and functioning banking system.
