Madam, – I wish to make a few comments on the Editorial (July 24th) on the state of the hotel industry. The number of visitors is falling, not rising. The British market, our largest, is down 30 per cent while others show modest gains on a poor 2009. Excluding the Dublin short-break business, inward tourism has been dropping for some 10 years as the Irish cost base rose. Tourism will not grow enough to go anywhere near closing the tax-incentivised oversupply of 20 per cent.
The oversupply has driven prices to non-profitable levels as the insolvent hotels, subsidised by their bankers, scramble for cash-flow using below-cost pricing. No matter how well a hotel is operated it cannot compete with the increasing “zombie” properties.
The inevitable result will be very serious damage to the tourism industry and its ability to compete internationally. In this context it is totally appropriate that Minister for Tourism Mary Hanafin should discuss the business with NAMA now.
NAMA is the biggest player in the Irish hotel sector but is reported to be prioritising the desolate building sites, which will yield nothing for many years, over its hotel portfolio. Without NAMA’s participation a coherent policy is not possible. – Yours, etc,
Madam, – Your editorial (July 24th) misses the point as to why the industry is struggling: one word – costs. Ireland is a ridiculously expensive place to do business and when you reach break-even point (about €40 plus VAT per room to include rates, overheads and labour), there is simply no profit. Indeed you are right to castigate the industry for overcharging in the past but who could blame hoteliers when supply was limited and demand was high especially at weekends.
It’s simple economics. Every sector was at it and while that does not make it right, why on earth would any business charge below what the market will bear? Of course you can get a week’s holiday for €350 in Iberia and a meal for two for €15 when the minimum wage is circa €3 per hour.
As more and more hotels go into receivership (approximately 40 currently) and around 300 are in bank control), the net result will be scores of closed hotel mausoleums around the country, a testament to the impossible cost of doing business here. Government and in particular, the Minister for Tourism, must take the lead in overseeing an orderly wind-down of non-essential zombie hotels. If it is left to market forces as you suggest, the result will be many tourist areas with little or no accommodation while others will remain oversupplied.
Rest assured there is no profiteering in Irish hotels – it’s a now question of survival. – Yours, etc,
Madam, – Your editorial (July 24th) regarding Minister for Tourism Mary Hanafin’s intention to meet NAMA regarding the hotel industry misunderstands the frustration of hoteliers.
Imagine a successful property developer decides to invest in a new paper of record. He has no experience with papers of record but has on hand a consultant’s report which has established the market for a new paper of record.
A number of years later the property developer and new paper of record has huge losses and has been subsumed into NAMA together with another paper of record that another property developer invested in. The established paper of record wholly understands that there is only one paper of record and there is no space for two, never mind three.
So what should NAMA do with these papers of record? The current response of the banks, having taken control of properties in the hotel industry, is to lower the selling price of hotels below cost to attract accommodation.
This is the market in action and wonderful for consumers’ rights? Well, no, the state is propping up unsustainable hotels with illegal state aid.
Would the paper of record be as robust in seeking to deter political interference in NAMA if it were operating against a competitor that was charging 1995 prices for its paper? – Yours, etc,