THE GOVERNMENT is working closely with the hotels industry to examine where there is an oversupply of beds, in order to ensure the sector has a viable future, Minister for Tourism Mary Hanafin has said.
The Minister was addressing the question of the possible closure of a number of non-viable hotels where related loans had been transferred to the National Asset Management Agency (Nama).
According to the Irish Hotels Federation, as many as 200 hotels – containing 15,000 beds – need to be closed in order to bring the hospitality sector back to viability.
Ms Hanafin told The Irish Times the question was not to identify just numbers of hotels and beds, but to establish their location and how they were spread around the country, so they could be discussed with Nama from a policy perspective.
She said this could be correlated with whether there was a need in these areas, for example, for student accommodation or for English-language schools to attract tourists.
Nama had indicated that it would get around to examining the hotels sector at the end of the year. In the meantime the Government and the Irish Hotels Federation were working on putting together “as much documentation and as much of a picture for them as possible” in relation to the hotels sector, the Minister said.
Ms Hanafin added that the question of maintaining jobs if hotels were to close was a concern for the Government.
“What we don’t want, though, in the long term is to find that not only have the Nama hotels shut down, but that in the process the viable hotels have gone too. I really want to make sure we don’t end up with a long-term crisis because of the short-term maintenance of jobs.”
Where hotel developers were availing of tax reliefs, Ms Hanafin said she believed the Department of Finance’s view was that there would be a difficulty in relieving people of their obligation to pay a “clawback” because it would “undermine tax relief” and almost certainly end “in trouble with Europe”.
Ms Hanafin said the Nama-related hotel loans needed to be examined in the context of the entirety of the accommodation supply in the country.
The question of some banks keeping non-viable hotels open merely for their asset value was also “a problem”.
President of the Irish Hotels Federation Paul Gallagher said the only way the market could resolve itself was if market forces were allowed to exist.
“We have an artificial market. It’s not correct, it’s not functioning. If it were, insolvent hotels that are unable to pay the financial institutions capital interest would not be allowed to exist.”
Mr Gallagher said he believed “very few” jobs would be at risk as a result of closing a certain number of hotels because business would transfer to other hotels in those locations.
He said that without doing something about the insolvent hotels, the whole sector was in jeopardy and “all jobs across the sector are in jeopardy”.
Among the €80 billion in loans being sold to Nama are associated loans owing on hotels built and owned by developers moving under the agency’s control.
Nama’s business plan says that where a number of Nama-funded hotels are competing in a location where there is only potential for a single facility, the agency “will make its decision based on the optimal commercial outcome”.
On the question of value for money, Ms Hanafin said that accommodation prices had “never been cheaper” and that this was certainly attracting tourists.
Access to Ireland in terms of flights was also very cheap, she said.
She said, however, the main concern from a tourist point of view was the cost of “incidentals”, such as cups of coffee.