Industry on verge of collapse
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(l-r) Peter Bacon and Matthew Ryan |
The Irish hotel industry is facing bankruptcy, a new report said.
The industry is insolvent and 25% of its 60,000 rooms need to be taken out, the report said.
It confirmed hoteliers' fears that the industry would collapse unless urgent action was taken.
TheOver Capacity in the Hotel Industry and Required Elements of a Recovery Programme Report was commissioned by the Irish Hotels Federation (IHF) from economists Peter Bacon and Associates.
It said bad investments in new projects had helped create the current situation.
The Bacon report said that the number of rooms in the Irish hotel industry had grown from 21,000 in 1989 to a current 60,000.
Of these, 15,000 - 32% - had opened since 2005.
The report said: "This supply growth was driven largely by a number of factors, in particular,
accelerated capital allowances for developers, the ease of obtaining finance and the
wishes of planning authorities to incorporate hotels into development schemes.
"In many cases the commercial viability of the hotel business was not sufficiently
prioritised, despite warnings from the IHF."
The result of overcapacity has been a drop in average room rates.
These fell from €57 in 2000 to €38 in 2008. They had since fallen by a further 26% in 2009.
The report said: This is the steepest fall of any major European country, making Ireland the cheapest Western European country for hotel accommodation.
Bacon said demand had dropped and hotels with no long term viability were dropping rates simply to maintain a cash flow.
It said hotel were staying open because banks were reluctant to realise losses and write down loans granted to hotels that have no prospect of recovery.
As a result, the whole sector was being affected including hotels which did have long term future.
It said the answer was to take 15,000 rooms out and to decommission future projects.
Matthew Ryan, the IHF president, said: "This Report is possibly one of the most detailed and comprehensive analyses of the sector ever undertaken and includes very serious measures to improve the viability of the sector.
"The Report calls for the urgent active participation of the stakeholders involved including the banks and financial institutions, the Government, the tourism bodies and the hotel sector itself to seek effective solutions."
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