An accommodating man

THE FRIDAY INTERVIEW: CIARÁN HANCOCKinterviews Tom Moran, hotelier

HOTELIER Tom Moran comes through the door of his office and offers his hand and an apology for keeping me waiting. He was delayed by someone in the car park of his well-known Red Cow complex.

It’s an occupational hazard for the amiable and popular Limerickman, who has traded from this site since 1988.

It’s a Tuesday night in the run-up to Christmas and the four-star hotel is buzzing with revellers.

June Rodgers, an old hand at Christmas cabaret, is playing to a crowd of about 460 recession-weary punters. They could do with a laugh. We all could.

“For a Tuesday night, it’s not bad,” Moran says of the expected crowd.

Moran himself is keeping the sunny side out, in more ways than one.

In the words of his long-time sidekick Pat Power – the group’s finance chief and only non-family shareholder – Moran is “as red as a rasher” after completing a charity walk in Britain with staff at his UK hotels.

“I did three days . . . 66 miles with them. I thought I’d never get there,” he says. About £25,000 was raised for the British Heart Foundation, so it was worth it in the end.

Moran isn’t the type to brood, although he’d have good cause given the collapse in the hotel trade here.

TS Taverns Ltd, which owns Moran’s 10 hotels and Red Cow Inn pub, made a loss of €101.9 million in the year to the end of January 2009.

More than half of that was finance charges and currency hits related to Moran’s €570 million acquisition of Bert Allen’s six Bewley’s hotels in 2008.

An interest bill of €39.2 million, required to service the loan for the Bewley’s hotels, also helped drag the company into the red.

Moran is a pragmatic man. When asked whether he paid too much, he shrugs and gives a simple answer. “On today’s prices, yes, but at the time it was a great deal. Even my accountant and the banks thought it was the deal of the century. But we didn’t see the recession coming.”

Who did?

“None of us did. The way they were trading, the potential was enormous, and we bought potential.”

As Moran tells it, all things being equal, his 10-property hotel chain should have achieved earnings before interest, tax, depreciation and amortisation (Ebitda) of about €60 million in the last financial year.

Instead, the credit crunch and recession pulverised the business and left it with Ebitda of just over €31 million.

Suddenly, the interest bill attached to the deal became a monster that had to be fed.

And the chain’s Ebitda has continued to decline – it will be about €5 million off last year’s figure when the current financial year ends on January 31st.

Moran and Power went back to their banks and refinanced a large portion of their loan, kicking out the repayment deadline.

“That should take care of our interest, which is most important,” Moran says matter of factly.

“January 2011 we will definitely break even and probably make money,” he predicts.

“Now, if the world falls off the face of the Earth again next year, we have no control of that.”

Moran is an old hand at this game. He made his first fortune in Britain, buying pubs, doing them up and then flipping them for a frothy profit.

He returned to Ireland in 1979 with enough money in his back pocket to fund the purchase of some pubs in Limerick.

He became a hotelier by chance. The way he tells it, a friend persuaded him to go to an auction where the Red Cow was on the blocks.

Somehow, he left the room as the proud owner of a pub at the now infamous busy motorway junction.

He later opened a hotel next door and he has permission to extend it further and add a 17-storey extension. This is on hold until the recession ends.

Six of his seven adult children now work in the business, and Moran insists the Bewley’s deal was an investment in their futures.

So no regrets? “Not in the least,” he says, without hesitating. “In the present economy it will take at least 10 to 15 years but I’m still a young man, hah, hah.

“It was always seen as a long-term investment, as a 20 years investment. I’ve six of my family working in the business. So it’s an investment for them.”

Back to business and Moran says that while occupancy is “very good”, the average rate paid for a room “is not where I’d like it to be”.

Bewley’s rates are about €75 a night while the Red Cow is €10-15 more. “That’s down on the previous year by €25,” Moran explains. His Silver Springs hotel in Cork is similarly affected, but the two London properties are bucking the trend, with rates “never below £100 a night”.

“We’re selling the four-stars at three star prices,” he said. “Hoteliers can’t keep selling rooms at the rates they’re selling them. Rate is killing everybody.”

With the Irish hotel sector in dire straits at present, Moran said he would consider taking on management contracts for troubled properties. “We’ve had approaches from different banks for different hotels. We’d look at it, but there’s nothing concrete yet.”

He reckons about 20 hotels in Ireland could close for good in the current economic cycle as the glut of rooms becomes too much for the market to bear. There were simply too many hotels built during the boom.

“I have been saying this for the last eight to 10 years,” he says. “A lot of hotels will end up as nursing homes. It will be good for elderly people.

“Nursing homes are a lot more expensive to stay in than hotels. I can see a lot of people converting their hotels into nursing homes.

“If I had a hotel out in the sticks I would consider doing that. But it wouldn’t be practical for any of our hotels.”

In his own business, Moran is proud that he hasn’t had to lay off any permanent staff or cut their wages.

Instead, staff were asked to work an extra 10 per cent in hours. “Other directors wanted to do a pay cut, but I disagreed completely. I felt that if we gave them a pay cut they wouldn’t perform as good as normal, especially in the industry we are in because they are meeting and greeting all the time.”

He reckons costs across the business have been pared back by more than 15 per cent.

Come what may, Moran insists that June Rodgers won’t be working for Nama next year. “It definitely won’t end up in Nama. Under no circumstances.”

Before buying the Bewley’s properties, Moran tried to snaffle the Great Southern Hotels from the Dublin Airport Authority.

He failed and the GSH sites were sold piecemeal to different groups.

“That would have been a disaster,” he says with a broad smile. “I would definitely be in Nama if that had happened. I don’t even think Nama could hold me.”

Moran’s 60th birthday is around the corner, but he has no thoughts of retirement. “I can’t retire at the moment. We have to get out of this dip. Once we get out of this dip, I will maybe look at a five-day week instead of a seven-day week, hah, hah.”

On The Record

Name: Tom Moran.

Position: Founder and owner of Moran hotel group.

Why in the news?Recently filed accounts show that the Moran and Bewley's hotels made a combined loss of €101.9 million last year.

Family: Married with seven children.

Lives: Rathfarnham, Dublin. Also has a villa in Spain.

Hobbies: Cycling.

Something you might expect:He loves hurling. A keen follower of his native Limerick, he also keeps an eye to the Dublin hurlers. "They're coming on nicely at it," he says.

Something that might surprise:"I've just taken up walking."