Business
Subscriber Only

Direct provision sees State prop up swathe of Irish hotels

Caveat: State asylum system readies for €500m splurge before decommissioning

Travel customer review site Tripadvisor is an essential reference for many people before they book a place to stay. Guess which hotel is currently top rated in Dublin? It isn’t the Shelbourne or the Merrion, nor is it the Westbury or the Marker. It isn’t any of the luxurious, well-invested five-star hotels across city. It isn’t one of its more traditional gems, either.

According to Tripadvisor’s reviews, the top rated of all 176 hotels in Dublin currently is the Holiday Inn at Dublin Airport, which this month closed its doors to the general public after just seven months in operation to become an accommodation centre for foreign nationals seeking asylum.

More than 92 per cent of the 188 reviews for the hotel, which sits across the M1 motorway from the rear of Dardistown cemetery, give it a rating of five out of five. Many are ostentatiously effusive, gilding it with praise in a notably similar style. There appears to be a remarkable level of consistency and consensus among the hotel’s customers. That is according to Tripadvisor, at any rate.

Accommodating people fleeing war and misery can be a lucrative business for private operators

Whatever one thinks of customer ratings on Tripadvisor, it is clear the 421-bedroom Holiday Inn at Dublin Airport must be a fine property indeed. It is brand new, having opened its doors only last July. It cost at least €56 million to build, judging by the amount of debt that its owner, the UK-based JMK group, has secured against the hotel in borrowings from Fairfield Real Estate Finance. That level of investment buys a top-class physical product.

The pandemic has been terrible for the hotel sector and it delayed the original opening of the Holiday Inn by 18 months. But all signs suggest that business volumes in hospitality will recover steadily over coming years. Hotel development remains one of the hottest tickets in commercial property. Well-built hotels such as the Holiday Inn surely will emerge striding from the ashes of the virus, possibly even soon.

So why would JMK, run by the Pakistani-Irish businessman Jalaluddin Kajani (also known as John Kajani) shut its doors to the public before they have a chance to become familiar with it? Why would it join the State’s oft-maligned system of direct provision for refugees, when it is clear that becoming an asylum centre will potentially damage the Holiday Inn’s image in the eyes of future customers?

It is glaringly obvious that the State must be making it worth its while.

Revenue per available room (revpar) is a standard industry metric for measuring the topline performance of hotels. Hospitality data firm STR has suggested that it may take until 2024 for revpar to recover to 2019 levels, which at that time were about €119 per night, on average, for Dublin hotels.

The the International Protection Accommodation Service (Ipas), the office of the Department of Children that houses asylum seekers, is currently paying hotels about €100 per night for rooms. That is well above the depressed revpar levels of the last two years and, if it comes in the form of a guaranteed State contract at a high occupancy rate, would make perfect financial sense for a hotel such as the Holiday Inn.

Otherwise it is at the mercy of a potentially fickle recovery in international travel and it also runs the constant risk of being plunged back into financial penury by a resurgence of the pandemic.

System under strain

The pandemic and the ensuing need to thin out overcrowding for public-health reasons have put enormous strain on the State’s direct-provision system over the last two years. The annual costs have ballooned beyond €183 million, well past double what it was in 2018. Ipas has signed accommodation deals with scores of hotels in the pandemic – it has six exclusive hotels on its books in the Dublin area alone, with many more taking asylum seekers on an ad-hoc basis alongside commercial customers.

With the reopening of travel after the latest phase of the pandemic, the problem is getting worse. Ipas says there have been 3,300 new arrivals of people seeking asylum since October. The system is straining like never before, forcing Ipas to offer ever more attractive deals to hoteliers.

Sources tell me the State is now signing deals with some hoteliers guaranteeing payment on the basis of 100 per cent occupancy. A full hotel, 365 days per year is the stuff of dreams for hoteliers. And consider then the obvious scope for cost-cutting when running a direct provision centre, compared with an expense-addled commercial hotel.

Ipas won’t discuss its contracts with individual hoteliers, but if the 421-bedroom Holiday Inn got the same deal offered to some others in the industry recently, the State could soon be paying close to €295,000 a week for the use of that hotel. That comes to more than €15.3 million per year.

Accommodating people fleeing war and misery can be a lucrative business for private operators.

Profit margin

According to a report just before Christmas, the highest earner in the State from providing accommodation for direct provision was hotelier Séamus “Banty” McEnaney, who is also the Monaghan senior football GAA manager. His companies were paid €15.78 million by Ipas.

They won’t have made anything like that kind of profit. But the snippets of accounts available from other direct-provision providers (the performance of many others is obscured behind unlimited accounts) suggest McEnaney can expect his companies to bank profits on Ipas business of up to 20 per cent.

McEnaney operated eight hotels for Ipas in 2020, some of which he does not own but which appear to be leased from other owners, such as the Carnbeg in Dundalk and the Airport Manor in Dublin. Overall, he operated 496 rooms for Ipas, in addition to the homeless facilities he runs for Dublin City Council.

The Holiday Inn instantly will sit alongside McEnaney’s operation as one of the largest providers of accommodation to Ipas.

It would not be a major surprise to see an operator such as McEnaney eventually take over the running of the Holiday Inn for Ipas from JMK, which by next month will be busy operating three other commercial hotels in the State, as well as building two more.

The Government’s stated policy is that direct provision will end by December 2024, to be replaced by a system of mostly “own-door” accommodation facilities for asylum seekers. But before it ends, the system is readying for one last splurge. This week, Ipas closed off a tender for another panel of hoteliers to provide accommodation over the next 34 months, right up to the policy changeover deadline.

The State estimates the cost will be up to €500 million, according to tender documents. Not all of that will flow to hotels, but a large chunk of it will. The State, through direct provision for refugees, is propping up a swathe of Irish hotels. What will they do if this State gravy train really does end?