Ireland’s hotels have debts of €6.7bn

About 300 of 850 hotels are in financial difficulty but turnover is up at most hotels

Pat McCann, chief executive of Dalata Hotel Group: “Hotels need to get into a position where they can generate sufficient working capital.”

Pat McCann, chief executive of Dalata Hotel Group: “Hotels need to get into a position where they can generate sufficient working capital.”

 

Ireland’s 850 hotels have aggregate debts of €6.7 billion and about 300 of them are in financial difficulty. These are the key points of a report on the health of the sector jointly commissioned by AIB and the Irish Hotels Federation.

The report also found that 54 per cent of hotels increased their turnover in 2012, while two-thirds of the 111 respondents expect tourism to improve here within the next three years.

In his commentary to the report, commissioned from consultants Amárach, IHF chief executive Tim Fenn said overhanging debt was a “key challenge” facing the sector, along with labour costs, which account for about 40 per cent of hotel turnover on average, and local authority rates, which he argues have not been lowered in the downturn.


‘Debt servicing’
“It is vital that debt servicing does not compromise the ability of hotels to deliver good customer service and to continue to maintain appropriate quality service standards,” Mr Fenn added.

The €6.7 billion figure would include the €1.166 billion paid for Jurys Inns by a group of investors put together by financier Derek Quinlan, and the near €400 million paid by developer Sean Dunne for the two former Jurys Doyle hotels in Ballsbridge.

In the report, Ken Burke, head of AIB Business Banking, said the bank was “wholeheartedly committed” to helping the sector develop in the coming years.

AIB’s annual report shows that it had €2.6 billion in gross loans to hotels on its books at the end if 2012, including lending in the UK. It says it now has an exposure of €1.1 billion in hotel loans.

Speaking to The Irish Times yesterday, Mr Burke noted that the bank had helped a number of hotels refinance their borrowings in recent times.


Working capital
This includes the five-star Fitzwilliam Hotel in Dublin, where AIB has provided a three-year term debt facility of €21 million in addition to working capital and leasing facilities.

It was also the sole lender to Doyle Hotels (Holdings) Ltd for its €220 million, four-year refinance of term debt in addition to working capital and foreign exchange facilities.

In his commentary, Pat McCann, chief executive of Dalata Hotel Group, which operates the Maldron chain and runs a number of other hotels for lenders, including Citywest and the Ballsbridge and Clyde Court, said: “Hotels need to get into a position where they can generate sufficient working capital. This can be very difficult for some as revenues and margins continue to decline.”

Tom Barrett, head of hotels and leisure at estate agent Savills, said hotel stock here reached 60,000 bedrooms at peak and is declining by about 1,000 a year.