Ireland’s hotel industry: Another grim story

Another grim tale


Ciara Moynihan

Despite the seasonal upswing, the hotel industry remains in a desperate state. According to an Irish Hotels Federation (IHF) survey conducted this year, 88 per cent of hoteliers were concerned about the viability of their business for 2010. 
What is to be done? The IHF has focused on four areas that need attention: Local authority rates, operating costs, the strength of the euro and wages – all of which, the IHF says, are too high.
Local authority rates are indeed undeniably high. According to the IHF, Mayo charges between €930 and €960 per room (Kildare is the dearest at €2,000, while Longford is the cheapest at €670). However, in these straitened times, county councils are unlikely to compromise their budgets by reducing rates to the extent to which hoteliers have been calling (i.e. a reduction of 30 per cent).
Operating costs are a burden shared by every other sector throughout the economy, and the strength of the euro is determined by factors beyond the country’s control, so the hotel industry is unlikely to be able to effect the changes it needs or wants in either of these spheres.  
The fourth area the IHF has focused on is wages. The minimum wage is too high, or so the argument goes.
The minimum wage is €8.65 an hour. A person working a 35-hour week earns €302.75 gross per week. Or €15,743 gross a year. That’s less than half the average industrial wage. Or, let’s call a spade a spade, sweet FA.
Frankly, asking the lowest-paid workers to prop up an ailing sector smacks of an immorality too obviously grotesque, too self-evidently wrong, to need an argument to be set out against it.
So it appears the industry is between several rocks and a hard place, and many hotels will inevitably collapse in the crush.
How can the sector have found itself in such a bind? The big bugbear that haunts the industry is overcapacity – a hangover from the Government’s ill-conceived and too-often-extended hotel tax-incentive bonanza, which encouraged hotel development for all the wrong reasons. And who was it that profited from these tax breaks? Yes, that’s right, the developers.
As disquiet over the tax breaks grew, there was a rush to build before the breaks were axed. As Róisín Burke recently revealed (Sunday Independent, July 18) there were 350 applications for hotel projects in 2004 alone, while a staggering €329 million in tax breaks was given for hotels between 2004 and 2007. Tourism rose by 70 per cent since 1996 – not bad – but hotel rooms rose by 150 per cent.
And it is this overcapacity that the industry is left to struggle with. Yes, there has been an economic downturn, yes less people are staying in hotels, but the industry would have been in a far better position to cope if all those extra rooms hadn’t been built.
Ghosts in the housing market, zombies in the hotel sector, vampires in the banking sector, skeletons in government closets… Ireland has become a very ghoulish place indeed.