Failte Ireland produces a fascinating seasonal Tourism Barometer report which is based on a survey of those in the hotel and hospitality sector so as to paint a national picture of the health of the vital tourism sector. The latest Barometer for September 2011 has been published and is available here. It has some stinging commentary about what is perceived to be a distortion of the market-place by NAMA and the so-called “bank-run” hotels – hotels to which banks have appointed receivers or where banks are closely involved in the operation of the hotel; these hotels are perceived to be under-cutting non-NAMA/bank-controlled hotels by offering uneconomic rates, and that further, these hotels are seen to be spending money unavailable to other hotels to market and maintain their properties, one comment says “NAMA and other bank-run hotels, and golf courses, are charging lower prices, and yet can still afford to maintain their business. There is anecdotal evidence that they are the only hotels spending money on carpets, curtains etc. The losers in the end will be the smaller family run businesses”
Of the 900-odd hotels in Ireland, NAMA has a say in the running of just over 80 and most of these 80 are still being run and operated by the original developer (or, as if often the case, a specialist hotel operating company). In fact according to the NAMA foreclosure list, there are only about 20 hotels where NAMA is involved via a receiver; I understand that NAMA has security in place over 21 golf clubs in the State, 12 of these are in Leinster, five in Munster, two in Connacht and two in Ulster. Of course NAMA is approving business plans with all the developers so it may well be the case that NAMA is funding the operation of non-foreclosed hotels. But it would be unfair to omit reference to other “bank-run” hotels. Bank of Scotland (Ireland) is understood to have been the biggest lender to the hotel sector during the Celtic Tiger years and has foreclosed on several hotels. Other non-NAMA banks with hotel sector exposure include Ulster, ACC and National Irish Bank. NAMA may not even be the single biggest player in the “bank-run” sector.
Section eight of the Bord Failte report examines concerns facing tourist facilities and perhaps not surprisingly, the general economic state of the country is the foremost concern with 65% of respondents citing it, but not too far behind the second biggest concern is “low-priced competition” and the report says “by far the most frequently mentioned source of such competition is NAMA or bank-funded hotels. Operators in some other sectors are not able to make back discounts given on rooms rates through bar or restaurant revenues” Comments from respondents to the survey include “as a B&B, competing against NAMA financed hotels which will sell rooms at any price to achieve value added benefits from the bars and restaurants – the B&B sector is unable to compete” and “we have seen room rates plummeting due to NAMA hotels offering unsustainable rates. This has had such a detrimental effect on the ordinary independent hotel, this cannot be allowed to continue”
In response to the Failte Ireland report and the comments relating to NAMA, a NAMA spokesman said “NAMA’s involvement in the hotel sector is greatly exaggerated and non NAMA banks have much greater exposure and influence in this sector. The agency has stated on a number of occasions that it will not permit hotels to maintain unviable rates.”
I have seen evidence of Ireland’s Competition Authority corresponding on the subject of NAMA’s involvement in the hotel sector, but to date it seems the Authority has insufficient evidence, if such evidence exists at all, to pursue an investigation. It is certainly the case that non-NAMA or “bank-run” hotels closely monitor the activities of NAMA hotels. Unfortunately, financial accounts in the public domain don’t tend to show line expenditure items like rent or loan interest or management or receivership fees, so it can be difficult to confirm that NAMA hotels are being operated on a “viable basis”, in the sense of making a profit after taking into account all expenses for the business, and the fear is that it is NAMA or the banks which forego interest and rent, or absorb receivership and management fees themselves, thereby leaving the actual hotels just needing to cover daily operating expenses.
Recent reporting on the Irish hotel sector suggests that occupancy has stopped declining and is more or less stable at 80%, according to CBRE and that revenue per room is rising slightly, but it seems to be still the case that prices generally remain rock-bottom, and that for consumers, value being seen today may never be repeated.