This is a brief follow-up blogpost following the revelation on here that more than one in six Irish hotel rooms is controlled by a bank – via a receiver or liquidator or has itself acknowledged bank support as critical to its survival. There are some minor corrections and a few additions to the list of bank controlled hotels – and “thank you” to the blog’s audience for their contributions, both publicly via comments and privately. The total rooms under bank control has risen to just over 10,000 meaning more than one sixth are subject to bank control; NAMA and NAMA bank’s control falls slightly to 53.9%. The numbers captured are likely to underestimate the true level of bank control. The data below and additional receivership information is available in a google docs spreadsheet here.
There has also been some comment from the Competition Authority, NAMA and the Irish Hotel Federation (IHF). In respect of suggestions that bank-controlled hotels are setting their prices at levels which unfairly undercut traditional rivals, the Competition Authority says “the Competition Authority received a number of complaints in relation to this some time ago, back in 2010. We looked into it at the time and found no issue under the Competition Act, specifically, we found no breach of section 4 or section 5 of the Act”. The IHF says it “is currently working with the Government and financial institutions to address the issue of overhanging debt in the hotels sector. We expect to have an update from these discussions in the last quarter of this year” NAMA hasn’t specifically commented but its past position on hotels has been “there are more than 900 hotels in Ireland. NAMA has loans linked to just 121 operating hotels – 13% of the total – and will only support a hotel if its business is viable and based on a sustainable long-term business plan. We have had interaction with the Competition Authority to show them that our debtors and receivers are not engaged in any market distortive practices.”
A report published by Ireland’s biggest commercial property company, CB Richard Ellis, earlier this week painted a hotel sector which is recovering, with average room prices up by 6.2% to €89.26 in the past 12 months – compared with general Irish CPI inflation of less than 2% – and revenue per room up by 6.7% to €70.67 over the same period. CBRE also confirms that more hotels are coming onto the market, courtesy of banks including NAMA and receivers. However, it should still be noted that in the recent Comptroller and Auditor General’s report that NAMA’s strategy overall for Irish hotels is “hold”, presumably to the second half of this decade.
To go back to where we started, prices in Irish hotels are so good today that they might only just meet operating costs and you may never find such value again. And no, this is not a paid-for advertorial by the Irish hotel sector, the observation of the prominence of bank controlled hotels in Ireland, and disposal strategies and pricing are all genuine.
UPDATE: 6th July, 2012. The data above has been updated to remove one hotel which now leaves 9,958 hotel rooms, or one sixth of the 2009 Bacon Report total number of hotel rooms in the State, with 54.2% under the control of NAMA or NAMA banks.
UPDATE: 19th July, 2012. Independent TD, Michael Healy-Rae from the beautiful Kingdom of Kerry, has tackled Minister for Finance Michael Noonan about NAMA’s impact on the hotel sector – this during what is the High Season for the Irish hotel industry in respect of weddings/tourism, a Season which is reported by RTE to have gotten off to a disappointing start, particularly at hotels outside Dublin. We learn that NAMA controls 121 hotels through its developers and receivers in “Ireland” – presumably that is the Republic of Ireland because the 900 hotels cited by Minister Noonan in the same reply is for the Republic only. NAMA has closed four hotels and NAMA continues to mouth the defence that its impact on the sector is over-stated. With more than one in six hotel rooms under bank control in the State, and NAMA and NAMA banks in control of over half that identified total, NAMA isn’t exactly a bit player. The NAMA defence has been subtly modified however and the defence is now “it will not advance funding to hotels that are not commercially viable as there would be no foreseeable return on such funding” – previous NAMA has talked about not funding loss-making hotels.
So if Hotel A is losing €1m per annum, it is loss-making but if Hotel A is losing €1m per annum and owes NAMA a €100m loan and the hotel is only worth €40m, it might still be in NAMA’s interest to keep the hotel operating in the hope that the worth of €40m will increase at more than €1m per annum – thereby offsetting the €1m loss – which would then mean it would be “commercially viable” to fund a loss-making hotel. Subtle difference. The complete exchange is here.
“Deputy Michael Healy-Rae: asked his views on the strain being put on long established hotelier by National Asset Management Agency operated hotels who are able to offer unrealistically low prices; his plans to review the long term viability of these hotels that are operating at a loss; and if he will make a statement on the matter. [34507/12]
Deputy Michael Healy-Rae: the number of hotels here that are operated by the National Asset Management Agency; and if he will make a statement on the matter. [34508/12]
Deputy Michael Healy-Rae: the number of hotels under the control of the National Asset Management Agency that have closed down recently; and if he will make a statement on the matter. [34509/12]
Deputy Michael Healy-Rae: his views on the fact that long established hoteliers in the hospitality sector are being put under severe strain by the National Asset Management Agency operated hotels who are able to offer unrealistically low prices in many cases; if he will review the long term viability or not of operating these hotels at a loss; and if he will make a statement on the matter. [34550/12]
Minister for Finance Michael Noonan: I propose to take Questions Nos. 80 to 83, inclusive, together.
NAMA advises that it does not own or operate hotels. NAMA’s role in relation to the properties securing its loans is that of a secured lender. Other than properties that have been enforced, all of which are listed on NAMA’s website and which are managed by the appointed receivers/administrators, properties including hotels continue to be managed by their existing owners or their professional managers/agents. NAMA, in line with its legislative remit, takes a very close interest in their efficient management and sale with the view to maximum loan repayment in order to protect the position of the taxpayer.
NAMA advises that its debtors and receivers control 121 hotels in Ireland, of which 117 are fully operating; four hotels recently ceased trading. There are over 900 operating hotels in Ireland and, accordingly, NAMA has exposure to only 13% of the sector. Its potential impact on the overall viability of the sector is overstated. The Deputy may wish to note that NAMA have advised that while the Competition Authority received complaints about NAMA’s impact on the hotel sector, the Authority decided not to pursue these complaints after engaging with NAMA.
NAMA further advises that as a secured lender it will not advance funding to hotels that are not commercially viable as there would be no foreseeable return on such funding and, therefore, it would run contrary to NAMA’s statutory commercial remit.”
NAMA Wine Lake 
Not a pretty sight. How are hotels not in NAMA or under bank control going to compete with this lot, whose tentacles stretch into every corner and crevice of the land and who have access to funds at less than 1% at least NAMA has? Surely, this is totally unfair competition? Can these poor souls not go to the EU Competition authority or are they going to be given short shrift just because NAMA was given a nod and a wink at EU level? Just because they got the go ahead, does not mean it’s legal. It’s legal up to the point of a successful legal challenge and the ECJ is not the same as our “politically weighted” supreme court that always has one eye firmly fixed on the result the government “needs”. It is legal then as long as nobody challenges it at EU level, and as long as nobody has aspects of it declared illegal. It has not been brought to the European courts yet, but is going to be yes/no? Maybe Treasury will go this route as a final throw of the dice but it is always better for an innocent party, and Treasury is not an innocent party, to bring the case.
There is little doubt in my mind, that many of these hotel businesses are to be lambs to the slaughter in fact they are doing well to have survived to now. But why? (1) Initially the danger to the EU banking system (still there) (2) The daft idea then spawned by Bacon himself acting as advisor and “front man”, for government, that we needed this NAMA toxic skip for commercial loans. (Not that his involvement with Ballymore Properties would have influenced him for a minute. (3) The lunatics in government and on county and city councils spawning a raft of tax incentives while others made sure that coaches and four could be driven though development plans end result more hotels per square inch than Las vegas. . As with financial regulation there was none, planning wise it was a jungle and they should all have been made to resign Gormley was way to soft as evidenced by the demise of the Greens at the pools. Onwards and upwards then I say, as far as the ECJ because this, to use a favourite Peter Mathews expression, “is simply abzurd”.
As a Traditional Hotelier we were shafted by the “Developers” while they were building and operating these white elephants…and now we are being shafted again as their questionable lenders, “THE BANKERS” now runs them under Asset Management Companies totally undermining the concept of the market finding its own trading level.
These Hotels as they fail should be closed and then perhaps the Hotels that were not wreckless will have a chance to survive and re-invest and not see all they have worked for so hard go down the tubes.
Land was re-one for Tourism projects by Local Councilors best describe as “gobshites”…with absolutely no business acumen between any of them, their greatest challenge was to see how many could fit in the one car to go to a Conference at the far extreme of the country and all claim individual mileage expenses.
While we might think this was all Fianna Fail, don’t forget that Fine Gael had control of most Local Authorities during these crucial rezoning.
County Managers wanted that TROPHY HOTEL, Five Star, with Golf Course and Spa on their doorstep so as the could use it to wine and dine and charge it down to the Commercial rate Payers, yes the Traditional Hoteliers.
The Irish Hotels Federations and its previous administration sat on their hands and if you asked a question you were quickly reminded not to rock the apple cart. A cosy cartel not to be upset, perhaps? As a guardian of the Industry the past CEO was in my opinion asleep and the IHF cannot represent Traditional Hoteliers and Bank Controlled properties as it is doing today…an absolute conflict of interest.
Most Hotels built in the “Celtic Tiger” era were Trophy Assets, built to avoid tax and never made money but it was better to get a tax write off of several million and while losing a few hundred thousand each year for the first seven ……….. madness only the fools we had in Government and still have could allow this to happen and indeed continue
Let’s get a movement of Traditional Hoteliers that are still standing together and take on the Banks, NAMA and the Government and take a case to the European Courts of Justice.
Hi NWL,
I’ve heard there’s a similar problem with golf courses in NAMA (likely to be the newer developments) damaging the business of long established golf courses through their ability to charge lower green fees, etc. This may be just gossip/bitterness but I wonder if you have found any evidence of this.
@Bunbury, I think I have heard suggestions in every sector in which NAMA has an interest through the property underpinning its loans, that NAMA is distorting competition by funding loss-making enterprise in the hope that the underpinning asset will recover and offset any short term loss on the business. That could be anything from pubs, hotels, golf courses, resorts to ordinary business linked to NAMA developers.
In reality, the only instance in which I have seen these suggestions rise above the level of speculation has been in the hotel sector, and the Competition Authority looked into that, and say NAMA has no case to answer.
So maybe gossip/bitterness, but seemingly nothing that has landed on the Competition Authority’s doormat just yet.
There may be parallels here with the case of Sean Quinn and Quinn Insurance.
There was always gossip/bitterness from other Irish insurers saying Quinn was only able to offer lower prices to customers because he wasn’t making sufficient provisions for losses.
But the gossip/bitterness was never substantiated in Ireland.
It was in the UK market that his under-provisioning was really exposed. When Quinn was losing his empire, an appointed administrator to his UK insurance operation immediately said more funds were needed to cover potential losses.
The UK doesn’t seem to do sacred cows like we do here.
Does NAMA have UK assets that might generate complaints to the equivalent of the Competition Authority over there?
Is it not somewhat amusing that with all the ree-raa about the hotel business what we are actually speaking about is a industry that operates for on third of the year and entirely predicated on vast transfers to their highly trained staff through the dept of social protection. Of course there is a few shillings to be made in hotels. They have virtually no other costs beyond set up.
And as to the old ‘established’ family hotels. Ever wonder about the high costs of Legal persons. Well most of those hotels in the county towns had a visitation of the traveling circus that is the Circuit Court a few times a year and has permanent sittings of the District Court.
You’d actually wonder is cars existed for those in that world, for certainly the motorways don’t.
This is a very sad situation. I hope the traditional hoteliers have the strength to stand together against this. The destruction of wealth in Ireland has got to be stopped and so much of this is coming from NAMA. It has to stop. Cashing in for short-term gain is the same crazy mentality as the mindless and unplanned building bonanza that created the problem in the first place. I agree that Fine Gael is as much to blame as the previous Government as they controlled the councils and planning. The creators of crazy tourism tax-breaks and greedy councillors have so much to answer for. It won’t stop either until planners and councillors are held accountable for their bad decisions.
The focus should be on stopping the destruction of wealth and allowing Irish business to grow in a sustainable way. This should guide every decision and policy. I hope there is a smart and strategic thinker out there with time, money and a patriotic interest in Ireland and the Irish to help steer this around. Our political leaders are like rabbits caught in the spotlight and short-term gain and spin-machines guide their decisions. Right now it seems there is nobody with understanding at the wheel, we are heading towards a cliff and the vultures facilitated by NAMA are scooping in to take up the pickings. Cromwell probably plundered far less than the plunder that is taking place now and the penny will not drop until it is too late.
Traditional hoteliers stand together and try to get your message through. There should be a clear policy on tourism and hotels in Ireland headed by Failte Ireland that focusses on a sustainable industry. If they are not doing this then that should be changed. NAMA or the Department of Finance should not be allowed to block it. If this is happening then the public must know – NOW.
I will ensure that I stay in a hotel that is not controlled by NAMA or a receiver in future and I am sure most people would also if they knew the facts.
I dont find hotels in Ireland – outside say Dublin – particularly cheap and am sure that any sort of collective action to raise prices by “traditional” hotel owners would be illegal and contrary to consumer welfare like any other price fixing scheme. By normal market measures for competition policy purposes, NAMA doesn’t own enough hotels to have a decisive influence on prices in the sector. Most hotel owners just need to work harder to lower their prices and improve the quality of their services, just like other Irish retailers, particularly supermarkets, and for that matter hairdressers, yoga instructors, restaurants etc etc.
NWL is a great site, but sometimes drifts into a sort of “producer protection” attitude which is far too common in Ireland. I sometimes think that Conor Pope’s “consumer” writings in the Irish Times should instead be labelled “producer”, given their tendency to swerve any discussion about increased supermarket competition into what-does-it-mean-for-Irish-farmers/wholesalers etc etc.