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.”