Shelbourne among big names on 'life support'

HOTELS: YOU DON’T have to travel far through recession-hit Ireland to find a hotel in financial intensive care

HOTELS:YOU DON'T have to travel far through recession-hit Ireland to find a hotel in financial intensive care. According to the Irish Hotels Federation, 50 hotels here are in receivership while 82 are under the control of the National Asset Management Agency (Nama).

Some big names are in intensive care or on the blocks for sale. They include the Shelbourne and Four Seasons in Dublin, Breaffy House in Mayo and Parknasilla in Kerry.

“You can stand outside a hotel these days and not be sure who owns it,” said Paul Gallagher, federation president and the man who runs Buswells Hotel in Dublin. Opposite the Dáil, Buswells is a popular hangout for media and politicians. It is owned by Seán Quinn, who has his own difficulties following a failed €2.5 billion gamble on Anglo shares.

The story is familiar. During the boom, new hotels popped up all over Ireland, built by developers and businesspeople, often driven by attractive tax breaks. They cashed in on the explosion in tourism and Irish people splashing out on luxury short breaks.

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Then the crash came and tourism collapsed. Hotel owners could no longer meet the interest payments associated with the hefty loans they’d used to fund their properties.

This has led to a number of hoteliers securing lucrative contracts to run these hotels on behalf of the receivers or banks. Tifco, led by experienced hotelier Enda O’Meara, is running the Clontarf Castle and the Burlington in Dublin and Parknasilla in Kerry, which was redeveloped by Bernard McNamara.

Pat McCann, the former boss of the Jurys Doyle hotel chain, has secured probably the biggest slice of this work. Mr McCann’s day job is head of Maldron Hotels, a relatively new budget hotel chain that itself availed of generous tax breaks to build in 10 locations.

But he has also built a sideline by securing management contracts to run nine hotels in receivership – Citywest and Finnstown House in Dublin, the two Heritage hotels in Laois, the Clare Inn, Breaffy House in Mayo, Whites in Wexford, the Clayton in Galway and the Diamond Coast in Sligo. The contracts are handled by Dalata Management Services. Dalata Ltd is the vehicle behind the Maldron chain.

“No question, back in 2009 I would have targeted this area, more through the banks at the time,” Mr McCann said.

Typically, Dalata operates 12-month rolling contracts, a level of commitment that suits both sides in the current climate.

“We try to work with the local management teams,” he explained. But Mr McCann also has his own crack troops to work through whatever problems exist at the hotels.

His aim on entering a property is to stop the losses and boost cash flow. “The big problem for many of these hotels is that they are standalone hotels and they don’t have the resources for purchasing and marketing and so on. That’s where we can help.”

He is coy about the financial details surrounding the contracts, but it is understood they generally involve the management firm receiving a percentage of turnover (around 3 to 5 per cent) and a cut of any profits.

Mr McCann says seven of the properties under his watch are in the black and that Dalata and Maldron can help the hotels achieve savings and efficiencies of up to 20 per cent. He acknowledges that in the long term, there will have to be a cull of Irish hotels to bring supply and demand into harmony. He says 5,000 to 6,000 rooms – about 10 per cent of the total – need to come out of the system.

However, many established hoteliers have cried foul about the impact of hotels on life support offering cut-price deals.

“This has the potential to drag a large section of other hotels into the ward that requires life support,” Mr Gallagher said.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times