Up to 100 Irish hotels are likely to be in receivership by the end of 2011 as the sector struggles under €6 billion in outstanding loans, according to one forecast.
Outstanding loans average €100,000 per hotel room, estimates Aiden Murphy of Horwath Bastow Charleton, the accounting firm that produces an annual survey.
Average profit per hotel room is just €4,000, breaking down into €6,000 for Dublin and €3,000 outside the capital.
Murphy says the funding gap means many hotels are weighed down by loans they have no prospect of repaying commercially. He said owners were “serving time” until the banks decide on a hotel strategy. “The scale of this problem is extremely worrying,” he said.
Central Bank statistics show hotel loans by Irish banks totalled €5.2 billion at the end of 2010, excluding loans in the National Asset Management Agency (Nama).
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Murphy estimates that loans acquired by Nama relating to 87 hotels have a face value of more than €1 billion.
Since 2000, 24,000 rooms have been developed in 340 Irish hotels. “With these being the newer properties, it is likely that debt per room is higher than average for these hotels,” he said.
Sixty-five of the country’s 900 hotels have been put in receivership since 2008. This year’s Horwath Bastow Charleton Irish hotel survey, launched last month, showed that 11% of Irish hotel rooms are in receivership.
Most hotels in receivership continue to be traded by the receiver, and have not been offered for sale on the open market, a trend that Murphy questions.
He offered for sale the 71-bedroom Shandon hotel in Co Donegal, a family-owned business to which he was appointed receiver in February. The hotel continues to trade. “The job of the receiver is to maximise the recovery for the bank,” he said. “I would have thought it is better to dispose of the hotel as early as possible rather than wait a number of years.”