The high staffing level across the group is one of the factors behind the hotel operator’s accumulated losses of €40m. The group is on course to lose another €7-8m in 2006, according to an internal analysis prepared for the government. In 2004 the losses were €2.2m.
The situation at the company is so serious that GSH directors said they were not prepared to sign off on the 2005 accounts without clarification on the future of the hotel group.
At a board meeting on January 27, the directors decided they had no option but to sell the hotel chain “to protect the board from accusations of reckless trading and in the best interests of all the stakeholders”, a government briefing document revealed.
The board of the GSH recommended the group be sold as a going concern and that recommendation was endorsed by the Dublin Airport Authority (DAA) at its board meeting on February 6.
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There are 400 permanent workers in GSH and part-time employees make up the equivalent of another 300 full-time posts. Staff costs amounted to almost 50% of overheads last year, compared with an industry norm of about 34%. The Great Southern on Galway’s Eyre Square is believed to have as many staff as bedrooms.
Outdated management structures were also identified as an issue in the group’s under-performance.
Ministers have expressed surprise at the scale of the problems in the hotel chain which is owned by the DAA, formerly Aer Rianta. Martin Cullen, the transport minister with political responsibility for the eight hotels in the group, will meet trade union representatives on Tuesday to hear their concerns about the proposed sale.
Joe O’Flynn, the general secretary of Siptu, said his union’s preference is for the hotel group to remain in public hands, either by way of transfer to Failte Ireland or CIE, which owned the original hotel chain.
He disputed the scale of the reported losses and accumulated debts, particularly last year’s loss of €6m. Siptu has commissioned an independent analysis to determine how much money the DAA has drawn down from the hotel group to service loans used to finance the airport authority’s refurbishment programme.
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Siptu would be looking for signs that the government was genuinely concerned about the displacement of well-paid jobs in the economy, he said.
A spokesman for Cullen said it was premature to discuss redundancy packages. “We will just have to wait and see what the advisors come back with,” he said.
Tourism minister John O’Donoghue, who has two of GSH’s eight hotels in his Kerry South constituency, said last week that the contribution of the workforce over many years would require they be given some “tangible benefit” in recognition of their role.
Cabinet members were taken aback at the scale of the group's problems and the pace at which they were progressing.
Only the airport hotels — Dublin, Cork, Shannon — are breaking even, according to the transport department’s analysis. The group’s hotels in Galway, Killarney and Parknasilla need major investment.
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The Corrib Great Southern on the outskirts of Galway and the Rosslare Great Southern could be the most difficult to sell. GSH is to commission private advisers to study the situation and recommend how to proceed.
Siptu says it is concerned that developers might seek to make money from the lucrative land banks at GSH locations in Corrib, Eyre Square, Killarney and Parknasilla.
The group has been affected by the huge increase in hotel capacity around the country.