Clare hotels facing closures

Last year was the worst year for Clare hotels since the 1980s and with many carrying heavy overdrafts from the winter, businesses could be forced to close if tourist numbers don’t increase in 2010. This is according to the chairman of the local branch of the Irish Hotels Federation.
“It was the most challenging year for Clare hotels for the past two decades. I think you would have to go back to the ’80s to find a year as bad. In resorts like Kilkee and Ballyvaughan, I’d say the scenario was much worse. I’d say there really wasn’t a viable season for a lot of people. The only reason a lot of hotels have managed to carry on is because they are family owned and were able to sustain themselves going into this season. I think there are a lot of people who didn’t take a salary out of their businesses in the county last year. It was a very tough year,” IHF Shannon branch chairman, Michael Vaughan told The Clare Champion.
“There are a lot of people very worried about this season. The biggest worry people would have is whether or not they will be able to meet their financial commitments in the year ahead. Many of the Clare businesses would be carrying huge overdrafts over the winter. In a normal season, a mature business would be able to hold onto the cash accumulated during the summer to pay the bills in the off-season but even small hotels have very high overheads, like electricity and rates. Rates have to be paid whether the place is trading well or not and are essentially a tax,” he continued.
According to figures from the IHF, there are 49 hotels in Clare with 2,554 rooms. The local authority rates charged per room are €738.67 and totalled €1,886,575.67 last year. In Limerick, the rates are more than double what is charged in Clare and Kildare hotels pay higher rates than any others in the country at €2,003.71 per room.
Although hotels in Clare have to pay amongst the lowest rates in the country, the county’s hoteliers are urging Clare’s local authorities to charge the fees as a percentage of companies’ overall turnover.
“Many of the tourist businesses outside of Ennis are seasonal and by and large the rates being paid, while not as expensive as other regions, are still a heavy burden. Our argument in the federation here in Clare is that we would like to see rates being calculated on a level of turnover. If rates were say 3% of turnover, the councils would benefit more in the really good tourism years. It would also be an incentive for the council to spend more money on generating tourism and it would be less pressure on hotels in leaner times,” explained Mr Vaughan.
According to the Lahinch hotelier, national figures on occupancy don’t tell the whole story. “National figures don’t translate that well to Clare. I would say the occupancy figure for the year here would not have been more than 55% on average. That means most hotels were only full about half of the time. For a viable hotel business, you need occupancies of 60% and over,” he revealed.
“We have seen some high-profile hotels in trouble in recent years and I would say most hotels in the county are surviving because of extra funds owners are putting into them or owners or managers not taking an economic return from the property. We are nursing our businesses for the last year or two but that can’t go on forever,” Mr Vaughan continued.
The hotelier went on to say that an over-supply of hotel rooms in other counties is adding to the difficulties faced by Clare hotels.
“Hotels in Limerick city are having a huge effect on businesses in Clare. I would say there are six or seven hotels in Limerick being artificially propped up by banks who are afraid to close them down for fear of having to write off the loans they were given or they have to stay trading because otherwise there would be a huge claw-back on the tax incentives they were given. I have no doubt the Limerick hotels are taking tourism business that would normally stay in Clare at rates that are uneconomical. There is widespread evidence of below-cost selling in the hotel industry at the moment,” he claimed.
According to those surveyed in the Hospitality Ireland Hotel Tracker Index, prices for hotel rooms in Clare, Galway and Limerick have remained relatively steady at five-star level between January 2009 and the same month this year but prices of rooms in four and three-star hotels have decreased by between 8% and 31%.
According to Mr Vaughan, there are approximately 1,000 hotel rooms too many in the Shannon Region.
“In Limerick from 2004 to 2009, the hotel room stock went from around 1,400 to nearly 2,400. International tourism figures into the region have remained roughly static since 1999. There has been an increase in hotel stock but not in tourist numbers.”
He pointed out that the majority of the new hotel rooms were occupied by the domestic Irish market.
“This wasn’t sustainable because we had all the SSIA money and discretionary spending. This is the market that has collapsed. We should have been increasing our tourist numbers pro-rata but we never achieved that,” he stated.
“While lots of initiatives have been put in place to attract people to the county and hoteliers are hopeful for the year ahead, they are wondering where business is going to come from, particularly with the loss of so much air traffic through Shannon. We have seen 15% less air traffic from America. Nationally, taking in Dublin airport, that figure is down 20%. There is a big, big worry that there won’t be enough tourists to go around for all the businesses that are depending on them this year,” Mr Vaughan said.
“In Clare we’d estimate that things aren’t quite as bad as the tourism figures for the region suggest but they might be down 15% to 20%. Also, about 60% of Clare hotel business came from the domestic Irish market and the big worry this season is how will that market hold up? Will as many people come as have in previous years and will they stay as long? This year is a great unknown. We felt last year we would feel some pain but the full effect of December’s budget will not be seen until the summer,” he concluded.