Friday, October 12 11:02:34
An independent economic report undertaken by economist Alan Ahearne has urged the Irish Hotel Federation (IHF) to take decisive action to restore financial stability to the Irish hotel sector.
The report revealed the mounting challenges facing the sector in Ireland, including debt estimated at E6.7bn, and a necessary debt restructuring of 38 per cent to return the sector to sustainability. It also proposed a range of Government policy initiatives to restore financial stability to the sector so that it can realise its potential as an engine for job creation across the country. These include:
&#61623; The existing Employment and Investment Incentive Scheme should be extended to include restructured hotels, thereby providing incentives to private investors to invest equity in restructured hotels.
&#61623; A new Hotel Restructuring Fund could use funds from the National Pension Reserve Fund and the sale of state assets to invest in hotels that have a commercially sound prospect for profitability, growth and providing sustainable employment.
&#61623; A Qualifying Investor Fund for Hotels may be attractive to private investors, especially from abroad, who would like to invest in Irish hotels but do not wish to own hotels directly.
"The reality facing the sector is that the banks will only lend to potential domestic investors to buy or refinance viable hotels if sufficient equity capital is available. However, there is a severe lack of funds available to new and current owners, preventing the repair of individual property balance sheets," said Tim Fenn, CEO of the IHF. "This lack of funds represents a market failure that is choking the recovery process in the sector. In the meantime, unsustainable levels of debt are damaging the sector and the wider tourism industry through under-investment in the hotel stock."
"Now is the time for the Government to take decisive action to help improve access to equity finance and restore financial stability to the sector. This issue cannot be allowed to fester and jeopardise future growth and job creation in the wider tourism industry. If we don't act now, we'll be picking up the pieces of a failed tourism industry in five years time."