A report out today (11/11/09) by economist Peter Bacon for the Irish Hotels Federation outlines what many have known for some time, namely that Irish hotels are in dire financial straights. In the last 20 years, the number of hotel bedrooms has grown from 21,000 to almost 60,000 today. Since 2005, the number of rooms has risen rapidly - by about 15,000 or 32%. Market forces would normally have forced hotels with weak business models to close. However, this has not happened. Banks are reluctant to realise losses and write down loans granted to hotels that have no prospect of recovery. Furthermore, new hotels are required to stay open for seven years to allow investors to retain capital allowances.
A major and chaotic shakeout is predicted and it suggests that 25% of hotel rooms need to be closed down. Not an easy task in the current environment.
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