Hoteliers want quicker rates review

The Post - The country’s hoteliers are willing to help fund a national review of commercial rates in order to speed up the process of revising them, according to the new president of the Irish Hotels Federation.

Paul Gallagher, who is general manager of Buswells Hotel in Dublin city centre, said that hotels and guesthouses paid 6 per cent of the state’s rates. He said this represented a charge of €90 million a year, or €1,500 a room.

Legislation introduced in 2001 requires the state Valuation Office to complete a national revision of rates.

However, because of manpower shortages at the Valuation Office, according to Gallagher, only two local authorities have completed rate reviews since then.

He said that these two had reduced the rates by 30 per cent. That figure, he said, indicated that hoteliers were paying €27 million more than they should at a time of great difficulty for the sector.

Gallagher said that reform of the valuation process was ‘‘badly needed’’, and that hoteliers were now open to funding a revision of rates.

‘‘Ultimately, it is something that will save hoteliers money in the long run. An outside agency could easily be appointed to speed up the process," he said. ‘‘We are willing to pay a fair rate, but the delays in the revisions are too long."

The IHF has already called on the government to initiate emergency legislation that would permit its members to declare inability to pay rates because of the economic downturn.

‘‘We are being penalised by an antiquated taxation system of commercial rates that sees local authorities extract taxes without any up-to-date reference to the level of profitability, turnover or overheads of the business," said Gallagher.

He said that the IHF would consider taking a constitutional challenge over the issue of rates, but added that the move could result in a ‘‘pyrrhic victory’’.

Gallagher said he would also use his presidency of the IHF to prioritise the marketing of Irish hotels overseas.

He said the sector’s ‘‘near-total reliance on the home market’’, which provided 70 per cent of total occupancy in 2009,was a flawed strategy.

He wants to raise a marketing fund of €1 million from hoteliers in the coming months to help search for business in new markets. ‘‘We are willing to put our hands in our pockets to stimulate demand," he said. Gallagher said the failure of lenders to close insolvent hotels was damaging the entire sector, but the influence the IHF could exert was limited.

A survey by the IHF found that 70 per cent of hotels and guesthouses had experienced unfair competition from so-called ‘zombie’ hotels, which are insolvent but are being supported by banks.

‘‘Businesses which could be viable, even with a struggle, are being driven into insolvency by the facilitation of the continued trading of competitors who are not meeting the basic requirements of covering their costs and servicing their debts," Gallagher said.

Economist Peter Bacon told the IHF annual conference last week that financial regulatory authorities should force banks to recognise the losses on loans to insolvent hotels and to foreclose on those hotels if necessary.

Gallagher said the IHF was loath to take a case to the European courts, or to make a formal complaint to the financial regulator. ‘‘Lobbying has also worked well for us," he said.

The IHF has voiced concerns about below-cost selling and unfair competition to the Competition Authority, but the authority said that evidence of agreement or collusion was required to establish predatory pricing.

The Competition Authority also said the Competition Act required an undertaking to be dominant. Gallagher said that the IHF would be able to make a stronger case to the Competition Authority when the National Asset Management Agency (Nama) assumed control of hotels that had defaulted on loans, as Nama would then have a dominant position.

- By Susan Mitchell


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