Over 10% of hotels in receivership

MORE than one in 10 hotels in Ireland are in receivership, and the sector has warned the days of rock-bottom prices is coming to an end.

Food and beverage spend at Irish hotels was down 5% last year and by up to 10% at weddings. Two in five hotels said wedding sizes fell by between 5% and 10% last year.

Positive signs lay ahead for the sector, however, with close to two-thirds of hotels expecting occupancy levels to rise this year.

According to the annual Horwath Bastow Charleton Irish hotel survey, rates fell 25% over the last three years and at an even sharper rate in Dublin, falling by 32%. The average room rate for Irish hotels is now €74.

In bad news for consumers, nine out of 10 hotels expect rates to be maintained or increased this year indicating further discounting is unlikely to occur.

Partner at Horwath Bastow Charleton Aiden Murphy said: “Hotels in the capital are likely to achieve occupancy levels in excess of 75% for most of the period between June and September and when big events are taking place across the city the sector will experience full nights.

“However, there is a risk that premium prices applied during these full nights when hotels experience high demand will be pushed too far. We are all well aware that Irish people are more price conscious than ever now and that they are looking around for the best value. With this in mind, it is realistic to think that they may refuse to stay in Dublin and pay what they consider to be highly inflated rates.”

Last year almost two thirds of hotels implemented pay cuts, while close to a third made redundancies. The sector also said that there is a risk of over-dependency on domestic market as 65% of all guest nights were sold to Irish consumers last year.

The survey results also signify that the sector bottomed out in terms of decline in 2010, with net profit percentage for Irish hotels now just 10% of revenue. This represents a dramatic change to the operating environment in 2007 when net profit was 16%.

In the first five months of this year, receivers were appointed to 20 hotels – a figure likely to surpass the 30 hotels who went into receivership in 2010.

Payroll is the single biggest cost item for any hotel and the survey showed evidence for the first time that payroll percentage costs, while still high, are starting to fall. In 2010, 43 cent out of every euro in hotel sales was paid out on payroll, compared to 44 cent in 2009 and 38 cent in 2006, the historical norm.