News last week that the average price of a hotel room in Ireland slipped below €100 will have come as no surprise to hoteliers who are battling falling numbers of foreign visitors, reduced discretionary spend from the domestic market and a clear oversupply. But they are also facing another factor – in the form of examinership – that is helping drive down room rates and which industry veterans fear could drive other hotels out of business.

One senior industry voice described the "huge amount of anger and frustration out there" amongst hoteliers who are being undercut on rates by hotels in examinership on the one hand. On the other they are also angry about the fact that they have paid their Vat and local authority rates charges in full yet down the road a hotelier has emerged from receivership having agreed a deal where, in some cases, just 15% of what is owed to the Revenue has been paid.

"The solvent guys are not getting a level playing pitch. They've been striving desperately to make things work and then they're effectively being penalised for paying their bills on time and in full," the source said.

They have been heartened however by the fact that some judges appear to be questioning the viability of some of the business survival reports being presented to them as part of the examinership applications by companies in the hospitality sector. Last week for example Mr Justice John Edwards questioned how the company behind Dublin private members' club Residence could be saved in the current financial climate.

"Membership of a club like this is a luxury item and we have just emerged from one of the harshest budgets in living memory," he said. "Is it being suggested that membership and the sale of food and beverage will grow in 2010 and 2011, in a situation where people have less money in their pockets?"

However, he was swayed that there was a reasonable prospect of survival and appointed Jim Stafford, of Friel Stafford Corporate Recovery, as interim examiner. An outside investor, widely rumoured to be Johnny Ronan of Treasury Holdings, is interested in becoming involved. Members say Ronan and nightclub doyen Robbie Fox have spent significant amounts of time in the club in recent weeks. Stafford would not comment on that but said a number of potential investors have shown interest in the company.

Last week's research from Hospitality Ireland magazine, in association with Bank of Scotland (Ireland), showed that the five-star sector had been most affected by the downturn with average room rates dropping just over 30% since August. This is hardly a surprise given the relentless march upmarket that characterised the Irish boom experience.

"Notable examples include the Ritz-Carlton Powerscourt, where a double room midweek is currently available for as little as €125 (if booked in advance), while Cork's Hayfield Manor and Lyrath Estate Hotel Kilkenny are currently offering double rooms at €129 and €100 respectively," the survey found.

Some of the five-star hotels built around the country were never likely to be profitable and many were undertaken without sufficient market research being undertaken. The sole reason for the construction of some of them was the tax breaks on offer and now the fact that people don't have as much money to spend combined with the fact that corporate overnighters have switched to three- and four-star hotels means that the vacancy rates in some are huge.

The research also found that the average room rate had fallen below €100 since the recession officially began in June 2008.

"The fact that the average room rate has slipped below €100 is particularly troubling for the hotel industry, especially in the light of the recent report issued by the IHF and economist Peter Bacon about the challenges facing the sector," said Stephen Wynne-Jones, deputy editor of Hospitality Ireland.

"Nonetheless, there are signs that the much-anticipated green shoots of recovery may be on the horizon, with many hotels streamlining their operations, keeping costs down, and ultimately enhancing the value proposition for the customer. The next few months will tell a lot about the inherent strength of the industry."

That may be their experience, but there is sustained speculation that two well-known hotels in Dublin city centre are close to closure and that other big hotels are continuing to struggle. The cold weather may have provided some others with an unexpected boost though, as some of those with the money opted against a hazardous trudge home through the snow in favour of staying in hotels around the country.

That will have been a rare boost for an industry that has been effectively banjaxed by the fact that tourism revenue declined by almost 17% in 2009 to €5.2bn – its lowest level since 2004. This drop of course is partially due to deflation in both hotel rates as well as restaurant and drink bills, but also due to a further decline in visitors to Ireland last year.

Fáilte Ireland chairman Redmond O'Donoghue said last week he "hoped that 2010 will be 'the last tough year' in what has been the most challenging cycle that Irish tourism has experienced" but that is probably either overoptimistic or overreliant on an expectation that increasing numbers of Irish people will choose to remain at home this year. Given the weather conditions that's unlikely.

The reality remains that the €10 travel tax is putting people off visiting the country, as airfares are simply too high when other countries with lower prices on arrival can be visited just as easily. It's time for the measure to be dropped, particularly given that Conference Centre Dublin will open this year.

FÁilte Ireland's
2010 Priorities

l Supporting key tourism businesses to increase their international customer base, better manage their cost base, improving overall performance and sustaining employment levels.

l Investing more than €20m under its capital investment programme to improve and broaden the appeal of Ireland's portfolio of tourist attractions, activities and tourism-related infrastructure.

l Launch its biggest ever home holiday marketing programme "as a central plank" in its strategy to increase the home market share of the overall Irish leisure break market. The domestic market now accounts for 65% of business in the intensely competitive hotel sector.