Irish hotels: cheapest in Europe

Between 80 and 90 hotels will go into receivership in the autumn, when the summer holiday season ends, according to the Irish Hotels Federation (IHF).

IHF president Paul Gallagher said the crisis-hit hospitality industry is going to see casualties in the coming months, with more hotels going out of business.

"There is a cohort of hotels finding it extremely difficult to survive and a lot of them are the traditional hotels that have been there for years," Gallagher told the Sunday Tribune.

The fact that Nama is to become a key player in the Irish hotel industry is putting pressure on long-running businesses and their viability while hotels with unsustainable borrowings and debt levels are being kept open.

Gallagher pointed out that under normal conditions, the market would force hotels with unsustainable borrowing and debt levels to fail but "an artificial market" was created that was crippling the industry.

"In artificial market conditions, hotels are not closing down and this is primarily due to the reluctance of banks to realise losses and write down loans advanced to hotels that have no prospect of recovery."

He was reluctant to name individual hotels but he said the IHF believed that between 80 and 90 hotels would go into receivership in the coming months.

The IHF has called for the removal of clawbacks on tax reliefs for hotels, arguing this would encourage 'zombie hotels' to exit the market.

It was recently reported that the excess room supply in the hotel sector has seen average room rates drop back to 1999 levels.

A survey by consultants Horwath Bastow Charleton (HBC) found that one-third of Irish hotels had difficulty meeting interest repayments on their bank loans.

Gallagher added: "Irish hotels are now offering the cheapest hotel rooms in Europe but a lot of the hotels are engaging in below-cost selling. If you don't have to pay back the capital interest you can afford to do that but it is an artificial market."

There are fears among some hotel owners who have been in the business for generations that below-cost selling by zombie hotels will put them out of business by Christmas.