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Dublin: 5 °C Friday 19 December, 2014

Think you’re in debt? Try being an Irish hotel, they collectively owe €5.3bn

And it’s stopping them renovating.

Image: Niall Carson

IRISH HOTELS HAVE so much debt that its hampering their ability to maintain and renovate according to a new report into the industry.

The report was put together by NUIM economist Alan Ahearne and found that the total debt in the sector was €5.3 billion at end-2013, an unsustainable level that needs to be reduced by €1.4 billion. This is despite hotels already managing to reduce their debt by that same figure over previous last two years.

The situation is worse outside of Dublin where small and medium hotels have found it harder to reduce their debts. Ahearne says that there is an “enduring problem” of indebtedness in the hotel industry outside of Dublin, a problem worsened by the fact that they are seen as a less enticing prospect for investors:

Unlike larger hotels in urban areas,  these smaller hotels have not been attracting overseas investors or real estate investment trusts. As a result, many viable hotels remain in the hands of receivers.

The report also points out that the sharp drop in prices for hotels over the last few years should be attracting bidders but it is not because investors are not able to access finance to invest in the sector.

President of the IHF Stephen McNally says that tourism has created 23,000 jobs since 2011 and argues that investment funds must be made available to hoteliers so they can not only bring down debt but put money into renovations.

“It is in everyone’s interest to ensure that hotels have strong balance sheets and access to equity finance, allowing hotels to invest in product development, maintain and upgrade hotel room stock and take advantage of anticipated growth in overseas visitors,” he says.

The report echoes a study published by the Central Bank last month which that hotels are the most indebted small businesses in the economy.

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Read: Here’s why hotels are Ireland’s most indebted small businesses >

Read: 66 per cent of hotels and restaurants at risk of collapse >

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