Hotel industry begging bowl out and about again

It doesn’t really matter what the economic climate is the parasites of the hotel sector are in full voice in the run up to the 2011 Budget.

The whingers and moaner of the Irish Hotels Federation want more subsidies, more tax reliefs, less taxes – more, more, more.  But Ireland is not ripping the economy asunder in order to keep these leeches fed.  They seek

• Measure to support the survival of the tourist industry
• Want the Government to promote cost competitiveness
• Maintain the current level of (subsidised) promotion activity
• Address the capacity problems facing hotel and guest house owners

All of this just falls short of asking the State to wipe their lobotomised arses as well. This shower of perennial, feather-bedded losers are so constipated with the abundance of tax reliefs they have gouged from the Irish taxpayers and they can barely stand erect from the burden of these.

Hoteliers need to understand that to be viable a business must be self-sufficient. The capitalist system has no interest whatsoever whether the Irish tourist industry survives, or not.

The Government has no role in relation to cost competitiveness. They need to pay their own promotional expenses just as beer, escort services, hookers and tobacco companies do. The matter of capacity is their own affair. Hoteliers will comply to the last letter of all covenants connected to the tax reliefs for capacity expansion – don’t expect taxpayer to pay on the double.

So wallow on, losers and maybe taxpayers will look forward to an era when the tourist industry provides what customers want at a price they can afford to pay. Focus on your inevitable extinction.

NAMA and the Irish hotel industry

I am cringing with horror and revulsion at the report in the Irish Independent on Friday, 23 July that Mary Hanafin TD, Minister for Tourism, Culture and Sport is to meet NAMA to discuss ‘the problems’ in the hotel industry.  Their industry spokesmen concurrently attempt to blackmail and browbeat the citizens of Ireland by telling us that their demands to eliminate unwanted capacity  would cost less than the welfare costs in the event of the subsequent, but inevitable, meltdown of this industry.  She must not cave in to this delinquent posse and they must endure the total impact of the unmitigated consequences of their own decisions.  You must especially stamp on their demand that those who benefited from €1 billion in tax foregone should be let off the hook in meeting all obligations and conditions attaching to this.  Jimmy Deenihan, the Fine Gael spokesman on tourism is quoted in the article as saying – you “must show leadership” and so must he.

Public confidence in the NAMA enterprise is sceptical and uncertain, at best, and if it is demonstrated that NAMA is prone to heavy-handed political manipulation at the highest level the public will be extremely distressed and angry.

Hoteliers exist in a capitalist system which functions on the basis of risk and reward, as is the case with our economy as a whole.  Nobody forced them to increase capacity by 18,000 rooms since 2003 and this reckless expansion occurred without any commercial rationale, or informed foresight,  whatsoever to justify it.  The hotel industry had already expanded by 60% between 1997 and 2003 at a cost to the taxpayer of €140 million in taxes foregone.  This vested interest was therefore totally indifferent to risk and acted as though the only price on risk is that paid by the State with our money.

They also have the audacity to demand a State-sponsored ‘high-level’ committee to gerrymander their industry by selecting which hotels would be eliminated and which would be maintained for strategic posterity, featherbedded, of course, by impoverished and stressed taxpayers who have contributed €1 billion in taxes foregone since 2003 to create massive unwanted capacity.  

While the EU Commission approved the accelerated capital (depreciation) tax allowances as a legitimate State aid on 23 December 2002, Commissioner Monti did point out that “the Commission regrets that Ireland put the aid in question into effect, in breach of Article (88)3 of the Treaty.”

When hoteliers successfully lobbied the Department of Finance they argued that these very generous tax allowances would induce speculators (should I have said investors?) to build hotels at regional locations where there had never been a hotel before - and which saw very few customers subsequently.  When the EU Commission wanted these allowances guillotined on 31 July 2006 the Department of Finance persuaded the Commission to extend them to 31 July 2008 on a tapering-out basis  “because there was a very large backlog of pipeline projects and the rush to complete construction would inevitably lead to short-term overheating of the Irish construction sector” – not because the State aid was yielding positive results in the form of viable sector at remote regional locations.

The hotel industry speaks of the importance of its economic contribution to the State.  A critical illustration of economic stature is money in the bank.  Central Bank data indicates that hotels and restaurants increased their bank deposits since 2003 by only  €115 million to a total of €655 million in 2010 – less than one third of 1% of the total deposits in banks by Irish residents.  That is equivalent to less than €9,000 for each of the industry's 60,122 rooms.  But the very prudent and far-sighted Irish banks lent the industry €4 billion since 2003 to build the unwanted capacity and the average indebtedness in respect of each of the unwanted rooms is now over €350,000.  The tourist industry as whole owes the Irish banks over €10.9 billion - €1 for every unit of integrity and intelligence quotient that exists in the top-level of our banks.

The hotel industry lobbyists hum like choir boys about the €10 departure tax as though it was a red-hot poker impediment to their prosperity.  Their cute-hoor mentality, of course, precludes any suggestion as to who will provide the revenue were this tax to be eliminated.  The old-age pensioners and the infirm would bear the burden, I presume.  I suppose their next melodic aria will be to lobby the relevant authorities to increase the UK minimum wage from £5.80 per hour and the US minimum wage from $8 per hour to enhance the prospects of filling their bedrooms and meeting the exorbitant charges from time to time – ‘because these markets are so important’.

The hotel industry is the author of its own catastrophe havoc with the connivance of the State, the EU Commission and its ever-friendly bankers.  They tell us that it will recover in five years if it is kept breathing through one nostril with relief from local authority rates and additional large dollops of cash from our national debt.  Recovery of the incumbent regime is a most unlikely prospect and there is certainly no evidence to support a 5-year time frame.

The vacuum that is created by the destruction of this industry will be filled in due course by a new generation of hoteliers whose understanding of capitalism, providence and insight will hopefully be better honed that the current generation of losers and the Minister of the day might even have the possibility of presiding over an industry that is viable and functional while NAMA will have reached the geriatric stage of its natural life uncorrupted by political meddling.

Risk displacement strategy of Irish Hotels Federation is to pimp Irish taxpayers

THE latest posse of knuckle-dragging parasites attempting to loot Irish taxpayers’ are the nation’s  hoteliers’.   Their mouthpiece, The Irish Hotels Federation, want to remove investor risk by slipping their greasy fingers around you tax payments because it has dawned on them that their industry has been an economic basket case since 2002 and they need to eradicate all risk to their investors!  The investors comprise fat cats who opted for tax avoidance rather than taxation.   

***** The Grand Vision  *****

This tale of woe has its origins in 2003 when The Irish Hotels Federation successfully hollered and yelped for tax allowances on capital investment to be spread over 7 years rather than 25 and their wish was granted. There were 42,235 hotel bedrooms in 860 hotels at the end of 2002. The Irish banks sector provided credit of €2,862 million to the hotel sector at that time (equivalent to €67,763 per room, with a loan-to-value ratio of 1.4) . If the capital tax allowances they so desperately sought were granted they intended to add 3,707 bedrooms in 45 new hotels bringing the total complement to 45,942 bedrooms in 905 hotels by the end of 2005.  The new rooms were to generate additional annual sales revenue of €61.85 million, having cost €463 million to construct (average construction cost €125k per room).   Another  important objective was to attract international hotel companies, such as Marriott, Radisson, Hilton, Four Seasons, Westin, Quality Hotels to operate them.

The lynchpin to achieve this was to attract the support of fat cats – high net-worth individuals with high anticipated tax liabilities in Ireland over the subsequent 7 years that could be avoided through the availability of capital allowances on new hotel projects.  If these allowances were not to be granted that “would have serious consequences of the industry as whole”.  The fat cats, the IHF said, would have otherwise invested their abundance outside Ireland and on villas in the Mediterranean.

A hotel building project costing €12 million would attract tax allowances over 7 years worth €4.92 million.  The fat cat would invest half of this, €2.46 million and the remainder would be borrowed with recourse to no other assets that that hotel.  The grand plan was that after 7 years milking tax allowances the property could be sold at multiples of its construction cost.  Unfortunately for those concerned, the property bubble burst.  Many of these hotels never made profit so their capitalised value is also down the toilet.  Therefore, the risk of loss must be passed to the taxpayers’ and ranked higher than welfare in priority. 

 

The ensuing dilemma

The Irish hotel industry in 2009 apparently comprises 917 hotels with almost, – and, wait for it, 60,000 bedrooms. Approximately €1 billion has been claimed in capital allowances by the fat cats since 2003 and a further €600 million is potentially claimable. While hotel bedroom capacity increased by 42% the brilliant and astute Irish banks increased credit to the hotel industry increased by 188% to over €7billion (equivalent to €116,000 per room – but with a loan to value ratio of 1.88). 

Bed-night demand by overseas visitors increased by 33% to 13,585,000 between 2002 and 2008 . As you can glean –everything is a little out of kilter and urge of fat cats to avoid paying Irish taxes ran somewhat ahead of reality and needs of the market place.  Not enough consumers came traipsing in their hotel doors willing to pay exorbitant prices and tolerate the impersonal  service provided by a badly paid, poorly trained, non-unionised. Eastern European labour force.

 

Foreign visitor trends

Total bed nights via overseas visitors increased by 15% from 2000 to the end of 2003.  The number of US visitors dropped by 140,000 in 2001 but recovered by 437,000 in 2002 before dropping by 106,000 in 2003.  The main source of growth was from Great Britain – almost one million extra bed nights between 2000 and 2003.  But it was visitors from other parts of Europe that made the numbers expand between 2003 and 2008 – from 2.4 million bed nights to 5 million.

The annual capacity of the Irish hotel sector is of the order of 21 million room nights and the number of beds per room trend has increased.

 

Cue the Pimps

When the consumers don’t show up to be financially castrated the next category to be raped is the taxpayer.  The Irish Hotel Federation looked into its soul and found the practice of reducing prices, so that they somehow relate to the consumer’s perception of value, is a flawed practice because it leads to market failure. Their pre-Budget submission this year ‘no more taxes but bucket loads of subsidies’.  They want State support to survive the recession caused by the banks who lent them too much money.  The natural consequence of any failed commercial adventure is that they go out business and that’s what these hotels need to realise.  Perish and get lost.

This means essentially that industry revenues are lower because extra transactions do not materialise. “The traveller is becoming more demanding in securing value for money” – their words, not mine.

Pimps’ begging list

Facilitate the closure of 217 hotels built since 2005 containing 15,600 rooms through the following ‘exit strategy’.  They call for ‘a managed process’.

• If these hotels close, the IHF requests that capital allowances already claimed should not be clawed back from the fat cats by the Revenue Commissioners on grounds that the hotels have been built less than 7 years ago. They argue that allowing hotels to exit without consequences for the investor in terms of the value of the tax allowances would have “no financial implications for the Exchequer compared with the situation where these remain open for 7 years”.  There’s insight for you! 

Well, they certainly do have major financial implications.  The Government has decided to save €233 million by cancelling Christmas welfare bonuses.  A €1 billion claw-back could pay the welfare Christmas bonus four times over were the Revenue Commissioners to nail these belligerent bastards to the contingent liabilities.

The want the Financial Regulator (if he’s awake) to oblige Irish banks to recognise bad loans in hotels. But the banks are playing ‘cute whore’. 

They are reluctant to do define a loans as bad because if such a bank asset is not realisable they need to raise more core capital and they are not in a position to do so – hence NAMA. 

This grand plan could also mean that if a large portion of the extra €4 billion in bank credit provided since 2003 becomes bad, the taxpayer is left with the liability.

• The want a Hotel Restructuring Fund to arbitrate in situations where currently insolvent hotels are deemed to be (do I construe systemically?) important for the recovery tourism against hotels which maybe solvent currently  but which (wait for this …) “have little or no strategic importance to the development of the Irish tourism product internationally”!  The profitable business may have no strategic importance internationally but some loss-making derelict incompetent ought to be bailed by the taxpayer because he is ‘strategically important’.  What unadulterated crap!

Having written off hotel debts and saddled the taxpayer with them, the parasites reckon that such hotels could be recycled back into the market at low capital cost and this would have long-term implications for competitors so they anticipate that this risk would need to be managed.

• Next on the list is a High Level Working Group, with large lactating breasts, who might remove hotels from the tourist accommodation sector and operate in sectors that do not threaten stability.  Presumably multi-ethnic brothels, homes for abusing priests, or lesbian nuns might fit the bill here.
• A Government Loan Guarantee is the next step on the road to risk elimination.
• Local Authority charges should be frozen to “improve competitiveness” .

Finally, now that all risk has been shoved onto the taxpayer the IHF advocates ‘transparency’.  The morons have apparently been charging different tariffs at home and overseas – ripping off foreign tourists and taking what they can get from the locals.