The Irish Hotel's Federation today strongly rejected the spin put by Richard Bruton, TD, Fine Gael spokesperson, on the gross margins in the hotel sector. His inappropriate use of data included in the CSO's Annual Services Inquiry 200 and his categorisation of the sector as being part of a retail rip-off could not be further from the truth. His selective suggestion that the ratio between the cost of goods consumed by hotels to their total turnover as being an indication of a rip-off, shows an alarming ignorance of the economics of a major service industry, according to the Federation.

John Power, Chief Executive of the IHF states, "It is incredulous that a national spokesperson of the second largest political party has taken such an ill-informed view of the pricing issue in hotels. Mr Bruton has taken a one-dimensional approach to his interpretation of the CSO figures, without even considering the cost structure of the hotel sector and the wider context of the cost of running a business in Ireland."

"Hotels provide a service and an experience to their customers, and are not retailers of a commodity. 60-70% of any gross margin goes directly to pay the wages of the staff who deliver that service. Hotels are not in the same category as retail shops, which make their profits on the margins between the cost of goods and the sale price, and which, by comparison with hotels have a relatively low labour cost. Hotels operate in the service sector where the cost of the raw materials are only part of the total cost of providing the service," says Mr Power.

"The hotel sector is the largest employer in Irish tourism, employing 65,000 people. When you consider that wages in hotels have increased by an average of more than 10% annually since 1997, it is only through the erosion of profitability and increased efficiencies that the gross margin has only increased by 4.7% between 1997 and 2001," Mr Power continues.

Also out of this margin the hotels sector has had to fund insurance premiums increasing at an average of 350% over the last four years, local authority charges annually increasing by at least 30% and energy costs increasing by at least 20%. The Federation has been consistently calling on the Government to urgently address these issues in order to provide a more competitive business environment, from which all sectors of business can benefit.

"I utterly reject this inappropriate attack on the hotel sector, which is already seriously creaking under the pressure of massive increases in overheads. As of today most hotels are struggling to survive and retain their staff and this is evidenced by the many special offers available at the moment. Margins are cut to the quick and the vast majority of hotels are at best operating at break-even. In future, I would urge Mr Bruton to properly inform himself of the relevance of CSO figures in the context of the sector to which they relate before making sweeping statements that are abusive and harmful to an industry, which contributes so much to the Irish economy," concluded Mr Power.

FOR FURTHER INFORMATION:
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