Thursday, 14th October 2010

INACTION BY MINISTER GORMLEY AMOUNTS TO DEROGATION OF DUTY, SAYS IHF
Hotels and Guesthouses in Precarious Position and Unable to Pay Excessive Local Authority Rates

The Irish Hotels Federation (IHF) today stated that inaction by Minister John Gormley in addressing the issue of excessive local authority rates levied on hotels has amounted to an unacceptable derogation of duty. This comes at a time when the Government’s focus should be on maintaining jobs and ensuring viable businesses survive the downturn. Mr Paul Gallagher, President, IHF states that the situation has reached a tipping point with 180 hotels and guesthouses across the country now being served with legal notices demanding full payment within six days under the threat of district court summonses.

“There has been a complete unwillingness to engage on the issue from the top down including members of the Government, local authority managers and the Valuation Office,” states Mr Gallagher. “The cashflows simply do not exist to meet these payments. Unless Minister Gormley shows leadership on this issue and intervenes, the situation will escalate with disastrous consequences for hotel businesses and knock-on effects for employees and suppliers.”

The hotel and guesthouse sector represents only 1.5 per cent of national GDP but is required to pay 6 per cent of the country’s total rates bill. In light of worsening trading circumstances, the IHF has appealed to Minister Gormley and the local authorities to introduce a 30 per cent waiver of rates for hotels and guesthouses pending the completion of the countrywide revision of valuations by the Valuation Office. To date, neither Minister Gormley nor the local authorities have been willing to address this issue in a meaningful way.

“Minister Gormley’s assertion that a waiver for hotels would be unfair is fundamentally flawed. In reality, the hotels sector is unfairly subsidising other commercial rate payers through excessive and disproportionate rates that do not reflect the perilous trading conditions faced by hoteliers,” states Mr Gallagher.  “At a cost of less than €30m, our proposal represents just over half a per cent (0.5%) of current expenditure by local authorities in 2010.”

“On the one hand, the Government talks about creating jobs while, on the other, it wilfully ignores the risks faced by a vital sector of the economy whose members are struggling to pay excessively high local authority rates. We’re calling on the Minister to instruct local authority managers to meet with hoteliers who are unable to pay and come to a sensible interim agreement so that affected hotels can continue to contribute to the local economy.”

The IHF states that hotels make a disproportionate contribution to local authority funding with many hoteliers being levied exorbitant rates of up to €2,500 – €3,000 per bedroom every year. The country’s 900 hotels, encompassing 60,000 bedrooms, pay approximately €90 million a year to local authorities in rates, equating to an average of €1,500 per bedroom regardless of recent trading circumstances. This is equivalent to an additional tax of 12 per cent on sales being paid to local authorities before all other costs and taxes are taken into account. Hotels no longer have the earnings to pay these excessive rates.

“Hoteliers have always been committed to providing good employment to their staff, supporting their suppliers – many of whom are small local businesses – and giving an excellent service to their customers,” states Mr Gallagher. “However, in order to survive, hotels have had to implement severe cost cutting measures. Every cost area over which hotels have discretion has been seriously examined and reduced. These measures include wage reductions, less hours roistered, reduced staff numbers, renegotiating supplier contracts and deferring renovation and investments.”

In the past, a mechanism existed whereby struggling hotels could seek a reduction in valuations for local authority rates purposes due to worsening economic trading circumstances. This was removed with the enactment of the Valuation Act 2001, which promised that all rateable properties throughout the country would have had their valuations revised every 5–10 years. Nine years later, only three (of the 88) rating authorities have carried out the revision process.

The revisions which have been completed have resulted in the local authority rates liability of hotels being reduced by on average more than 30 per cent. Based on this experience it is reasonable to suggest that if the revisions were completed in the remainder of the country similar results would be achieved.

FOR INFORMATION:
Eoin Quinn                          Tel: 01 6760168
Weber Shandwick           Mob: 087 233 2191