HOTELS CANNOT AFFORD TO PAY LOCAL AUTHORITY RATES
Lack of Willingness to Engage By State Bodies Leaves No Option 

20th June 2010

The only response that can be given to a stony silence from The Valuation Office and local authorities invited to engage with individual hotels in relation to discussing unjustifiable rates is for hotels to now only pay what they can afford, the President of the Irish Hotels Federation (IHF) said today after a meeting of its National Council. 

“We have been put in this position by the Valuation Office which after nine years since the enactment of The Valuation Act 2001, has carried out revisions of rateable valuations in just two of the 88 rateable areas in the country. It has ignored numerous letters from individual hotels over the past three months, seeking to know when they can expect to have their properties listed for revision of valuation. Our members are literally up in arms as to what to do now and where to go – we have appealed to local authorities to introduce a 30% waiver of rates for hotels and guesthouses pending the completion of the countrywide revision of valuations by the Valuation Office. Neither the local authorities and the Minister for the Environment, Heritage and Local Government is willing to address this issue which is a big contributor in sending hotels to the wall each week,” Mr Gallagher said.

“Every other supplier and business in the country understands the severity of the economic situation and what needs to be done to keep businesses alive and find workable solutions – the Minister for the Environment, The Valuation Office and local authorities are simply ignoring or rejecting these reasonable approaches to them.” 

Whilst hoteliers have negotiated with suppliers substantial reductions in input costs in order to deal with the recessionary pressures, one major cost to hotels which has not reduced is local authority rates. This is partly due to the nine year delay in the Valuation Office revaluing properties. The IHF President urgently calls on the Minister for the Environment, to immediately instruct local authorities to introduce a rates waiver for hoteliers who simply do not have the funds to pay. He also called on each local authority in the country to recognise the particular difficulties being faced by hotels at this time and to agree to accept from hotels an amount of rates that each property can afford to pay. He particularly urged them not take legal actions which would force hotels or guesthouses to close or go into receivership or liquidation.

The IHF states that the 900 hotels in Ireland encompassing 60,000 bedrooms pay approximately €90 million a year to local authorities in rates. This equates to an average of €1,500 per bedroom and in many cases, rising to high as €2,500 - €3,000 per room in some local authority areas. “The Federations 900 members pay 6% of the total rates base in this country; this is an unreasonable burden on such a small number of businesses. It is plainly oblivious that my members are not in a position to continue to shoulder this unreasonable burden and the government and local authorities need to wake up to this fact,” Mr Gallagher continued.

The vast majority of the hotels in the country are now in financial crisis due to:

• an excess of hotel bedrooms over demand,
• 30% decline in the sectors revenue
• a fall in occupancy rates of hotels and
• a collapse in hotel room rates.
  
  

“The money is simply not there to pay rates at the levels currently levied. Whilst each individual hotel will decide its own payment schedule according to its particular circumstances, we know that in a lot of cases an inability to afford to pay will mean that the full payment will not be made,” Mr Gallagher said. “In order to survive, hotels nationwide have already implemented severe cost cutting measures. These include wage reductions, cutting staff roster hours, renegotiating supplier contracts and deferring renovation and investments. Every single cost area has been seriously examined and reduced in a bid for keeping the business afloat.”

According to Mr Gallagher a mechanism in the past where struggling hotels could seek a reduction in valuation, for local authority rates purposes, due to worsening economic trading circumstances was removed with the enactment of the Valuation Act 2001. This Act promised that all rateable properties throughout the country would have had their valuations revised every 5-10 years. Nine years later and only three (of the 88) rating authorities have carried out the revision process and two of those undertaken had rates payable by hotels reduced by an average of over 30%.

“Our members remain committed to meeting their responsibilities to their stakeholders by providing employment for their staff, supporting their suppliers – many of whom are small local businesses - paying their utility providers and providing excellent service to customers. Unfortunately, however, in the current economic environment, our members simply are not generating enough revenue to continue to meet these obligations while paying what are, in our opinion, and that of our members, excessive rates levied on the basis of out-of-date and out-of-kilter valuations.

Our members are willing to pay a fair and equitable level but simply can no longer bear the current rates that are imposed in this unprecedented environment when a re-evaluation process that was promised has not been completed. It is a ludicrous situation; many hotels have been told that, if they do not pay the full amount of rates due, they would be subject to court proceedings. This can only result in the further demise of hotels and the knock on effect on employees and suppliers to hotels. Many of our suppliers are small local businesses and now face their businesses being put at risk by local authorities threatening to use their strong legal position to force hotels to pay. That situation would absorb a major share of the cash resources of hotels that is used to run the business by purchasing supplies and services from local operators,” Mr Gallagher maintained.

“This issue is causing a major crisis for the hotel sector and we cannot stand idly by while local authority charges and rates are not reduced to take account of the inability of the hoteliers to pay them,” concluded Mr Gallagher.

ENDS

FOR INFORMATION:
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