Olivia Mitchell (Dublin South, Fine Gael)
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Question 63: To ask the Minister for Arts, Sport and Tourism the discussions he has had with the Department of Finance and the Department of Enterprise, Trade and Employment regarding the difficulties facing the hotel sector; the representations he has received from the hotel industry; and if he will make a statement on the matter. [8343/10]

Martin Cullen (Waterford, Fianna Fail)
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As we all know, the hotel sector generally had a difficult trading year in 2009. Declines in personal spending and consumer confidence and unfavourable exchange rates across our major source markets had a significant impact on the numbers of overseas and domestic tourists staying in Irish hotels. In this context, my officials and I are in frequent contact with individual hoteliers and the Irish Hotels Federation, IHF, and are well aware of their concerns and priorities. I am in regular contact with the Minister for Finance and the Tánaiste and Minister for Enterprise, Trade and Employment about the issues facing the sector and there are also frequent contacts at official level.

As a result of such contacts, budget 2010 incorporated a range of measures to renew tourism. These provide for an overall increase in funding levels for tourism services, including the maintenance in real terms of funding for the tourism marketing fund and a trebling of the funds for tourism product development. In addition, a new rail travel initiative aimed at senior citizens from abroad and a reduction in excise duty on alcohol products and VAT will also benefit the sector. I should point out that the IHF welcomed the strong acknowledgement by the Government of the important role of tourism in the economy as well as the specific measures I have just outlined.

I am keenly aware that labour now represents over 40% of hotel costs. I welcome the recent changes in Sunday pay rates in the hotel and catering sectors. I also welcome the recent announcement by the Minister of State with responsibility for labour affairs that he will propose an "inability to pay clause" in the Industrial Relations (Amendment) Bill. This measure will assist hotels and other businesses facing substantial challenges to stay in businessand safeguard jobs. The inclusion of tourism in the employment subsidy scheme and the work of the credit supply steering group are also positive developments for the sector and have been welcomed by the IHF. All of these measures had been the subject of prior discussion between the Tánaiste and me.

As the Bacon report clearly indicates, tackling the overcapacity that undoubtedly exists in the hotel sector is a complex matter and ideally requires a market response over time. I am conscious of the difficulties that hotels and the tourism sector face in the current economic climate. It is my intention, together with that of my Department and the tourism State agencies, to continue to work with the industry to assist the sector to manage its way through these difficulties, be it in stimulating demand, helping to address costs and productivity or securing access to credit. The Deputy may rest assured that I will continue to raise those issues that affect the industry bilaterally with my ministerial colleagues and at the Cabinet table.

Olivia Mitchell (Dublin South, Fine Gael)
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I thank the Minister. I wish to take him up on one of his points, as the others might arise in later questions. Previously, I raised with him the difficulties being experienced by some hotels in getting credit whereas those that owed the most, those that were virtually owned by banks, were having no trouble in getting credit. Indeed, money was being poured into them. I wrote to the Competition Authority about this matter, which responded to the effect that it shared my concerns. It is trying to approach the matter from a different angle. Unfortunately, a requirement under the Competition Act is that one firm must be dominant if the authority is to act. That is not currently the case, although it may be when the loans are taken over by NAMA. Nevertheless, what is occurring is anti-competitive and distorting the market.

Brendan Howlin (Wexford, Labour)
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A question to the Minister.

Olivia Mitchell (Dublin South, Fine Gael)
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Hotels that should have gone to the wall are receiving credit from banks on the back of taxpayers' money. It is unethical and was not envisaged when we put money into the banks. Neither was it envisaged for NAMA.

Could the Minister help in any way? If this situation is allowed to drift, we will have fewer hotels, as those in question will fail regardless. The spread of hotels across the country will also pose a difficulty.

Brendan Howlin (Wexford, Labour)
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I will call the Deputy again.

Olivia Mitchell (Dublin South, Fine Gael)
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Could the Minister ask the Competition Authority or, in the context of reckless trading, the Office of the Director of Corporate Enforcement to examine this issue? Could he ask the Financial Regulator to examine it in terms of the banks giving their large debtors and clients an unfair advantage? There seem to be many ways to approach the issue, but it should be stamped out right now. If it lingers under NAMA, it will be catastrophic.

Martin Cullen (Waterford, Fianna Fail)
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The Deputy and I have been ad idem regarding her point for some time. That we have both raised the issue in our respective ways has been helpful. Obviously, I have discussed the matter with the Minister for Finance and raised it at the Cabinet table, where I intend to keep it. The construction and operation of NAMA will be crucial and I cannot countenance a situation in which hotels that are clearly non-viable are kept going simply to turn over money at rates below the real costs of hotel rooms, etc. in the marketplace. I have evidence to show that this situation is affecting competitive hotels, albeit ones that are struggling because of the decline in the tourism market. They can survive by setting intensely competitive rates, although not substantially below cost.

Notwithstanding the Deputy's points and the complexity involved in the various reasons for supporting hotels, the situation boils down to difficult decisions being taken quickly and early in the operation of NAMA. Businesses that are clearly incapable of functioning in the market must go out of business. There is an overcapacity in the market of approximately 15,000 beds. All of these do not need to go, but hotels are being supported despite not being viable.

Brendan Howlin (Wexford, Labour)
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We have gone over time. I want to allow Deputy Mitchell to ask a brief supplementary question.

Olivia Mitchell (Dublin South, Fine Gael)
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I would ask a brief question if I could remember it. The Leas-Cheann Comhairle has put it out of my head. If bad hotels are to go the wall, the Bacon report suggested that the clawback be dropped. However, I am against that suggestion. We gave people money to get into the business and now we are giving them money to get out of it. Bad hotels should fail if good hotels are to survive. This is the way the market works. We should not be giving more taxpayers' money.

Martin Cullen (Waterford, Fianna Fail)
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The Deputy probably knows the answer. That issue was raised in our pre-budget considerations, but it is not a road the Government has gone down. There are inherent dangers, in that-----

Martin Cullen (Waterford, Fianna Fail)
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I heard rumours.

Martin Cullen (Waterford, Fianna Fail)
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-----it could be applied across the system. It would be a win-win scenario for someone who failed,-----

Olivia Mitchell (Dublin South, Fine Gael)
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Exactly.

Martin Cullen (Waterford, Fianna Fail)
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-----but that is not the intention of any scheme and certainly not this one.

Olivia Mitchell (Dublin South, Fine Gael)
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I thank the Minister.