Sandra McLellan (Cork East, Sinn Fein)
Link to this: Individually | In context

Question 37: To ask the Minister for Transport, Tourism and Sport the efforts he has made to ensure that a competitive business environment is maintained in the tourism industry; the further efforts he has made to ensure that hotels under the control of the National Asset Management Agency are not operating on a below-cost basis; and if he will make a statement on the matter. [18956/11]

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

The Government's recent Jobs Initiative has placed tourism at the heart of our economic recovery. The decision to reduce the VAT rate on a range of labour-intensive tourism services from 13.5% to 9% with effect from 1 July 2011 is a major concession providing an opportunity to enhance further the competitiveness of our tourism product.

The Government has also significantly reduced the cost of employing people by halving employers' PRSI for those on modest wages and also by reviewing the regulatory framework for employment in a range of sectors.

In regard to hotel-backed loans held by NAMA, under Section 66 (1) (a) of the National Asset Management Agency (NAMA) Act, the participating institutions were required to service loans in the same manner as a prudent lender, prior to their transfer to NAMA. All banks are also obliged by the financial regulator to lend in a prudent and sustainable manner. Where the Deputy has evidence that a bank is acting contrary to its regulatory obligations, the matter should be brought to the attention of the Financial Regulator.

My officials have raised this matter with officials in the Department of Finance and I am informed by NAMA that it has acquired loans secured by some 83 hotels located within the State, of which 78 are open for business. NAMA has informed me that it does not support any hotel operating on a below cost basis. I am further informed by NAMA that it will be developing a comprehensive strategy to deal with the hotels in its portfolio. NAMA has acknowledged that the long-term future of some hotels may not be as hotels and alternative uses will have to be found for them.

There appears however to be a perception amongst some quarters of the hotel industry that the removal of these so-called "Nama Hotels" will allow hoteliers to revert to 2007 prices. This is not realistic and would be damaging to the Irish tourist product. Any recovery in Irish tourism will be dependent - along with other factors - on being cost competitive. Significant increases in hotel prices would undermine this. Furthermore, it must be noted that a large number of hotels in financial difficulty are not in fact financed by Irish banks, but rather by foreign owned banks and as such are not within NAMA.