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In Ireland, Thirty-six Insolvent Hotels, Now Owned by the Government's
 Bad-loans Bank, Still Open for Business and Charging Money-losing
 Room Rates - Dragging Down the Viable Hotels

By Jim Landers, The Dallas Morning NewsMcClatchy-Tribune Regional News

August 17, 2010 --DUBLIN -- Tourists to Ireland this year face frights that appall the economic sensibilities, even as they delight travel budgets. These are zombie hotels.

Zombie banks -- insolvent, failed and dead except for an infusion of government funds -- were part of the U.S. economic landscape after the 2008 financial meltdown. Mergers and closures largely put those to rest.

Here in Ireland, zombie banks stagger on, living on tax dollars. The biggest property bust in the Western world is pushing housing prices down by 50 percent.

The hotels in this fiasco have gotten less notice. In the last decade, governments across the island treated hotels as tax trophies -- the perfect vehicle for taxing someone who doesn't vote in your hometown. (It is a strategy not foreign to Dallas.)

The national government played along. Developers were allowed to write off the cost of building a hotel in seven years. For every completed hotel room, the local government could collect about $2,000 a year in taxes.

Between 1999 and 2008, Irish developers added 27,000 hotel rooms and brought the national total to 68,000 rooms. Paul Gallagher, who heads the Irish Hotels Federation, says that's left Ireland with a surplus of 15,000 hotel rooms.

Thirty-six insolvent hotels, now owned either by the commercial banks or the government's bad-loans bank, are still open for business. They are charging money-losing room rates, Irish economists say, and they are dragging down still-viable hotels in the process.

"Rates are down 30 percent since 2008," Gallagher said. "Dublin is now the cheapest city in Western Europe."

Gallagher manages Buswells Hotel, a luxe property with 67 rooms half a block from Ireland's Parliament. Rooms at Buswells start at $115. The average four-star hotel room is going for about $110 a night (including taxes).

Hotels in the popular west of Ireland are charging less in the midst of empty holiday villages and new summer cottages that Dubliners would now like to sell.

It's all a sharp comedown from a few years ago, when the Irish themselves were practically the richest people in Europe, and the country had a renaissance of music and other arts to lure the hip and savvy.

Shane Clarke of the government's Tourism Ireland said the costs of hotels, food, entertainment and other tourist services are down 20 percent.

"The perception that we were an expensive destination, that there'd been a loss of value for money -- a lot of that has been addressed," he said.

The lower rates would be more attractive if Ireland was alone in its recession. But the global downturn has sharply curbed international tourism. Fewer than 850,000 Americans will visit Ireland this year -- a drop of about 15 percent from the peak in 2007. British travelers are the bulk of Ireland's international visitors, but that business is down by a million visitors since 2006.

The government is trying to lure tourists with offers of free train travel for "Golden Trekkers" 66 and older.

To recover, though, the viable Irish hotel industry says the zombies must be closed.

"The whole of the hotel industry is facing losses," Gallagher said. "Our sector is a black spot on the economy."


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