Re: Re: Pierse Construction in Liquidation

Home Forums Ireland Pierse Construction in Liquidation Re: Re: Pierse Construction in Liquidation


Firstly, the Shelbourne is not involved in the receivership as it is a separate entity – I used it as an example of what I consider to be the daft forecasting/financial planning of McNamara.

That said, I disagree completely with your figures. –
@teak wrote:

The €265 million total outlay on a 20 year mortgage would mean an annual bill of around €1.4 million — very manageable on this revenue.

Ahem. :confused:You got the decimal point in the wrong place – @ 5% the interest bill is €14 million – somewhat less manageable.:p 😉

Rooms are the profit centre – it takes just one maid to service 12 rooms and he/she is not on shift rates. However, room rates have now dropped to 1999 levels and show no signs of coming back. The margins in restaurants are very slim, due to the high wages and other input costs. The staff –to- diner ratio in a good restaurant is one for every two guests. That is why the industry is being crucified by minimum wage costs and also explains why so many close. It also is why restaurants have the highest failure rate of all new business start-ups.

People dropping in for lunch? Lunch is a thing of the past; when did you last have a business lunch? In the boom times most were too busy and since then lunch for us ordinary mortals (i.e. not bankers or public servants;) )is a sandwich at the desk and if lucky that might be taken elsewhere and joined by a bowl of soup.

Receptions and functions are profitable if done right; however they never were a dependable profit source – they were an often-necessary ‘cream’ or icing on the ordinary business. The tighter drink driving laws has meant fewer people eating out and fewer bottles of wine being sold; a downturn in the economy means that people will not stay overnight for functions, which hits room occupancy and an gives the additional whammy of lower drink sales because punters have to drive home.

Luxury hotels might have higher room occupancy rates but they are much more sensitive to the economic environment. Look at the list of Irish hotels that have problems – they mainly are the 5 star ones (with the ubiquitous spa.)

Your figures are predicated on an occupancy rate of >80% which is not possible even in boom times. Occupancy rates of >65% is doing well, even in a city centre five star! (A good year in London used to be about 72% I recall from somewhere.)

@teak wrote:

Would I be wrong in suggesting an operating profit margin of 75% for a five-star ?

An operating profit margin of 75% is the stuff of dreams – for more correct figures look here:-

It was great to see the Shelbourne being restored, but as an investment it was dead in the water from the start due to the purchase costs. The renovation costs were a small overrun. Last year the company that operates the hotel (and does not have to worry about such details as debt service – or even, heaven forbid, capital repayment:eek: ) made a loss of €3 million. This year the climate is a lot worse.


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