Michael Lennon, President of the Irish Hotels Federation called on the legal profession to adopt 'a more reasonable approach' to personal injury cases, saying the legal profession must shoulder some of the responsibility for the excessive cost of public liability insurance, which is threatening the viability of many businesses including some in the hotel sector.
Speaking at the IHF’s annual conference in Galway,he said that the legal costs associated with administering claims are so high they are having a hugely detrimental impact on the proper administration of justice. Furthermore, he stated that the legal profession could do more to reduce the number of fraudulent and exaggerated claims coming before the court, which he said were also contributing to the high cost of insurance.
“The pace of insurance reform continues to be painfully slow. We welcome the establishment of the Personal Injuries Guidelines Committee and are hopeful that it will lead to more realistic awards for the future. However, in the meantime, excessive insurance premiums are continuing to hurt many businesses with a significant number of hotels this year paying over €1,000 per room. For an industry that is so price-sensitive, this level of cost is completely unsustainable.”
“We have no issue whatsoever with genuine claims where guests are rightly and properly compensated, and everyone is entitled to be professionally represented. However, at present, the scales of justice are tipped firmly in favour of the plaintiff and this cannot continue. The exorbitant fees being charged by lawyers are deterring insurance companies from pursuing cases through the legal system. According to figures from the Personal Injuries Assessment Board, only 1800 or 5% of personal injury claims were settled through the courts, whereas 24,700 or 74% were settled by insurers or abandoned.¹
Mr Lennon added: “It’s not unheard of for a plaintiff’s legal costs to be triple the amount awarded to them so not surprisingly insurers often prefer to settle a claim before it goes to court rather than risk running up a sizeable legal bill. But where is the justice for the defendant, who ultimately ends up with a significant hike in their insurance premium? We need to improve access to civil justice and to increase the scrutiny of insurance claims, which will help to deter fraudulent or exaggerated claims, to the benefit of society in general.”
Mr Lennon added that greater scrutiny of claims at an earlier stage in the legal process could also help to weed out the opportunistic and exaggerated claims that are still making their way to the courts. “Again, we have no issue at all with genuine claims. However, when a case collapses in court due to expert evidence showing injuries were exaggerated, one can’t help but wonder whether the plaintiff’s lawyer could have made a better effort at establishing the bone fides of a case before it went to court, saving time and money for the defendant and their insurance company, as well as freeing up the courts system.”
Referring to the recent General Election, Mr Lennon said that it was encouraging that all the main parties had finally recognised the negative impact of increased insurance costs on the viability of many businesses. “Fine Gael’s commitment to broadening the insurance market and making perjury a statutory offence was welcome as were Fianna Fáil and Sinn Fein’s pledges to establish a Garda Fraud Unit. With just one prosecution for insurance fraud under current legislation, which came into effect in 2004², there is plenty of room for improvement there. However, the real test is what we’ll see included in the eventual programme for government. The pace of reform must accelerate and in a timely enough manner to address the damage that is being done to the viability of businesses today.”
The tourism industry’s mixed performance last year looks set to continue according to an industry survey* undertaken by the Irish Hotels Federation ahead of its annual conference in the Galmont Hotel, Galway. While 40% of hotel and guesthouse owners across the country report an increase in business levels compared to this time last year, a slightly higher number (45%), are reporting a drop. With the survey also highlighting continued concerns around the high cost of doing business, business sentiment, not surprisingly, has slipped for the second year in a row. Just one third are reporting a positive outlook for the year, compared to 40% this time last year.
Hoteliers’ concerns about the high costs of doing business include what Michael Lennon, President of the Irish Hotels Federation, described as ‘hidden’ costs, which he says aren’t readily considered when discussing the challenges facing sector. “Local authority rates, for example, are the single biggest cost that tourism businesses have no control over. Hotels are making a disproportionate contribution to local authority funding with many hoteliers levied rates of up to €3,000 per bedroom while the average local authority rates equate to €1,500 per room.”
“A shake-up of local government funding is long overdue. We are calling on the incoming government to ensure a fairer distribution of the rates burden right across the country. Hotels are willing to pay fair and reasonable rates but recent commercial revisions have led to excessive increases in many cases,” he said.
Higher water charges are another worry raised by members in the survey. Mr Lennon said that hoteliers have serious concerns about the approach taken by Irish Water in relation to harmonisation and increases in the overall cost burden on businesses. “These proposals will impact significantly on our sector given the relatively high usage of water by hotels, particularly by those premises with leisure facilities. The proposed increases, in many cases, amount to 30% over three years, which are completely unreasonable and a significant added pressure for a sector that is so price-sensitive.”
The threat of a disruptive Brexit remains a significant concern for the vast majority of hoteliers. The survey shows that both the British and Northern Ireland markets continue to be challenging for the hotel sector. Amongst those surveyed, over 40% report a fall in business from Northern Ireland with more than 60% seeing a drop from Great Britain. These reductions are being offset to some extent by the performances of the domestic and US markets, which remain buoyant. Home grown business is up year on year for close to half of hoteliers surveyed (46%) while over a quarter are reporting an increase in business levels from the US. Just over 40% are reporting an increase in forward, or advance, bookings for the remainder of the year, while a similar number are reporting a fall.
While business sentiment may be subdued, hoteliers are continuing to invest in their properties with over three quarters planning to undertake refurbishment or capital expenditure projects during 2020. “Irish tourism cannot afford to stand still. It supports approximately 260,000 jobs across every county, over 90,000 of which have been created since 2011. It generates over €9.2 billion in revenue, making it a major contributor to rural economies. It is also highly competitive and we compete internationally for business every day of the week. Irish hotels are renowned across the world for the quality of our properties and our high standards of service. Maintaining such a reputation requires continued investment to ensure our product remains fresh and relevant in the face of evolving consumer tastes,” said Mr Lennon.
Most hoteliers, according to the survey, are planning refurbishment projects for their existing guestrooms and common areas. One in ten are planning to upgrade or expand their leisure facilities with seven per cent planning to add new leisure facilities.
Conferences and meetings continue to be an important source of business for many hotels around the country. Of those, over a quarter reported an increase in business compared to this time last year.
Breakdown of hotel and guesthouse business levels across key markets compared to this time last year:
Great Britain: 10% are reporting an increase; 62% are seeing a decrease and 28% see no change.
Northern Ireland: 10% are reporting an increase; 43% are seeing a decrease and 47% see no change.
United States: 27% are reporting an increase; 33% are seeing a decrease and 40% see no change.
Irish domestic market: 46% are reporting an increase; 29% are seeing a decrease and 25% see no change.
Germany: 13% are reporting an increase; 27% are seeing a decrease and 60% see no change.
France: 7% are reporting an increase; 21% are seeing a decrease and 72% see no change.