Crisis struck overnight for Paradores. After an unwise investing strategy that it could have very well carried out for much more affordable prices (take for example the 40-million euro Cádiz building), Paradores is suffering serious liquidity problems that are complicating their attempts to privatize. The companys deficit is currently 80 million euros.
In theory, its investments could have been amortized over 30 years. But with access to credit markets restricted, the company is struggling to face debt payments that are due this year. Such difficulties coincide with a significant slowdown in the hotel business that started when the financial crisis hit in 2008. For Paradores, business now depends mostly on long vacations during the holiday season and less on people enjoying quick getaways.
The majority of hotels with less than 40 rooms are not being rented. Further, Paradores hardly owns any assets that it can sell, because the majority of their stock belongs to the state. Its brand name carries most of its worth.
Paradores was handed to one of Zapateros friends to manage, and this friend had no previous experience in hotel management. The results of profligate management are now apparent, making Paradores look more like a Spanish town government than a private company. A typical motto: If the money is there, go ahead and spend it.
The next leader of Paradores should learn from this lesson. It does not bode well that Minister Soria has halted a temporary Expediente Regulador de Empleo (ERE), which is an administrative redundancy procedure only found in the Spanish labor market that employers must comply with to request a temporary suspension of labor contracts or a collective dismissal. Privatizing the management of Paradores is something that she should consider, because the state-owned company does not need many cutbacks in order to get back into shape and start making profits.