Veteran hotelier Mr Paddy Fitzpatrick is giving more than half of his hotel empire away to his two sons, John and Paul, as part of a major restructuring that also sees Fitzpatrick Hotels buy out the 40 per cent of the company held by venture capital company ACT.

In an interview this week with The Irish Times, Mr Fitzpatrick said he and his son John will retain majority control of the group's US hotels with other family members having a minority interest. It is understood, however, that Mr John Fitzpatrick - who has spearheaded the group's successful expansion into the US - has the option to buy out the other family members from the US hotels.

In another development, Mr Fitzpatrick has bought a new hotel in Chicago to add to the two hotels in New York that are being passed on to Mr John Fitzpatrick. This hotel, the Summerfield Suites, has been bought for $23 million (€27.5 million) and a further $9 million is being spent on expanding the hotel from 120 to 160 rooms.

The other main element of the restructuring sees Mr Paul Fitzpatrick take full control of the Fitzpatrick Bunratty Hotel in Clare. Mr Paul Fitzpatrick is also planning to develop the Bunratty business in conjunction with the development of a new "design hotel" chain. To this end, he has bought the 86bedroom Morgan Hotel in Dublin's Temple Bar for an estimated £4 million (€5.1 million) and has plans for other "design hotels" in some unspecified European cities.

Mr Paddy Fitzpatrick and his daughter Eithne are retaining majority control of the Fitzpatrick Castle Hotel in Killiney, while the other family members will have a minority stake.

Although different hotels have been parcelled out to the various family members, the group is to retain the Fitzpatrick brand and the centralised marketing of the hotels will be retained.

And six years after it bought a 40 per cent stake in Fitzpatrick Hotels for £6 million, ACT's stake is being bought back by the family. Mr Paddy Fitzpatrick would not disclose how much ACT is getting for its stake but it is thought to be in the order of £16 million.

Commenting on his decision to give large portions of the company to his sons and daughter, Mr Fitzpatrick said it was driven by both management and tax reasons. He estimated that he is transferring £25 million worth of property to his family.

"We've learnt a lesson from what has happened in some other families. We've seen some families disintegrate. I wanted to make sure that the members of the family got what they deserved after a lot of hard work and will be able to work for themselves without having me dragging at them."

He added that his ability to give large parts of the business away had been made easier by recent changes to inheritance tax and gift tax. "It made it possible to give parts of the business to the family before I pass on and it relieves the burden of death duties. I'm 71 now, I'll quietly step back from running the company," he said.

Although the Fitzpatrick hotels in New York have suffered from lower occupancy as a result of the slowdown in the US - "we've gone from 90 per cent to 70 per cent occupancy" - he was bullish about the prospects for the new hotel in Chicago. "We've spent $23 million on the hotel, and will spend $9 million upgrading and extending it to 160 rooms. But our stage two plans are to convert the seven lower floors that are currently in office use to hotel rooms."

This would increase the size of the hotel to 200 rooms in a city that is the biggest convention centre in the US.

Last year, Fitzpatrick sold the Silver Springs Hotel in Cork to the Moran Group, part of a deliberate move by the group to reduce its exposure to the Irish market. Mr Fitzpatrick is adamant that too many hotels are being built and, in particular, that too many have been built for pure tax reasons not tourists.

"There's been huge hotel overbuilding, I'm terrified by what's gone on."

Mr Fitzpatrick said the group's trading this year has been hit badly by the foot-and-mouth outbreak.

"Cancellations for the summer were dramatic. Bookings are bouncing back but our results will be down on last year," he said. He added that profits last year were around £3 million.