Hotel management company Bespoke has liquidated its interest in four regional UK hotels, in a foretaste of other likely similar moves, over coming months.
The decisive action to close properties leased from landlord Fragrance comes as hotel operators look forward to reopening after lockdown – but also weigh up the expectation of considerable financial headwinds.
The four hotels – the Lyndene and St Chads in Blackpool, Townhouse in Manchester and Duke in Plymouth – have all been formally closed down by Bespoke, with staff notified of redundancy. Bespoke subsidiaries holding the liability for the properties have been placed into liquidation.
Bespoke chairman Haydn Fentum told Hotel Analyst the regrettable decision was taken after reviewing all the options. Bespoke had signed four year leases on the properties as it took them on, meaning there was another 18 months remaining. With such a short run-on, there was limited scope for recovering revenues, or negotiating deferred rental payments.
The Cornwall and Blackpool hotels had enjoyed good summer trading, though in contrast the Manchester property had suffered from its city location, and from Manchster’s higher level lockdowns.
“When you’ve something in the sick bay, it’s a huge amount of your focus,” said Fentum. “It’s a shame.”
The move appeared to blindside landlord Fragrance, who issued a statement as news of the closures broke, expressing shock at the move: “Fragrance have offered extensive support and worked tirelessly since the pandemic forced hotel closures to arrange a way for Bespoke Hotels to continue to operate Fragrance’s properties. Fragrance are dismayed that Bespoke Hotels have not offered equivalent support to keep these hotels running (despite continuing to support and operate some 80 other hotels during the pandemic) and have now caused distress to numerous families without notifying Fragrance. Bespoke Hotels put forward no feasible solution to the financial issues faced by the companies running their hotels and have offered no support from the wider Bespoke Hotels Group of companies.”
Fentum also called for further support for the hospitality sector, to reduce the likelihood of further failures. “We’ve had a one size fits all approach to the economy,” in contrast with more targeted support in other countries, he said. Sector support “needs to continue”, to help businesses return to healthy trading.
Aside from the Fragrance properties, Fentum said the Bespoke business, with 82 hotels across the UK, “is in good financial shape”. He expects a positive summer with strong trading, not least from the largely coastal Shearings hotel portfolio, which Bespoke took on last year.
Bespoke has continued to sign hotels to its management platform, during the pandemic. In August the company took over 40 Shearings properties around the UK, after parent SLG closed down. And in October, two properties owned by Fairtree International, in Grasmere and Caernarfon, joined the portfolio.
Martin Rogers, of Global Hotels & Leisure Consultancy, who works closely with Fragrance on their UK portfolio, told Hotel Analyst the company is keen to see the situation with the four properties resolved quickly, so it can prepare to reopen them for summer 2021: “We just need to get our hotels up and running.”
Elsewhere, Rogers said Fragrance is pressing ahead. “The two hotels in Paignton are rapidly coming out of the ground,” with a Mercure due to open in early 2022, followed later in the year by the adjacent Ibis Styles. Builders will shortly be appointed to construct the replacement for the Palace Hotel in Torquay, where a 248–room hotel has been approved.
In Liverpool, contracts have been signed to create an MGallery hotel from the former Municipal Buildings. And in Bath, new architects have been appointed after a previous design to convert the Royal Mineral Water Hospital building into a hotel did not meet with planning approval.
Elsewhere, Rogers said Fragrance is looking at two further UK sites. While in Asia Pacific, Fragrance continues to push ahead in Australia and Singapore, having just opened a Novotel in Perth and Movepick in Hobart.
HA Perspective [by Chris Bown]: This isn’t the first hotel insolvency, but it does feel like this is the first major national hotel operator to blink. A tough, but decisive move has ensured that a financial liability has been minimised, while the balance of Bespoke’s major portfolio can now be the focus of management attention, ahead of a potentially promising summer staycation season that ought to be cashflow positive.
Bespoke’s alternative would have been to hold on and hope – something that plenty of others are probably doing, right now. But with the government making up their Covid-19 lockdown strategy on the hoof, that’s putting yourself in the hands of politicians who have not distinguished themselves by their strategic thinking over the last year.
Unusually, the hotels had been leased from Fragrance by Bespoke; something that the group looks to avoid in general.
Fragrance has made a major play in the UK, and is investing substantially in not just owning hotels, but developing and redeveloping others, placing a big bet on the coastal UK market. Expect it to be rehiring staff at the four hotels shortly, and appointing a new operator – but perhaps not asking them to sign a lease.