10 Hotels Project - Institutional Investor

 

 

  • In January 2009, Focus Hotels Management was approached by an Institutional Investor to discuss the management of 10 properties prior to the incumbent tenant going into administration.
  • Investor was not allowed to be involved in operating companies other than as a shareholder.
  • Focus Hotels Management identified a solution to buy the existing leases with new agreements on rent.
  • The solution was a profit share lease with terms similar to a management contract.
  • Tenant went into administration in mid-January 2009.
  • Focus Hotels Management bought the leases from the administrators and finalised and implemented the new lease structures.
  • Focus Hotels Management took over the hotels within two weeks of the administration.

 

Operational Overview

 

  • Before taking over, Focus Hotels Management carried out a full review of operating efficiencies, identified the primary issues and put in place plans to address these immediately once in control.
  • These plans included:
    • Removal of existing branding, taking the hotels back to their original names.
    • An external and internal clean-up to enhance the sense of arrival.
    • Implementation of management and staff training to improve morale.
    • Significant national sales and marketing campaign supported by a number of key agencies.
    • Purchasing reviews with many new suppliers.
    • Quick fix limited capital programme.
    • Implementation of identified operational efficiencies. 

 

Branding Review

 

  • Review of available brands and branded all the hotels with the best brands available within their competitors set.
  • Focus Hotel Management agreed future brand requirements with Accor and branded the hotels under Mercure.
  • A property improvement plan was agreed with the institutional investor.
  • The property improvement plan was implemented within the capital budget.

 

Hotel Development and Capital Projects

 

  • Identified some quick fix capital projects for immediate returns.
  • Agreed budget and timeframe with the institutional investor and implemented within 3 months.
  • Put forward a capital plan with supporting capital returns to upgrade all the hotels.
  • Returned to top 3 star quality, suitable for Mercure branding.
  • Capital plan supported by the institutional investor.
  • The capital plan was fully delivered during latter half of 2009 and throughout 2010, on time and within budget.

 

Achievements

  • During financial year 2009, the portfolio traded profitably net of all costs.
  • In February 2011, 9 hotels were branded Mercure, and Focus became the first significant franchisee of the brand. Revenues have continued to grow across the estate since.
  • In 2011, revenues were up from 2009 base position by 36% and profits up by 72%.
  • The initial agreement for leases on 5 year renewable terms was subsequently extended to 10 year terms.
  • By the end of 2013, and even after the disposal of a hotel, revenues had continued to grow by a further 12%+ and net EBITDA profits by 50%+. 
  • For the year ending 2014 like for like revenues improved by a further 9.3% and profits improved by a further 20.4%.
  • In 2016, the investor decided to sell the portfolio as it had achieved all their expectations. Subsequently, the final hotel in the portfolio was disposed of in October 2017.