Von Essen Lessons Learned for Hoteliers

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The Von Essen Group of 28 high quality hotels across England has fallen into administration, with debts said to total £250m.

With rumours surrounding the group for several years and a poor reputation in the payment of suppliers, the news is not a surprise in the industry.

But are there lessons to be learned for our south west hoteliers in maybe a similar market?

The fundamental issue for Von Essen is likely to be gearing. With high borrowings and then a downturn in the economy, the scope to pay bank interest was lost. Purchasers of hotels should consider carefully the level of debt that they can manage – good advice and financial modelling by your accountant is vital here.
Was there sufficient ‘reason’ for the group? In other words did the grouping add value to itself? The properties are highly individual and are traditionally managed by a charismatic owner, with a unique slant on the customer service ethos. They became managed hotels, but we understand with minimal central synergy (efficiency) normally seen in a group.
Were the properties of sufficient size to support a management team and allow a passive owners share of the profit? Hotels usually need 30plus bedrooms to support this model.
Provincial locations, with rising fuel costs may have deterred customers. The owner cannot change this issue, but addressing the first two points could have given more resilience.
Similarly a falling corporate market may have left a hole in mid-week occupancies. This may have been unstoppable, but owners need to consider the mix of their business and the risk that ‘eggs in a basket’ create.

It is easy to look back and claim an insight into ‘the inevitable’, but not so easy to not get pulled along by the love of a property - paying over the odds, and then owning a millstone. The mix between financial caution and entrepreneurial flair needs to be balanced carefully.

Business people should work closely with their accountant on acquisitions, but not be stifled by traditional ‘grey suit’ lack of vision.

At Accounting & General we have personal experience of successful hotel acquisitions, and also overreached failure. We are an ideal supporter in your journey.

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Von Essen Lessons Learned