Administrators from Ernst & Young were appointed yesterday by Von Essen’s banks Barclays and Lloyds Banking Group, after the company failed to make repayments on a reported £250m of borrowings.
The collection of 28 hotels, one of which is based in France, are not in administration and will continue to trade as normal, however a spokesperson for Ernst & Young said it is “too early to tell” what the fate of the hotel group will be.
“The administrators are working closely with the business to develop the appropriate strategy to take the business forward. Nothing’s being ruled out at this stage,” he said.
The collection of hotels, founded and chaired by Andrew Davies, includes listed properties such as Amberley Castle in West Sussex, Thornbury Castle in Gloucestershire and Cliveden House Hotel in Berkshire.
Rapid, high-cost expansion
Tim Smith, director of hotel consultancy HVS London, told BigHospitality that Von Essen’s administration had been speculated upon for some time due to its rapid expansion of high-priced properties and reliance on upmarket guests in a volatile market.
“They’re extraordinary properties, particularly in the Classic Set, and some of them will have very high maintenance requirements,” he said. “Mr. Davies paid a significant sum for some of these assets so there will be some large debt requirements and property cost requirements. So if you’ve got falling revenues because of pressures from the market generally, often there’s very little wriggle room.”
He added that although Ernst & Young are being very clear that the administration “won’t affect the hotels themselves” it is likely that one or two may be put on the market alongside a boardroom shuffle.
“One or two may fall by the wayside but I’d be very surprised if it’s anything more than that. I think what will happen is a restructuring of the ownership, and whether or not that includes the current board and owners we’ll have to wait and see. Often with a portfolio of over 30 properties one or two need to be sold to protect the rest.”
He added: “It is unlikely that there would be a single buyer in the offing for the entire collection, and it is equally unlikely that such a buyer would be willing to pay a premium for a significant number of hotels in this category.
“The more likely scenario is that the group will be split with interest and demand for the core assets as a smaller portfolio with others sold individually. The problem will be finding investors prepared to satisfy the requirements of the National Trust for properties such as Cliveden.”