Project White Rose

Operating a hotel group in administration

Project White Rose

Assignment

Assured Hotels were approached by Duff & Phelps in late summer 2019 to commence preparatory research and trading viability on an eclectic group of hotels as part of a larger insolvency case. At that stage due to a complex investor structure, it was unclear if the stakeholders had the appetite to trade the businesses to a sale as going concerns.

Following our initial assessment and report on the trading hotels it was agreed that the majority of the 12 assets could be operated profitably over a period of 6 to 12 months, on the assumption that this would enhance value to exit no later than the end of the following summer season 2020.

The hotels were all incorporated under different Ltd entities so fell into administration on different dates between July and September 2019, therefore benefitting from a period of cash generation at the tail end of the 2019 summer season.

Scope

Our initial review allowed us to identify opportunities to not only drive sales and save on day-to-day operational costs at each property, but also to suggest significant restructuring of the large head office function.

Ultimately as the hotel assets would most likely be sold individually to independent owner operators, AH absorbed most central roles. These included sales & marketing, rooms distribution strategies, procurement, financial control, HR & recruitment, and senior operational management. Unfortunately, this led to redundancies earlier than perhaps expected, but did facilitate equivalent savings on personnel and office premise approaching £750k per annum after redundancy costs.

The complex investor funding set up led to AH reporting to two separate Insolvency Practitioners (IP), where we managed reporting and workable cost split on our central resources. The overall strategy was the same - to trade the hotels hard over the winter and mitigate losses, which would then be re-couped in spring/ summer 2020 to maximise exit value before autumn.

Outcome

March 2020 obviously brought the start of the global pandemic and successive months of lockdown meant there was no possibility of trading hotels in administration with little support in the Government measures for insolvent businesses. Thankfully over the autumn and winter 2019 we had achieved commercial and operational stability in all hotel operations apart from one, and offers were achieved by agents across the portfolio which switched to a vacant possession basis.

Almost a year later half of the assets have been sold with the remainder set to follow. We continue to support the IP assisting on initiatives including asset security and value preservation through retained cluster managers and significant business interruption claims following the Supreme Court judgements handed down in January 2021.