Borrowers Need to do Their Homework Before Approaching Lenders
16 February 2011
LONDON, 16 February 2011 - Leading hotel operators, banks and investors reconvened at the annual GVA Hogan Lovells hotel conference in London last week where Alan Parker, the former CEO of Whitbread gave a keynote address.
Hosts UK property consultant GVA and global law firm Hogan Lovells presented the event in partnership with hotel industry specialists TRI Hospitality Consulting.
Entitled ‘More Flash! Less Cash?’, the conference explained the current state of the market and, against a backdrop of current refinancing/restructuring and stricter lending policy, considered the outlook for the hotels sector in 2011.
Over 100 senior professionals operating in the hotels sector attended. Of those attendees, just over 50% felt confident about the prospects for the UK hotel industry over the next 12 months and 64% predicted that RevPAR (revenue per available room) in 2011 in London would improve. In considering the ‘biggest risk to your business over the next year’ interest rates and public sector cuts each received 30% of the delegate votes. Of those polled, 84% expected restructuring, refinancing and forced/distressed sales to generate the most transactional activity in 2011. In terms of the ‘More Flash!’ 46% agreed that, for an independent hotel, adopting a brand is the best way to enhance capital value.
These views from the delegation emphasised the need to present a strong case to justify finance from lenders who are scrutinising proposals very carefully. The 'Less Cash?' hotel refinancing panel confirmed that lenders need to see proposals with evidence of a strong, experienced management team with a good track record, sustainable cashflow, a robust business plan, capital expenditure plans and a SWOT analysis, rather than the bricks and mortar value of underlying real estate asset. This was reflected in the voting, where only 13% of respondents agreed that banks have relaxed their lending criteria to the hotel sector over the past year.
Jackie Newstead, Partner at Hogan Lovells comments:
“While there are clearly a reduced number of lenders in the hotel sector, debt does remain available from a number of major UK banks. However, bank customers have to be more diligent in the way they approach the banks to maximise their chances of securing funding. Valuations remain an important consideration for banks, but customers must also evaluate funding availability by reference to their ability to cover finance costs from cash flow."
James Williamson, Director at GVA comments:
“Market sentiment has undoubtedly improved and will continue to do so in 2011. Nonetheless the recovery is weak at best. Banks and businesses remain tentative as to what the market holds. So, despite that improving sentiment, businesses need to work harder to present stronger cases in the knowledge that stricter lending criteria will not relent this year or indeed in 2012/13."
David Bailey, Deputy Managing Director at Tri Hospitality Consulting comments:
“While underlying uncertainty remains, it is clear that ‘brand’ alone will no longer compensate for areas of the business that lack due diligence. Businesses must present a transparent strategy that clearly illustrates sustainable growth, a good location, a strong product and a business plan that supports a sound financing model.”
For further information on the event and its content please contact James Williamson at GVA on 0207 9112109 or email@example.com, Ian Thompson at GVA on 0207 9112962 or Jackie Newstead, Partner at Hogan Lovells on 0207 2965262 or firstname.lastname@example.org or David Bailey, Deputy Managing Director at TRI on 020 7892 2202
GVA is one of the UK’s leading property consultants operating from 12 offices with 890 fee earners generating a turnover of £129.5 million year ending 30 April 2010.
The company provides a full range of property-related advisory led services including agency, planning, development and regeneration, rating, building consultancy, investment, management, valuation and corporate recovery.
It also offers specialist advice in areas such as finance, economic & social policy, telecoms, education, healthcare, hotels & leisure, retail, sustainability, contamination, plant and machinery and the automotive and roadside sectors. For further information visit www.gva.co.uk
GVA is a founding member of GVA Worldwide, an international organisation of real estate industry leaders serving key markets in over 25 countries. The organisation comprises of over 2,500 real estate professionals in over 85 markets worldwide.
A leading advisor in commercial real estate, GVA Worldwide optimises client portfolios locally and around the world. It serves the real estate needs of clients including multinational corporations, major space users, developers, owners, institutions, lenders and investors. For more information visit www.gvaworldwide.com
Hogan Lovells profile
Hogan Lovells is a global top 10 international law firm with 40 offices in the world's leading financial, commercial and political hubs with more than 3,000 legal professionals worldwide. For further information visit www.hoganlovells.com.
Hogan Lovells’ leading international hotels, leisure and gaming practice is comprised of lawyers with extensive industry experience and knowledge.
Its experience spans nearly three decades of hotel and resort acquisitions, sales, development, management and operations; equity and debt capital structures; joint-venture, and other ownership entity formation, and related business, tax, and operating representation.
In recent years, the group has been involved in hotel transactions in more than 30 states in the United States as well as in the United Kingdom, France, Italy, Spain, Germany, Switzerland, Poland, Czech Republic, Russia, China, UAE, Egypt, Kenya, South Africa, Mexico, Costa Rica, Chile and two dozen other countries.
TRI Hospitality Consulting profile
TRI Hospitality Consulting is the recognised leader in the provision of hotel-related consultancy services and benchmarking data internationally.
TRI’s consultancy services are underpinned by comprehensive in-house research and supported by our proprietary benchmarking survey. TRI provides a unique profit and loss benchmarking service to mid-market and full-service European hoteliers, which enables monthly comparison of a hotel’s performance against its competition. It is distinguished by the fact that it provides monthly analysis of up to 85 hotel profit and loss line items giving much deeper insight into hotel operations than only the three measures of occupancy, rate and revPAR to which other benchmark providers restrict themselves. The database now totals over 3,500 properties representing more than 350,000 bedrooms.
With offices in London, Dubai and Madrid, TRI’s clients range from renowned global multi-nationals to exciting new brands and market entrants. For more than four decades, TRI has worked closely with most of the world’s top hotel chains, as well as developers, investors and financiers in the sector.
For further information visit: www.trihc.com and www.hotstats.com
About Hogan Lovells
Hogan Lovells combines the breadth of business-oriented legal advice and high-quality service that clients have come to expect through working with its two founding firms – Hogan & Hartson and Lovells.
"Hogan Lovells" or the "firm" refers to the international legal practice comprising Hogan Lovells International LLP, Hogan Lovells US LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses, each of which is a separate legal entity. Hogan Lovells International LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia.
The word "partner" is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing. Rankings and quotes from legal directories and other sources may refer to the former firms of Hogan & Hartson LLP and Lovells LLP. Where case studies are included, results achieved do not guarantee similar outcomes for other clients.