KEN LEE, Town Hall reporter, on the council’s latest wheeze to generate a bit of spare cash by buying up a loss-making hotel
‘Hello! My name’s Tony. Welcome to the Croydon Park Hotel…’
The council has bought the Croydon Park Hotel, the 4-star, 55-quid a night tower that’s well-used by Gatwick airport staff and handily placed for the law courts.
What could possibly go wrong?
Property industry experts reckon that the deal could have cost Croydon Council in the region of £20million, using money borrowed from the Government’s Public Works Loans Board.
The Town Hall brains trust reckons that, by turning council leader Tony Newman into a latter-day suburban Basil Fawlty, they can make about £1million per year to top up their revenues from Council Tax.
Yet the hotel’s then owners sold it in 2017 after it had made a loss in the previous six months’ trading, and there has been no transformative changes in the business’s fortunes in the 12 months since.
Of course, this being the officer-led Croydon Council, such a large-scale purchase by the local authority, using millions of pounds of public money, has never been discussed in the Town Hall nor put up for any debate by councillors. The announcement was slipped out just before the late summer bank holiday…
The council has failed to state how much public money has been used for the purchase of the hotel freehold.
The council press office only said that the deal is “part of its drive to seek innovative ways to generate income for frontline services”.
Inside Croydon’s loyal reader will know that the council has been here before.
Under new ownership: the Croydon Park Hotel
When Croydon took a stake in the development business (through the CCURV partnership with John Laing), it was a large-scale and costly (for the Council Tax-payers) failure.
The more recent move into the house-building business through Brick by Brick has, after three years, yet to deliver a single new home and last year made a seven-figure loss.
So the notion that the local authority can branch out and start competing in the hotel trade with the Hiltons and the Ritzes (or more likely the Premier Inns), and manage to make money might be a bit of a stretch for many.
The council’s press release said that the hotel purchase “is expected to generate around £1million net revenue per annum, helping to protect local services for residents. The purchase supports the council’s financial strategy as well as its aim to invest in the borough where possible”.
No justification is given for the profit estimate, which could prove to be on the optimistic side. It suggests that, as freeholders, the council will be receiving more than £1million per year in rents from the leaseholder.
The recent business record of the Croydon Park Hotel is… well, a million pounds away from being a revenue-generator.
In July 2017, Dalata Hotel Group – despite having a corporate expansion programme – decided to sell Kasterlee UK, the company which held the Croydon Park Hotel’s leasehold.
The hotel had made a loss of £20,000 in the six months to end of June 2017.
It is the (unnamed) current leaseholder who will continue to operate the hotel, according to the council.
“At a time where government grant funding for local authorities continues to fall, we have to look at new and innovative ways to ensure we can provide services to residents. This purchase is one way to do it,” was the quote attributed to Simon Hall, the cabinet member for finance.
Owning the hotel may well offer some synergies for other council activities: it is handily placed for the Fairfield Halls, for example, and might be an alternative, and cheaper, venue for the Town Hall’s annual bun fights, such as the Mayor’s charity banquet.
The nondescript 1960s-built hotel has 211 rooms, what they call a “leisure club”, with a small swimming pool, some conference facilities (in competition with the Fairfield Halls), and a restaurant and bar.
But it has been some time since the Croydon Park underwent any kind of upgrade or renovation, and the council may have found themselves buying the property just at the time when it will require some serious additional investment to maintain its standards and rating.
Online reviews may not always be an entirely reliable source of feedback, but customers do rely upon them increasingly, and they will be aware that the Croydon Park’s rating has fallen below 3 stars. Guests have said that they liked the large rooms, while some said “they were dated and maintenance could be improved”. Others said that “the bathrooms were small and cleanliness could be improved”.
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Something smells here. The Council are not going into the Property Conversion business are they?
This matter really does require some scrutiny doesn’t it. Wonder who Sybil will be?
An interesting idea and I am sure there is more to this than revealed so far . . . or at least I hope so. How much interest is payable of a £20m loan? Once current lease expires will Alison grab this for housing the homeless? Might save more Council money than they earn as a hotel.
The current Public Works Loans Board rate is 2 per cent.
The amount paid will, eventually, be revealed in official records at the Land Registry. As it is public money, spent by a public authority, the council might serve the public interest and be transparent and say how much they have spent of our money.
Their reluctance to identify the current leaseholder at the hotel is also less than open or transparent.
Not sure where you got £55 a night from, no wonder it’s making a loss at that price, and I wouldn’t grumble on Trip Advisor however crummy it was if I got in for that!
It’s well over £100 for a standard room only some nights, seldom less than around £80
Late-booking rooms are available online for that price today…
Reblogged this on sed30's Blog and commented:
Whatever next!
This really is quite bizarre, there simply has to be more to it.
My guess is that as with the Taberner House project Croydon Council will wave through plans to extend the hotel or build more flats on the land. I can also see it ending up like the Queens Hotel in Crystal Palace with its occupants being families waiting for permeant housing.
It will end horribly of that I am certain.
Grauniad readers will have spotted this piece. It seems you can get a studio flat in a space a lot smaller than a decent sized hotel room. Those queuing for social housing should bait their breath.
https://www.theguardian.com/money/2018/aug/25/flats-block-converting-offices-living-space
You are being very unfair to Basil Fawlty!