BDL Management last week signed a management contract for nine Ramada hotels, which took its portfolio of owned and managed hotels to 46.
The announcement came in the same week that Exclusive Hotels acquired The Royal Berkshire hotel in Ascot for a figure off an asking price of £15m, sold clear of any brand or management contract, while being operated by Jarvis. The two announcements together have meant the ongoing diminution of Jarvis, as it continues to address its debt issues.
BDL was awarded the management contracts after the owners of the nine hotels negotiated the ending of leases with Ramada Jarvis, which were part of a reorganisation by Jarvis Hotels and involved two landlords, one of them owning six hotels and the other holding three properties. The nine sites, owned by Lioncourt Capital and Nationwide, will continue to trade under the Ramada brand name. Louis Woodcock, CEO of BDL Management, said: "The hotels are a strong addition to our portfolio and current brand mix."
Jarvis was taken private in December 2003, with a £229m MBO. The deal was backed by Lioncourt Capital and a consortium of Irish property investors, with debt funding from the Royal Bank of Scotland. It has been consolidating its estate since then, at one point selling 15 hotels and spending over £40m on renovations, but has suffered in the UK's mid-market downturn. It is thought to have been in breach of its banking covenants for more than two years and saw pre-tax losses expand from £4.1m to £15.6m in the year to March 2010.
The company's current debt is reported to be around £130m – thought to be greater than a recent valuation of its estate – with speculation in March suggesting that the company had been in talks with private equity group Patron Capital over a deal to take joint control of the group with Royal Bank of Scotland's West Register vehicle. The deal was expected to have cut Jarvis's debt to £60m and would have seen HSBC and Bank of Ireland writing off debt and ongoing involvement.
The group has also been subject to rumours of a sale to Akkeron Hotels, which acquired Forestdale Hotels at the end of last year. Akkeron, as well as Benson Elliott Capital Management, had been tipped as buyers, but it is thought that concerns over Jarvis's £17m pensions liabilities were a deterrent.
At BDL, director Stuart McCaffer drew attention to the group's decision to focus on management, commenting to Herald Scotland: "Our model has changed slightly. Before, most of the hotels we managed, we owned. As the world has changed, since the credit crunch…because there is less opportunity to own hotels in your own right, we are taking on management contracts."
HA Perspective: Jarvis was created in 1990 at the tail end of the last great UK property boom prior to the most recent one in the run up to 2007. It was one of several chains created to "mop up" the UK's under invested mid-market and was one of the half dozen hotel companies that listed on the London stock market in 1996.
Its struggles provide a cautionary tale about the perils of the provincial mid-market. There is plenty more pain to come during this cycle.