Wyndham has suffered a double blow to its Ramada brands in the UK. Two hotels have been put up for sale by landlord Shiva Hotels, with the likelihood a new buyer will rebrand them. And four of its Encore branded hotels are switching to Accor’s Ibis flag, after landlord Carillion opted for a rebrand.
Shiva has decided to exit its two Ramada branded hotels in Salford and Birmingham, offering the pair at a GBP22m asking price, although individual offers are also being invited by agents JLL and Savills. Both hotels have been running as Ramadas, but will be sold free of a brand tie, offering the opportunity for either a branded player to get into these key regional UK cities, or for a well funded independent to take the opportunity.
The disposal comes as four hotels under the Ramada Encore sub-brand switch to Ibis Styles. The four properties, in Barnsley, Crewe, Haydock and Birmingham NEC belong to infrastructure giant Carillion, who hired Michels & Taylor to select a new brand partner. Accor is franchising the properties, with Kew Green installed to manage them.
The Ramada in Birmingham has 90 rooms, and sits within the Mailbox shopping and leisure development in the city centre, part of a hotel offering that also includes a Malmaison hotel. While the Mailbox is about to be relaunched following refurbishment, it is understood the Ramada would benefit from investment – and therefore presents an opportunity to take the hotel offering up market.
In Manchester’s Salford Quays, the 142 room Ramada is close to the Manchester United football ground and Media City. The property is said to be in better overall condition.
“The market is significantly better,” said Rob Stapleton of Savills, noting Shiva was taking advantage of the uplift. “People like the value add opportunity we are offering.” He noted that some major brands, including those of Starwood, have no presence in the UK’s second and third cities, and might welcome the opportunity to use these sites.
Shiva’s decision to sell is based around its own portfolio activity elsewhere in the UK, particularly in London. While it owns mature assets including several Hilton branded properties, it has an active development programme that demands management attention and finance. Last autumn, the company paid GPB96m for the Kingsway Hall hotel in central London, which is undergoing extension and refurbishment. It is proceeding with other developments, and holds two City of London sites with medium term hotel development potential. In total, Shiva has a potential 2,000 rooms of central London portfolio operating or in development.
For Wyndham, the losses mean it now has 23 Ramada branded hotels in the UK, just 9 remaining under the Ramada Encore sub-brand and three standing as Ramada Plazas. The latest losses add to a string of exits from the brand over the last year. According to Hotel Analyst’s latest annual brand report, 2014 saw 17 hotels take down the Ramada, Ramada Encore and Ramada Plaza flags. Of these, five went to new budget brand Penta, and a further five converted to Choice brands; one moved to a Hilton DoubleTree, and another to a Holiday Inn. Against this, Wyndham did add Ramadas in Wakefield and Hounslow, and a Ramada Encore in Oxford.
In the face of these losses, Wyndham announced in December that it had signed a development agreement with management group Lester Hotels, with an aspiration to add 20 Ramada hotels over the next 10 years. Speaking as the deal was announced, Nima Davoodzadeh, vice president of development, UK and Europe for Wyndham said: “We look forward to working with Lester Hotels to aggressively accelerate the growth of the iconic Ramada brand in the UK.” While Lester chief executive Simon Lester added: “The diversity and appeal of the Ramada brand in the UK perfectly complements both our own portfolio and a number of current opportunities and we look forward to opening more Wyndham Hotel Group branded properties in the UK over the next few years.” The agreement saw an initial two hotels convert to the Ramada brand: the Ramada Resort Cwrt Bleddyn, and the Ramada Leicester Stage.
HA Perspective [by Chris Bown]: What next for Wyndham in the UK? The company is haemorraghing hotels from its mid-market brands. Right now, Ramada is unlikely to come top of any landlord’s selection process, once it is compared with rivals. The tie-up with Lester is hardly going to make up for the losses. Unless Wyndham – which proclaims itself “the world’s largest hotel company” – makes a substantial commitment to investing to support its presence in the UK, in the way it has in Germany, the Ramada name will continue to wilt away.
Shiva should have no problem finding buyers for its well located hotel properties; savvy operators will have already teamed up with an investor, to bid. Carillion is a construction and infrastructure company, not normally a long term property holder and investor. So expect it to take similar advantage of a strong market, to sell on its four hotels now they have a stronger brand over the door. But perhaps allow Kew Green and Accor’s distribution system a year or so to ramp up the occupancy and revenues, establishing higher value.
It is understandable that Shiva can see the benefit of concentrating its resources on developing its London portfolio, rather than invest in refurbishments that could tie up its interest in Manchester and Birmingham for a further few years. It has a strong development pipeline in central London, and good friends in Hilton who will doubtless be keen to brand some of the output.