PROJECT

Project Bumble Bee

Turnaround to Refinance

Appointed on an initial 2 year agreement to run this struggling full service asset in the North West of England

Assignment

Assured Hotels were contacted directly by the owner of this 150-bedroom property, initially engaged in an advisory capacity in May 2017, AH were then appointed on an initial 2 year agreement to run this struggling full service asset in the North West of England. Profit margins had reduced over a two-year period through both sales regression and poor management of costs & payroll, to a point where an EBITDA conversion of less than £350k at a margin of just over 8% from £4.3m sales at the end of FY 2016/17 was unsustainable.

Scope

Stakeholders recognised that something needed to change and supported us through some difficult decisions particularly:

Payroll reduction of £220k of fixed annual salaries through redundancies. These were either roles not required from an out-of-date top heavy structure or others where AH personnel picked up responsibilities under the scope in our engagement.

Turnover of the business was at an adequate level, but mostly propped up by a high volume of lower margin/ high cost of food & beverage offers via voucher sites.
Revenue growth potential from the bedrooms was significant, with poor practices leading to much lower KPIs in both occupancy % and rate management to industry expectations despite under investment in the bed stock.

Profitability was further compounded by a lack of a cohesive procurement policy and no recognised cost management or controls; reduced margins damaging the business for example food cost was running at 50%. Particularly problematic when we consider over 55% of revenues at circa £2.4m were generated in F&B outlets.

Assured Hotel’s team immediately started working directly with senior management to implement the required turnaround strategies & partner introductions.

Outcome

By just trading the asset harder allowed us to achieve sales growth driven by better process and an improved sales mix, better purchasing controls and general operating standards. The business started to recover almost immediately delivering £800k EBITDA, a more acceptable margin of almost 20% from £4.6m sales in the full year.

This subsequently allowed the owner to refinance the business with a new lender, which also allowed a cash injection to address overdue CAPEX in 2019 allowing us to start to reposition the business in the medium term. Assured Hotels are delighted to be appointed on a 5-year lighter touch basis to oversee this objective on a success led renumeration.

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