Is a ‘Hotel Folly’-scale nightmare avoidable?


Watching Hotel Folly — Folie à Deux — Madness Made of Two on BBC Four last month was enough to put a dampener on anyone’s dream of opening a hotel.

As frustrating as watching the fate of an ill-planned project of a lifetime on an episode of Channel Four’s Grand Designs — but more tragic — the feature-length Storyville documentary told the story of the spirited Helen Heraty and her new partner John’s battle to turn a 72-room stately home in York into a hotel.

After selling their holiday-rentals business and homes, the pair bought the Grade-I listed, run-down Grays Court, near the York Minster, for £1.6m.

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Fast-forward a few years to the onset of the economic downturn. John’s London architectural firm has gone down the pan, bank funding has frozen, the property is valued at a third of the price and Helen can barely afford to feed her seven kids, two dogs and cat — let alone pay to complete the conversion. I won’t give away the documentary’s ending for those of you who are yet to endure it, but it wasn’t an entirely happy one.

Billed as an account of how the British banking crisis impacted would-be entrepreneurs of the time, the programme actually highlighted the importance of communication — to avoid being dragged down by Heraty-versus-neighbour-type disputes that could be more easily resolved over a cuppa — and crucially, having a bullet-proof business plan.

While the UK economy appears to be heading in the right direction, first-time hoteliers seeking finance will still have a Heraty-sized struggle on their hands — an issue addressed during ‘the pantomime of finance’ panel session at last month’s Independent Hotel Show.

Santander Corporate Banking regional director Alexandra Rice, the panellist bravely representing the bank in a roomful of hoteliers, said ‘cold calling’ bank after bank — as Heraty does so tirelessly — should not be the most pro-active part of your plan.

“Interview your banker as much as they interview you,” she said. Do they know the hotel sector and understand the complexities of it? If not, find a banker who does.

Now Rice’s next tip is an obvious one, but that doesn’t stop us shouting at the TV as yet another hopeful individual steps onto BBC Two’s Dragons’ Den asking for half a million but unable to answer a few simple questions on their P & L — haven’t they seen the show?

You guessed it, Rice’s advice is to make sure you understand the financials of your own business inside out. Know your profit, your loss and if you expect an uplift in revenue beyond market growth, you need to have a good explanation why.

The banks will scrutinise your asset and its refurbishment programme, and they’ll assume that room rates will decrease over time. In a nutshell, if numbers aren’t your strong point, hire a finance manager and bring him with you to the bank, and if your banker hasn’t asked to see the asset, “be worried”.

You can appeal against rejections of course, but perhaps it would be best to sit down with your banker and ask exactly why the application hasn’t gone through. If it’s because your plan to open a hotel has as much substance as the dream it is based on, you could have just escaped a Hotel Folly-scale nightmare.

Tags : Watching Folie ? Deux ? Madness Made of Two on BBC Four last month was enough to put a dampener on anyone?s dream of opening a hotel.
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