Von Essen Group goes into administration

The owner of 28 luxury hotels in the UK and France Von Essen Group, has gone into administration after defaulting on more than US $412.7 million of debt.

While the hotels are operating normally, lenders Barclays PLC and Lloyds Banking Group PLC have appointed Ernst & Young as the administrator for the von Essen portfolio.

Director of hotel consultancy HVS London, Tim Smith, said the von Essen Group had “long been the subject of informal speculation largely due to the large number of hotels acquired in a relatively short space of time”.

“[There was a] reliance on up-market guests wanting to stay in provincial UK locations, and the reported prices paid for the hotels,” he added.

Smith said it was a “sad day” as the company had found a modern use for some stunning and important properties, calling each on “an individual gem in its own right”.

However, he asserted it was always questionable whether such hotels, especially ones as small as von Essen's, could produce enough net income to support the infrastructure of a group.

“There is little in the way of economies of scale to be factored into their operations,” he added.

“It further proves that the provincial UK hotel market is still very tough and price sensitive and whilst there remains demand for such properties, perhaps not to the level to cover the substantial costs of running such high quality hotels and the upkeep of such historic buildings.

“Hotels in most of the UK provinces are still struggling to produce pre-recession levels of occupancy, and room rates are still well down; it is unlikely that von Essen’s hotels will have been able to buck the operational trends which no doubt contributed to their demise.”

Smith concluded it was unlikely that there would be a single buyer in the offing for the entire collection, and it is equally unlikely that such a buyer would be willing to pay a premium for a significant number of hotels in this category.

“The more likely scenario is that the group will be split with interest and demand for the core assets as a smaller portfolio with others sold individually. The problem will be finding investors prepared to satisfy the requirements of the National Trust for properties such as Cliveden.”