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Thursday, 16 May 2013

Hotel opened by Easyjet founder has gone into administration

Ernst &Young has been appointed administrators of Glasgow eH (Trading) the operator of easyHotel in Glasgow City Centre.  The hotel has now been shut.  The hotel's rooms were priced at just £25 a night and was a "super budget" option.  The hotel was converted from a 1970s office block which cost £6m.  A quick back of the envelope calculation has shown that this was always going to be a struggle.

I am going to make some assumptions here;

125 rooms with 90% occupancy at 365 days a year!  = approx £1m a year in revenue  ( this is very optimistic occupancy rate)  The return on capital assuming running costs at £300k pa is 11%  so it would take 9 years to get your money back!  I have no idea how much it cost to buy the site.

Having said that the new owners of Travelodge are convinced there is a strong market for budget hotels in the UK and are investing some £200m over the next few years.  But even Travelodge is £50 a night.

Fiona Taylor of Ernst &Young said: "We are currently undertaking a full review of its financial position, but an immediate lack of funds has necessitated the closure of the hotel and the resultant job losses.

The administrators said the insolvency move does not affect its parent, Glasgow eH Limited Partnership, which owns the site of the former Drummond House, nor the wider easyHotel chain.

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