For Sale: Hotel, Needs Work

The possibility that the Posibilitum investment group, the owners of Alcúdia's Bellevue complex, might acquire the Hotasa hotels of the troubled Nueva Rumasa conglomerate should be viewed as welcome news by those running the hotels. I am told that the hotels are experiencing difficulties in providing services they should be. When the hotels opened for the season, and at one point it looked as some might not, suppliers made it clear that they would supply only on a cash-on-delivery basis.

The Hotasa hotels, which include three in Can Picafort, are an extreme case, but they are far from alone in having owners seeking buyers. Much of Mallorca's hotel stock is up for sale. And there are very few buyers.

The accord between tourism minister Carlos Delgado and the hoteliers that should pave the way for reform of the tourism law and so facilitate hotel conversion and change of use has been sought by the hoteliers for some years. The antiquity of many hotels makes their redevelopment a pressing necessity, but even with agreement and legal reform, a question would remain. How would these conversions be funded?

Delgado has said that the days of expecting grants, especially from central government, have passed. The banks have all but turned the taps off. The markets are reassured by this summer's rise in tourism numbers, but the leading hotel chains - and those which would be listed and more attractive to investors - have tended to look overseas for growth potential.

The hype of all the talk of hotel renovations and changes of use and the unions getting hot under the collar and threatening protests as a consequence may therefore be just that - hype. Some hotels and hotel chains are in good enough shape to effect changes, but many are not.

One reason why owners want to sell hotels and why it is proving difficult to do so and would also prove difficult to convert them is because they are that old that the cost of conversion would be nigh on prohibitive. Buyers are unlikely to take on hotels that demand significant investment in addition to what are sales tags which are too high. Like with many restaurants or bars that are for sale, the expectations of owners are unrealistic, based on past or expected performance and divorced from the circumstances that now obtain.

Bellevue, though taken on by Posibilitum, is a case in point when it comes to old stock. The complex, all 1400 apartments of it, is nearly 40 years old. Its sheer size is a constraint on renovation as is its age, but renovation is badly needed. Bellevue has acquired a more diverse market over the past few years - it isn't the ultra-Brit complex it once was - but it tends to be hotels for the British market in the resorts of Alcúdia and Magalluf that are the oldest and which attract less profit because of the very nature of the particular market they cater for. Another reason, therefore, why prospective buyers might be wary.

A further reason is the complexity of financing arrangements and ownership issues. The travel and hotel group Orizonia had, still has as far as I am aware, a mortgage on Bellevue which was raised as a guarantee against a debt to the company run up by the previous owners, the now bust Grupo Marsans. And there is a similar story with Hotasa.

Bank funding requires security, and in the case of Hotasa, the house has well and truly been bet. The court bankruptcy proceedings relating to Nueva Rumasa have revealed the scale of the mortgages that hang over Hotasa. One hotel alone, Santa Fe in Can Picafort, has been used as a guarantee four times, to which can be added the embargo slapped on it by the Hacienda in respect of a debt of some 120,000 euros. In total, the seven Hotasa hotels in the Balearics have mortgages valued at just short of 138 million euros, three and a half times the size of the mortgage debt said to be owed to Orizonia.

The judge presiding over the proceedings has been obliged to appoint five administrators because of the sheer complexity of the hotels' affairs. The labyrinth of different companies in addition to the various mortgages would surely make a purchaser riding to Hotasa's aid, be it Posibilitum or any other, pause while the administrators try and unravel the affairs. Hotasa may be a specific case, but who's to say what complexity might apply to other hotels or hotel groups and which might add to deterring prospective purchasers.

Outdated, unprofitable, underfunded, debt-ridden: the reasons why there are so few buyers for hotels and why the much-hoped-for conversions may yet never take place.


Any comments to andrew@thealcudiaguide.com please.