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.

Chain Reaction: Bankruptcies and non-payments

Spain’s economic woes are receiving plenty of airing, but what about what is happening on the ground? The crisis is such that one has an impression that much economic life in Mallorca is all but grinding to a halt, brought about by a lack of credit, non-payments, negative cash flows and bankruptcies.

Businesses in Mallorca are caught in the chain reaction of the absence of liquidity in both the private and public sectors. Of the latter, those affected are suppliers to town halls and other governmental bodies and those linked directly to government agencies. Take chemists, for instance. Some had started posting notices to the effect that they could not supply prescriptions through the local health system because the health agency, IB-Salut, was not paying them. IB-Salut, and its problems have been known about for months, is another division of regional government, like the tourism ministry, so in debt that the government is having to bail it out. The government has at least sought to reassure the chemists and patients of the health system that prescriptions will be guaranteed.

The town halls, notorious as bad payers even in the good times, can typically take six months or more in honouring invoices. The Council of Mallorca has had to reach into its pockets to give the town halls some cash that they cannot otherwise raise because central government has imposed restrictions on their capacity to borrow and thus get into further debt.

It’s not all bad news. One town hall, Alcúdia’s, is being reimbursed by central government, following a protracted legal battle to get back IVA which was wrongly charged to its services agency, EMSA. The 600,000 or so euros that the court has so far agreed to could rise. In the meantime, the repaid IVA will help to clear debts the town hall has to suppliers.

If only all town halls or businesses could benefit from such windfalls. If only, especially for smaller businesses, there were mechanisms to prevent their bankruptcy when faced with what is an increasingly common occurrence, the protection of voluntary administration by larger businesses which then do not make payments while they buy time to try and sort out their affairs. For the smaller businesses, their suppliers, there simply isn’t the time. And so they try and come to agreements with their own creditors or go bust and then find themselves blacklisted by banks.

The main business sectors affected have been construction, hostelry (in its widest sense, to include hotels as well as restaurants etc.) and transport. And there have been some big names that have got into difficulty. One of these is Marsans, formerly the ultimate owner, through the hotel chain Hotetur, of the Bellevue complex in Alcúdia. The sale of Marsans’ businesses earlier this year looked as though it might have brought salvation. The problems have persisted, though the new owners seem to have arrived at a solution that will see creditors paid and so stave off a court order that was to place Hotetur in voluntary administration, one that creditors had not sought when urging the court to force bankruptcy in pursuit of the money they were owed.

Even if a solution is found, there is also the effect on local business confidence to be taken into account. In the case of the huge Bellevue, any uncertainty sets the rumour mill ablaze, one not helped by staff being paid only 70% of their October salaries (as was being reported in the middle of November). Just the threat of administration for a major employer and purchaser of services, to say nothing of supplier of tourists, is sufficient to drain even more life from the sick body of the local economy.

Lawyers have expressed concerns about the bankruptcy law which came into force in 2004. It was one, they say, drafted at a time when things were good and when bankruptcy was relatively uncommon. Since 2008 the trickle has become an avalanche. While voluntary status has its benefits for the company facing bankruptcy, it does little for suppliers.

One lawyer has described the system as an abuse of the law, and the overwhelming majority of companies that enter administration subsequently fail, some of them emerging later under new names with new owners, for example, a son or daughter, thus getting around the banks’ blacklist. It has been said that the law makes it easy to simply close and disappear but also to get re-established in a different guise. And then perhaps to set the same chain reaction in motion, of smaller businesses, the suppliers, being left unpaid and ending up going to the wall all over again.

The chain reaction is likely to continue, likely to get worse. You can also describe the situation as a vicious circle, and the question is when or if the circle will be broken, because there is no sign of it being so.

Any comments to andrew@thealcudiaguide.com please.

Marsans Sold For Six Hundred Million Euros

The troubled travel concern, Grupo Marsans, has been sold to a company called Posibilitum Business. This is controlled by a Valencian businessman Ángel de Cabo who is involved with the real estate market in the Valencia area and has a reputation for taking on companies in difficulty.

Included in the sale is, of course, Hotetur, the hotel chain of which Bellevue (and Lagomonte) are a part. With the sale, one would imagine that rumours as to Bellevue’s future should subside. Nevertheless, it will take a while to see how the new owners tackle the problems that surround Marsans. Typically, businesses that specialise in taking over companies in distress look to reduce costs as a means of extracting profit, slimming them down with the possible intention of selling them on at a later date. The exact strategy for Marsans, and therefore for Hotetur, is not known as yet.

The Rumour Mill: Bellevue

Rumours. It was the regularity with which rumours surrounding Bellevue in Alcúdia surface that was one of the reasons why I spoke with the assistant director last year. Rumours are always circulating about Bellevue. Unfortunately, the contact is no longer there, but even were he it is doubtful that I would get far in asking a question about the current rumour that’s doing the rounds – that Bellevue will not be open next year.

There have been previous rumours along these lines, and they have all proven to be false. What is fuelling the current one is nothing directly to do with Bellevue or indeed Hotetur, the chain which operates the hotel. It has to do with the financial problems at Grupo Marsans, the ultimate owner of both Hotetur and the hotel complex. I have referred to these problems before, both here and in “Talk Of The North”. Marsans faces demands from creditors, one of which is the travel group Orizonia. A guarantee against a debt of some 40 million euros is Bellevue. Orizonia is demanding payment of this debt and the execution of its mortgage on Bellevue.

It is from this, one assumes, that the rumours are stemming. In the reports of the court hearings into Marsans and its difficulties, there has been nothing about Bellevue closing. The rumours would appear, as so often, to be the result of taking facts (and one can’t even be sure that facts are being taken) and moulding them into something without any basis in truth. I have asked people about the sources from which they have heard about Bellevue’s alleged closure. They go along the lines of someone who spoke to someone in a bar near to the hotel.

Bellevue stands on some 200,000 square metres of prime real estate in Alcúdia. It can, at a stretch, accommodate 6,000 guests. Orizonia, as with many a hotel or travel group, would love to get their hands on it. It has a hotel division that was created in 2008, into which Bellevue might well fit, though if you go to the website – http://www.luabay.com – and read the over-the-top narrative about how they will “seduce” you, you might be forgiven for thinking that Bellevue might not fit after all.

Of course, there is also a question as to quite how well Bellevue (as with many other hotels) is shaping up under the current difficult circumstances. But this is a separate issue. One finds it hard to believe that there is substance to the rumours.

And who knows, maybe a “new” Bellevue might become the destination for the much-longed-for Russian tourist market. President Antich has been in Moscow, wooing tour operators and predicting that Russia will become the third most important foreign market for Mallorca and the Balearics after Germany and the UK. Germans do not go to Bellevue in huge numbers, which is probably as well. You think there might be a bit of British-German antagonism, well according to some of my German sources this is nothing compared to that which exists between the Germans and the Russians. Hey ho, perhaps it’s as well that Russia aren’t in the World Cup.

Any comments to andrew@thealcudiaguide.com please.

Enjoy The Trip: Trip Advisor and other websites

Having mentioned Holiday Watchdog yesterday, time today to give Trip Advisor its place in the blog’s sun. It is the most important of the holiday (and restaurant) review sites, but it is not – in my opinion (and opinion is what matters) – the best. On the principle that a website should be simple to navigate, Trip Advisor gets my thumbs-down; it’s not a patch on Holiday Truths when it comes to user-friendliness and simplicity. But Trip Advisor is on a rather grander scale – it is international, and it has its own director in Spain. He was interviewed yesterday in the “Diario”. It is also, or has been, more susceptible to the owner-inspired (written even) glowing review, which was why the British Government legislated against such a carry-on.

Talking to the site’s Spanish director is an example of how well the “Diario” does tourism and the business surrounding it, and the most interesting aspect of the interview was – if dealt with only briefly – the revelation that a well-known (unnamed) Mallorcan hotelier considers opinions posted on Trip Advisor to be more important than official categorisation, the number of stars and whatever.

It had been, before I did the Bellevue interview last summer, my impression that no one much in Mallorca took any notice of sites like Trip Advisor. No one much in terms of hotel managements, tourism authorities, town halls and so on. I would still be surprised to learn that the latter two do take any notice, but the hotels are a different matter. Well, Bellevue was, and the then assistant director was. He’s no longer there. But Trip Advisor was on his favourites list (or possibly his un-favourites). It was important that it was, given the fire panic of last season.

The drawback with any site such as Trip Advisor, and any forums elsewhere and also Facebook and the rest, is that opinion is just that – opinion. By its nature it is subjective, unscientific; it is also just the tip of a very tall iceberg when it comes to the actual numbers of holidaymakers who ever go on to such sites. Should anyone take any notice therefore? Yes and no. Yes, because opinion can carry a lot of power, despite its subjectivity. No, because this opinion cannot really be challenged (and Trip Advisor has rules as to how hoteliers can respond, as was pointed out to me by the Bellevue assistant director) and because there isn’t a “profile” of the person placing the opinion. You might know their sex, their date of birth, their home town, but none of this tells you anything meaningful. This just adds to the unscientific nature of the opinion generation.

Nevertheless, the reviews and comments on sites are being taken seriously, in some quarters, testimony to the power of the internet. It’s those quarters that don’t take them seriously or just don’t even look at them that concern me, which brings us back to the tourism authorities and the town halls. I have said this before, but it bears repetition, and that is that these bodies should be devoting time and resources to monitoring to what is being said on the internet.

Were they to, they might actually learn something. Or be prompted into some course of action. They have a vast market research resource at the click of a mouse, and you doubt that they exploit it. More fool they.

Any comments to andrew@thealcudiaguide.com please.

Art Of Noise

5am. There’s a bass sound coming from somewhere. Is it from a car in the street? No, sounds too far away. Onto the upper terrace, and it is a little clearer; not loud but discernible. It’s coming from across Albufera. Sa Pobla. It’s travelling some eight kilometres or so; it’s coming from the party for the “Acampallengua”. 5am. Hopefully, no-one in Sa Pobla was desperate for a good night’s sleep; they wouldn’t have had one.

And what is this “Acampallengua”? Literally it means camp language. It’s pretty accurate. This is an annual occasion that moves around the island. It is a celebration of Catalan, and particularly popular with the youth; hence the party and the sports that had been arranged during the day. The camping part is that they pitch up and pitch tents and then head off to the sports, the night party, the fire run, the arts workshops, the giants and the pipers and the worthy speeches by politicos and the head of Obra Cultural Balear, the Catalan promotional organisation – “we will not make a step backwards in the struggle for our language”, says he (as quoted in translation from “The Diario”).

On the face of it, this event seems fair enough, a bit of camping out, a bit of football and a bit of techno. Yet I can’t help feeling there is something slightly sinister about the politicisation of the event and therefore of the language. Statements such as that by the head of the Obra makes this pretty clear, and in his audience are teenagers who are being made more aware of their language (which is fair enough) but also potentially being radicalised (which may not be fair enough). Whatever. It’s not my argument.

More noise. The tourism season cranking up and the sounds of entertainment are wafting across the resorts; no, wafting is way too weak, make that reverberating. By no means for the first time, there are a number of mutterings about the loudness of the Bellevue show garden sound system. I’m told that it is louder than last year. Every word can be heard clearly as far away as Magic and probably further. “Do you like The Beatles? Scream and shout … ” And so they do, and then once the show has finished at the midnight deadline they continue for some more minutes, demanding more and shouting some more.

This was a theme last year, as it will probably be a theme next year and the year after. Whether the sound system is excessive is not for me to say, but there is an ongoing difficulty in reconciling the noise of holiday and the sleeping and peace requirements of residents and probably also some holidaymakers. Were this a “problem” only occasionally, it might not all be so annoying to some, but it is every night. Not sure how you resolve it, especially when the wind is in the right (or perhaps that’s the wrong) direction.