Building frights

"I need a hefty bank loan or I need to rob a bank," says James Thomas, as he pauses to take a sip from his mug of tea. Thomas is joking, of course. He does not intend to rob a bank, but he does need to find one that will lend him a serious sum of money. If he cannot, he will have to walk away from the dream he has been chasing for the past two years.

Thomas quit his job in London in March 1999 and moved to Ramsgate in Kent to open a four-star townhouse hotel. When he did so, he knew that setting up his own business would not come cheap. However, one of the events of the past few weeks has made him realise it could be more expensive than he ever imagined.

Last month Thomas received two pieces of important news. The first was fantastic, but the second alarmed him.

The first news came from his architect, Philip Dadds. He telephoned Thomas to tell him that the local authority, Thanet District Council, had granted planning permission to convert the rather run-down Royal Harbour hotel into a plush townhouse. It was a wonderful moment for Thomas, as he had been waiting to hear the council's verdict since he submitted his planning application in January. It cost him £760 to do so.

Last month it looked as though his application might be turned down after some local residents objected to the renovation plans (Caterer, 8 March, page 46). Luckily, the council dismissed their concerns. "It was very exciting," says Thomas, before adding quickly: "I was, of course, always quietly confident."

Shortly after learning of the council's decision, Thomas received some more news. This time it came from his builders, and this time he was not excited by what he heard - in fact, it has forced him to reassess what he expects from his future hotel.

The builders told Thomas the renovation work would cost £1.4m. It was a bombshell, as he always thought the price would be somewhere between £500,000 and £1m. His challenge now is to find ways of cutting the cost. If he can, he would like to get the price down to £750,000.

"If I have to pay more than £1m to launch my hotel then I won't do it. It simply won't be worth it," Thomas explains.

In an attempt to reduce the builder's £1.4m estimate, Thomas has come up with a number of cost-cutting measures. For example, he has decided that instead of having mahogany doors in the communal rooms, such as the reception, he will use a cheaper, softer wood and varnish it.

He has also had to revise another of his plans. He had intended to knock down the interior walls on the ground floor to create a function room big enough for parties - such as wedding receptions - of up to 80 people. The function room would have had sliding doors, which could have been pulled across to create smaller meeting rooms.

Thomas has scrapped this idea, because the sliding doors would have cost £25,000. Instead, the interior walls will remain in place, giving him three smaller rooms, ideal for business meetings. Thomas consoles himself by admitting he didn't like the idea of hosting wedding receptions.

Reducing the expense of the renovation project is becoming a juggling act. On the one hand Thomas is managing to trim down the costs, but on the other he keeps being presented with unexpected extra expenses. For example, his architect asked him who would hang the pictures on the walls of each finished room. Suddenly, Thomas realised he would have 200-odd pictures to put up and he would need someone to do this.

Next month he expects to have a revised cost for the building work, which he is determined will be below £1m. Once he has a final figure he will visit a few banks to ask them if they will lend him the money to carry out the work. If he cannot find a bank to help him, he will abandon his project.

Thomas is working closely with his builders, his architect and his project manager. Together, they are trying to get the price down to one that he is happy with. By the time he gets to the stage where the builders are ready to start work, he estimates he will have spent £70,000 just on paying their fees.

In February Thomas didn't make a profit. In fact, he lost £3,000. The average occupancy for the month was low, at 44.5%, which resulted in a turnover of only £5,800. The operational loss was largely because he had a number of bills to pay and he gave himself a wage of £2,000. Thomas doesn't pay himself a salary each month because, he claims, he forgets. He paid himself in February because he ran out of money.

March was better. The average occupancy was 53% and turnover was £8,200. In the financial year ended 31 March, Thomas made a profit of £45,000, and April is looking good.

Business is picking up and Thomas is feeling optimistic. He is delighted to have won his council's support, and all he needs to do now is persuade a bank to back him. But, with so many obstacles already behind him and another fresh challenge looming heavily on the horizon, would Thomas have given up his life in London two years ago if he knew then what he knows now?

With an air of determination, he answers: "Yes, absolutely. I have a dream for this hotel and I'm not going to stop until my dream comes true."

Next visit to the Royal Harbour: 7 June