Peel profitability palls without saving Grace

Peel Hotels suffered a 20% drop in pre-tax profits during the 28 weeks to 3 September.

The fall, from £641,000 to £513,000, was largely the result of a £209,000 drop in the contribution from a management contract with Grace Hotels.

Grace, a subsidiary of investment firm Lehman Brothers, bought 29 former Thistle hotels in 1998 and called in Peel Hotels to run them. But following selloffs, the number of Grace hotels managed by Peel has fallen to 21, compared with 28 last year.

The group's turnover grew by 36.5% to £4.4m and operating profit by 21.5% to just over £1m, reflecting Peel's acquisition last year of the 89-bedroom Golden Lion hotel in Leeds and the 89-bedroom Caledonian in Newcastle. This doubled the number of hotels directly owned by Peel.

Its other two hotels, the 118-bedroom Bull in Peterborough and the 90-bedroom Midland in Bradford, experienced mixed fortunes. The Bull achieved increases in sales and profits, while the Midland had a "difficult" six months.

Plans for a £1.45m, 27-bedroom extension to the Golden Lion have been put on hold. The group's bar, Hakuna Matata, next to the Golden Lion, lost just over £38,000, partly as a result of high start-up costs.

Average room rate in the company's owned hotels declined by 1.3% but occupancy rose by 6.4%, resulting in a 5% increase in revenue per available room.

Chairman Robert Peel said that annual occupancy would be about 70%.

by David Shrimpton