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Buy-to-let hotel model viable despite recent troubles, says Flaxby boss

21 April 2009 by
Buy-to-let hotel model viable despite recent troubles, says Flaxby boss

The managing director of the Skelwith group, which is developing the Flaxby Country Club in Yorkshire, has denied that the buy-to-let business model is flawed.

Following reported financial difficulties at Hull-based Owner Hotels last week, and the collapse of buy-to-let firm GuestInvest in October last year, Paul Ellis, Skelwith Group's managing director, said the model remained viable.

Ellis said that other companies using the buy to let model had failed because the locations had been wrong and they had tried to "manufacture" a market for the hotel.

He said that sales at Flaxby Country Club, which is located off the A1 in Yorkshire and has investors that include Michael Vaughan and Lee Westwood, had been strong so far, with 260 of its 300 rooms available sold and £70m in revenue generated.

Ellis said: "The funding model is still viable but it is crucial to get the right location, and to think about the customer base and revenue streams of the operating hotel. Many of the buy-to-let developments were glorified apartment blocks on secondary sites.

"We are tapping into the growing tourist economy in Yorkshire as well as providing different revenue streams, such as a luxury spa, fantastic golf facilities, conference venue and a range of bars and restaurants. Room income is a mere 40% or our income with 60% coming from our ancillary uses."

He also said that the group was only using the buy-to-let model as an alternative to bank funding, which is "difficult to get", and that its investors were from overseas and would not expect to use the rooms during the year.

Owner Hotels on the edge of administration >>

Michael Vaughan invests in buy-to-let hotel development >>

Hotel buy-to-let model is under threat as GuestInvest fails >>

Buy-to-let market - room for more? >>

By Gemma Sharkey

E-mail your comments to Gemma Sharkey here.

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