Hotel deals can benefit all

Your news story headed "Unsustainable plans threat to hotel market" (Caterer, 9 November, page 6) doesn't present a balanced perspective on the current state of the hotel investment market.

It's true to state that competitiveness in the lending market has generally seen debt-to-value ratios increase as banks compete for business. There are, however, many variables in any transaction and one has to look at all of the circumstances, including, for instance, additional collateral offered by the borrower.

Equally, there's now much more creativity in the structure of hotel transactions, which can ensure that optimum terms are achieved for vendors while at the same time safeguarding the financial interests of all parties involved.

On occasions where price represents a high multiple of EBITDA (earnings before interest, tax, depreciation and amortisation), this may reflect that the hotel in question is currently undertrading by a significant margin. New owners using skilled operators can often turn the performance around in a comparatively short time.

What is apparent in the current market is that while there is pressure on banks and advisers alike to constantly raise the bar, most of the deals taking place are, in our experience, based on professionalism, sound business practice and parameters which should ensure very sound returns for investors and lenders alike.

Craig Millward
Director, CB Richard Ellis Hotels, London

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