Peel Hotels and Bespoke Hotels, representing several hotels in the town, want a review of the scheme which even the Council’s own officers describe as ‘high risk’.
The c.320-bed, two hotel and health club/spa scheme near the Bournemouth International Centre has attracted controversy, not least because the Council has offered to fund 100% of the total c.£70 million development costs, creating a risk free project for the developer.
Peel Hotels, which operates the Norfolk Royale Hotel in the town, and Bespoke, which has oversight over the Hallmark Carlton and Hallmark East Cliff hotels in Bournemouth, have consulted with other local hotels ahead of their action.
They question why the development, which was previously rejected as unviable by the private sector, is being pursued by the Council? They also question whether the Council’s decision to fund construction via a low interest loan from the Public Works Loan Board is an appropriate use of public money?
Hoteliers in Bournemouth say in addition to concerns about the financial viability of the scheme the development would add unneeded capacity and impact many traditional and long-established hotels, with several closures likely.
Peel and Bespoke have informed the Council they have launched legal proceedings to obtain a judicial review as to how the Council came to its decision to press ahead with the development.
Robert Peel, Executive Chairman of Peel Hotels, said:
“This is an unviable white elephant of a scheme. We understand the Council itself estimated that its interest in the £70m development will only be worth c.£40m when completed – an appalling outcome for taxpayers and one that raises questions about how it will secure a PWLB loan.
It seems that a prime motivation for the Council is to build the biggest scheme possible so that it can borrow as much as possible from central government and make a profit from on-lending to the scheme – so called “interest farming.
The big problem is that the loan needs to be repaid and that the projections have been inflated beyond the level advised by its own hotel adviser – Savills – to make it look feasible. So, as well as unfairly distorting the hotel market it’s a huge gamble for Bournemouth council tax payers.
We are committed to challenging this scheme on behalf of all hotels and health club/spa operators in the town and this legal action is one of many options we have.”