Big Dreams and Bad Sums

Kingsley Hotel

Kingsley Hotel – Under Water?

Driving past the Kingsley Hotel in Cork on the “Straight Road” as the locals call it, it’s really sad to see the place still shut and sadder again to know that it is now in the hands of the Receiver along with it’s sister hotel the Midleton Park.

The Kingsley Hotel was originally opened in 1998 on the site of the old public baths (I used hate going there as a kid!) by Thomas McCarthy and Thomas Kelly, two experienced hoteliers.

Dreaming big and with the help of willing lenders, this business duo transformed the then successful hotel in 2003 into a large five star hotel with over 130 bedrooms, suites and a separate luxury apartment development called The Residence.

We passed the hotel on a regular basis as the major renovation transformed the existing premises, including the building of an underground car park, which caused some costly delays to the project.

The work seemed to take forever and was eventually completed leaving Cork with a superb large capacity five star hotel. We regularly met clients there for meetings and we also had a few Fuzion brainstorming sessions, which invariably ended up being helped along with a few glasses of vino!

My last memory of the hotel was attending a book launch for Brian O’Connell’s fine publication “Wasted” in one of the superb reception rooms.

The freak Cork floods in November 2009 managed to shut the hotel and unlike all the other business properties affected it has remained unopened, apparently due in part to drawn out and complicated disputes over insurance.

Kingsley Hotel bedroom

Big Dreams?

As already mentioned the hotel and it’s sister hotel, which is reported to be trading well have been put into receivership by the bank continuing a trend, which we have witnessed across the length and breadth of the country.

This particular “episode” has been complicated by a freak flood but similar to every other scenario the banks/NAMA have decided that the high level of debt will not be recovered so they move and take over the operation.

Does this course of action and the relavant sums make sense?

- Lend too much to a business on the back of silly (hindsight is a great thing!) property values
– The business can’t sustain the high level of debt during the recession
– A depressed property market puts the whole scenario in the red
– Turf out the existing (experienced?) operators and replace them with high fee receivers and management companies
Negotiate a sale at a stupid price (watch this space) to an opportunistic investor (the bargain hunters are queuing up to get the best of the rich pickings)
– Chase the individuals unrealistically for the balance of the debt
– Eventually write off the unnecessarily huge level of unpaid debt (taxpayer mops up the difference)

This is the worst, laziest and most costly solution to a very tricky problem and unfortunately it seems to be the most popular course of action being taken.

With the Kingsley example and so many others that we are witnessing on a regular basis, surely it would be better to let proven operators manage the business through this difficult period in a “realistic” manner and let the economy and the property assets recover over time.

Businessmen with Big Dreams are the lifeblood of our economic recovery and the institutions that let these dreams go too far need to stop doing such Bad Sums..

Let’s dream again by having the courage to do Big Sums.

Greg Canty is a partner of Fuzion

Fuzion are a Marketing and PR firm with offices in Cork and Dublin

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8 Responses to “Big Dreams and Bad Sums”

  1. Elke Says:

    It is sad to see the hotel still closed and I agree that people are not given the chance to build up the business again. If debts are written off, why not against people who have proven to be able to run a business successfully. We are losing wonderful businesses to foreign investors who have no real connection to Ireland. Question is that Nama only sees numbers and not the longterm effect it has. They went from one extreme (lending like there is no tomorrow) to another (crippling businesses due to no lending at all).

    • Greg Canty Says:

      thanks for your comment Elke – for me the problem is that they are only looking at the “short term” numbers, which are always going to look terrible. They need to look at the Big Picture and the Big Numbers for the Best Solutions ..

  2. Trish Hyland Says:

    The terrible thing is that Midleton Park Hotel which is trading very well is now in receivership through no fault of the Owners, Management and Staff. Are we allowing debt to completely cripple us? If help isn’t given soon we will lose more and more Entrepreneurs. If it’s down to bad management that a company ends up in receivership so be it but there are some companies that are in trouble because of sister companies.

  3. Paul McMenamy Says:

    no vision in this country. just because we had a celtic tiger does not mean that Ireland has grown as a mature business nation. it hasn’t – yes, there are isolated contradictions but they are mostly isolated. the accountants have taken oven the asylum – with the stamp of our approval via the “elected representatives” we deserve.

    • Greg Canty Says:

      Paul – sadly I agree with you. For all the brain power, business acumen and expertise the “solutions” we have seen to our problems are virtually non-existent

      It’s upsetting to see the holes getting deeper due to lazy solutions and convenient “hand washing” …. Just get this problem off our books!!

  4. Fergal Bell Says:

    It’s very sad to see this happen. My family and I dined at the Kingsley several times a number of years ago and had a lovely experience. It seemed like a very stylish hotel.

    In terms of what next, it strikes me if the owners are capable hoteliers then surely they are best placed operationally. I tend to think the simplest solution is to place a moratorium on interest payments and let the business trade its way to profitability.

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