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Investment advice and due diligence

The client

A Pan-European private capital fund manager providing capital solutions to mid-sized companies.


What did Hotel Solutions Partnership achieve for the client?

HSP provided an un-biased expert opinion on the capability of the target company’s development team to efficiently identify sites, develop and roll out their concept in France and the UK.

HSP was able to bring all relevant operational information together in a logical manner; and in recognised budget and trading methodology formats (e.g. USALI accounting formats), so that the information and performance could be compared to competitive sets and market standards.

The Client was then able to make judgements against base case and upside performance criteria to reinforce and agree investment principles for the fund.

Consultants

Ian Oram, Philippe Maricq, Neville Ablitt.

Background

The client has been invited to invest/fund the growth of a relatively new International hospitality group, with hotels, restaurants and bars in France, the United Kingdom, USA and Spain.

Project objective

The Client provided specific questions that needed review and expert opinions

  • Do they demonstrate an ability to assess and budget new sites appropriately?
  • Do they follow a sensible and structured investment process?
  • Have they hit their development budgets and schedules?
  • Do they have the right resources internally to develop a pipeline of 5/10/15/20 new hotels?
  • Are their systems fit for purpose?
  • Are the pre-opening budgets fit for purpose?
  • What point are each of the development sites in? Will they meet the opening schedule?
  • How are the development costs tracking compared to budget? Will they open on budget?
  • How does the capital investment relate to pricing expectations? Are they in line with market standards?.

Project scope

The assignment was split into two distinct investigations/reports covering Technical Development aspects, and separately the Trading Performance for existing and new hotels.

The Technical review covered:

  • Existing owner development budgets vs market expectations
  • Development progress and programmes to complete construction and fit-out
  • An analysis of funds spent todate and those to be spent
  • Present and future development management capabilities
  • Present and future acquisition strategy
  • Deal times
  • Strengths and weaknesses

The Operational Review covered:

  • Exiting hotel trading performance including: Paris and London hotel market outlook; competitive set; growth drivers; trend in markets compared to exiting hotels; risks and challenges; benchmark transactions; current trading performance
  • Pipe line trading performances
  • Profit and Loss models
  • Investment Appraisal advice