Gleneagles slumps to loss of £½m

Published on Thursday 15 April 2010 22:35

ONE of Scotland's most famous hotels slumped to its first operating loss in a decade last year as the recession took hold of the higher end of the tourism market.

Gleneagles Hotels – which is owned by Diageo, the world's largest drinks company – made an operating loss of 554,000 in the year to 30 June as business customers cut back on their corporate events.

The loss follows a slump in recent years in operating profits, which stood at 5.5 million in 2003-4 but fell to 1m in 2007-8.

Peter Lederer, the hotel's chairman and highest-paid director, saw his pay package drop from 287,000 in 2008 to 209,000 last year after his bonus was cut because the company failed to meet its financial targets.

Accounts filed at Companies House revealed turnover at Gleneagles fell by 7 per cent to 35.6m as customers spent less money at the 232-room Perthshire hotel, which has held a full five red-star rating from the AA since 1986.

But finance director David Kemp told The Scotsman that the hotel had managed to pay for all its rolling refurbishment scheme, despite the operating loss, which he stressed had accounted for just 1.5 per cent of turnover.

He said the number of individual leisure customers visiting the hotel, which was the setting for the G8 summit in 2005 and is set to host the Ryder Cup golf tournament in 2014, had held steady. Staffing numbers increased from 676 in 2008 to 682 last year, with some employees offered part-time work or career breaks to avoid redundancies.

Mr Kemp said: "We've found this recession has been the deepest in living memory and has had a disproportionately negative impact on the upscale hotel sector.

"Rather than heavy discounting of our room rates, we've added extra things into packages for guests, such as upgrading their rooms or throwing in golf or other activities on site."

He added: "Trading continues to be challenging this year, but we're hoping to see an upturn by the end of 2010."

Gleneagles made a pre-tax profit of 2.5m after receiving interest on loans made to other companies within the Diageo group.

Andrew Fairlie's eponymous restaurant is operated as a separate business by the chef.

Mr Kemp insisted speculation that the hotel might be taken over was wide of the mark and denied it was up for sale.

Figures from tourism agency VisitScotland showed that 2009 was a difficult year for many hotels, with the total spent by domestic tourists falling by 2.7 per cent to 2.7 billion, while foreign visitor spending held steady at just over 1bn during the first nine months of the year.

Gleneagles was built in 1924 by the Caledonian Railway Company and was nationalised with the rest of the railway system in 1948.

The hotel was re-privatised in 1981 and bought by distiller Bell's in the mid-1980s, before passing into the hands of Diageo in 1997, following the merger of Guinness and Grand Metropolitan.