Future of five-star city hotel in doubt

THE future of the five-star hotel created in the former home of The Scotsman in Edinburgh has been thrown into doubt after its owners were put into administration.

The five-star Scotsman Hotel on the capital’s North Bridge is one of three UK hotels in the Scotsman Hotel Group, which bankers Lloyds have pulled the plug on.

The 69-room Scotsman Hotel is expected to be put up for sale within months, although it is likely to be kept open in the meantime, and is said to be “trading normally”.

It is thought the company was wound up owing some £50 million to the banking group, while it is also being pursued by Her Majesty’s Revenue and Customs.

The Scotsman Hotel Group also includes 42 The Calls Hotel in Leeds and Hotel de la Tremoille in Paris, both of which are similarly affected.

Administrators say they were called in as a result of a breakdown in talks between the bank and the company’s ultimate owner, Arab entrepreneur Sheikh Mohamed Bin Issa Al Jaber.

They say the Edinburgh hotel has been performing well in the current economic climate and say it may be sold off on its own, depending on the level of interest it attracts.

Ian Corfield, joint administrator at KPMG, said: “The Scotsman Hotel Group, which has gone into administration, has another subsidiary, which is continuing to run the hotel and it is trading normally at present. We expect that to continue for the foreseeable future.

“We have only just been appointed but we will be seeking a buyer for these hotels, although they will not necessarily be sold to the same owner.”

Colin Paton, chairman of the Edinburgh Hotels Association, said: “I would imagine there would be a lot of interest in potential buyers of the hotel. The industry has been doing very well in the city, bearing in mind the economic climate, and the hotel’s performance doesn’t appear to be a factor in what has happened here.”

No-one at the hotel was prepared to comment yesterday.

The Scotsman Hotel was created in the A-listed former home of The Scotsman, Edinburgh Evening News and Scotland on Sunday after being bought in February 1998 for around £4.3m as part of an ambitious plan to create a European-wide chain.

After refitting and refurbishment costing £19.5m, it began its new life as a five-star hotel in April 2001 and had taken more than £500,000 worth of bookings from as far afield as the United States and Japan before it even opened its doors. It features showpiece marbled pillars and floors, mahogany and walnut panelled walls, ornate ceilings and chandeliers.

However, trade slumped badly as Edinburgh’s tourism industry was hit in the aftermath of the terror attacks on the United States 2001.

TROUBLED PAST

The Scotsman Hotel was opened in a blaze of publicity ten years ago but ran into financial trouble just months later when a massive management shake-up was ordered to slash its huge running costs.

Another management shake-up followed in 2005 amid fears over the hotel’s financial performance and claims that it was about to go bust.

Originally backed by banking giants HBOS and Botts & Co, the Scotsman Hotel Group later became part of the Eton Collection. However the Eton Group, a sister company to the Scotsman Group, was put into administration last year and was later bought up by the Westmont Hospitality Group.