HOTEL LOSSES: Stockton Council owned Hilton causes row over deficit
A TOUGH year for a council-owned hotel has sparked another row over how losses are handled.
Stockton’s Hampton by Hilton Hotel will see a £215,000 deficit written off if councillors agree to a wider financial plan for the future next week.
And the financial hole has triggered fresh criticism of the project from the council’s opposition Conservative group – with its leader labelling the scheme a “vanity project”.
The council-owned hotel was funded from £17m of borrowing and opened in 2019.
Accounts for the council-owned hotel showed it made a £329,000 loss up to March 31, 2019.
But the hotel had only been trading for a few weeks before the start of the 2019/20 financial year.
It had a brighter following 12 months – recording profits of £115,000 with the help of events like the CityGames in the town.
However, council papers state the pandemic has had a “significant impact” on the Church Road site – with restrictions since November hitting the hotel hard.
A council report states the company running the hotel will receive an insurance payment to cover some of the impacts.
But this will not cover all the losses – meaning a six figure hit to the council’s coffers.
Officials had forecast pre-opening costs would be covered by money made by the hotel in following years – but the pandemic has put paid to that plan for now.
Regeneration director Richard McGuckin told the latest council place select committee the hotel had faced a “challenging year”.
He said: “The decision was taken early on in the pandemic to keep the hotel open to serve key workers.
“The hotel has continued to play a vital role in supporting key workers throughout the pandemic.
“We’ve seen a healthy flow through – but clearly, market conditions have been very different for the hotel this year.”
Conservative group leader Cllr Tony Riordan has accused the council of “using smoke and mirrors” in blaming the pandemic – pointing to losses incurred before covid struck.
He said: “The people of this borough were promised an annual profit of £250,000 to pump back into local services.
“It hasn’t made a penny.
“The local taxpayers are not fools.
“They didn’t vote for this white elephant and I’m sure they don’t want to bail out the reckless gamble of this Labour-led council.”
“An entirely misleading picture”
Cllr Riordan also questioned whether it was morally right to write off the debt when businesses were struggling in the pandemic and the council was pursuing payments.
But council leader Cllr Bob Cook hit back – accusing Cllr Riordan of “painting an entirely misleading picture”.
The Labour chief said: “Like any other newly-built facility since the beginning of time, the hotel carries some pre-opening costs.
“These were fully expected.
“We’ve been very clear that these costs are there – and even said that the £115,000 profits made in its first full year of operation would help us clear them.
“Obviously, the pandemic has come along and pushed the hotel into a loss this year, which means we haven’t been able to pay off these pre-opening costs as hoped.”
He added: “If the pandemic hadn’t come along, the hotel would have made another healthy profit and some of that would have gone towards paying off the pre-opening costs.
“So yes, it is down to the pandemic – it really isn’t rocket science.
“In fact, that is exactly why the Government has given local councils one-off funding to meet these kinds of financial pressures arising from the pandemic.”
In October, leaders said block booking of rooms by the NHS for key workers had insulated the 128-room hotel from the worst effects of the pandemic.
Council chiefs are banking on the hotel generating £250,000 per year in profit for the authority over the coming decades, on top of business rates to help fund council services.
Councillors will vote on the medium term financial plan and a 3.9% rise in council tax in the borough next week.
Words: Alex Metcalfe, Local Democracy Reporter
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