Industry: Hospitality (Accommodations & Food Services)
The client had built a boutique high-end hospitality business which included a top Zagat-rated restaurant, unique luxury lodging and a complete destination wedding business. A private school on a large adjacent property closed and the property including a unique but dilapidated country manor house and gymnasium- class room building was to be put on the market.
The entrepreneurial owner both saw opportunity in the unique country manor house and the potential risk associated with the development of this adjacent property which might be contrary to his property’s ambience. To mitigate this risk, he opportunistically and defensively purchased the adjacent property and began to develop it, but was struggling with the debt load.
The acquisition and renovation of the country manor added considerable guest room capacity – as well as substantial debt. Both the regional tourist season and the wedding business combined to accentuate seasonal cyclicality which capped the business’ peak profitability and depressed the off-season cash flow.
Working with the owner and general manager, we explored the owner’s vision and risk profile to guide market research and alternative solutions. MMG’s business growth management consulting supported extensive market research into new services and amenities that would complement the existing business and its clientele, utilize newly created excess housing capacity and ameliorate the cyclicality of the current business model. Finally, we developed a range of scenarios, at different risk and debt levels, including general business plans and full pro formas.
The down stream implications of the work included:
- Refinancing debt and adding a full service spa as destination amenity
- Creating new products & services, including counter cyclical spa-based packages
- Identifying spa services and pricing profile
- Targeting incremental sales of services for traditional guests, non-guest visitors to the area and local resident population
- Selling the restaurant and non-strategic portion of housing to a strategic partner
Based on this work, the owner created a more profitable business venture and increased asset value – while restructuring debt to levels more in line with the business’ cash generation capabilities.