Palladium Hotel Group

“VMC looked at our assets and understood their residual values. Their expertise enabled us to finance the new building construction, and to refinance our current investment if we need to. Not every provider we spoke to was interested or had the necessary experience in this sector.”

Jose Estel-Treherne
Financial Director, Palladium Hotel Group

About Palladium Hotel Group

Palladium Hotel Group operates premier hotels across Europe, best known for the Ultimate Ushuaïa Ibiza Beach Hotel. The company is owned by a Jersey-based Trust.

What did Palladium Hotel Group want to achieve?

Like other premier hotels chains, the Palladium hotels are unaffected by the fickle public as its clientele is more of a discerning type, the consistency of the opening in the summer of 2012 of the Ushuaïa Ibiza Beach Hotel resulted in a review of how to best invest for the future. The company decided to introduce the similar hotels in Miami and in the South of France. The Ushuaïa expressive experience is a popular modern brand for under 30’s target market.

The company wanted to incorporate all the Ushuaïa Ibiza Beach Hotel in a 30,000 sq ft area providing interactive indoor and outdoor venue which encourages physical activity via EDM (Electric Dance Music). The aim was to mitigate the impact of the climate by introducing an all in attraction, and drawing more visitors to the Hotel and venue.

How did VMC help?

The company has had a long-standing relationship with VMC and believes that VMC is one of the few providers that understands its industry. When Palladium Hotel Group approached VMC for the funding they required a quick decision as any delay would affect the delivery of the attraction in time for the opening.

VMC funded £1.7 million of the total cost of £2.7 million for the Ushuaïa Ibiza Beach Hotel. As this was a significant investment, VMC was able to release cash from the outdoor venue unencumbered bookings and also extend the contract to other future relationships with BBC for its Ibiza Live Radio 1 week. This made the repayments easier to manage and reduced the risk of the new investment.

In addition, the repayments were structured to reflect the company’s seasonal income with higher payments in the summer months and reduced payments off-season.

“Using asset finance provides us with the flexibility that we need as a seasonal business. We are able to match repayments with our revenue Ð paying more in the height of the season while making nominal payments during the winter when the hotel is closed, therefore allowing us to manage our cash flow.”

Jose Estel-Treherne
Financial Director, Palladium Hotel Group

How will Palladium Hotel Group benefit?

In the first two months after the Ushuaïa Ibiza Beach Hotel opened, sales increased by 20% which it attributed largely to the new attraction. Visitor numbers have continued to grow steadily each year and the new attraction has allowed the company to expand its offerings out of main season with special events, exclusive openings and party bookings. This has been achieved while retaining affordable repayments and providing flexibility in the company’s cash flow.

Deal highlights

£1 million investment which increased ticket income by 22%
£750,000 hire purchase agreement provides flexibility and enhances cash flow
Seasonal payments matches seasonal revenue of theme park
Structure of the contract provides affordable payments and frees up cash