Crowne Plaza's £38m debt to Newcastle City Council prompts 'fairly intensive' talks

The Crowne Plaza Hotel in Newcastle's Stephenson Quarter owes more than £38m to the city's council. Credit: NCJ Media

A North East council owed more than £38m from one hotel says it is in “fairly intensive” talks over that major debt being repaid.

Newcastle City Council has loaned tens of millions of pounds of public money to the owners of the Crowne Plaza Hotel in the Stephenson Quarter, behind Central Station, over the past decade.

The local authority put an initial £15m into the building of the four-star hotel in 2013, in the hope that it would act as a catalyst for the wider regeneration of the previously derelict area.

A further £14.8m loan was then agreed in 2019 under a “planned refinancing package”, before council bosses handed out another £1m the following year from a rescue fund for organisations left struggling because of the crippling impact of the Covid pandemic.

City councillors scrutinising the civic centre’s finances were told last week that talks are being held with the firm behind the 251-bed hotel, Newcastle-based Clouston Group, over the loans being paid back.

An audit committee meeting of Newcastle City Council heard the authority was in 'fairly intensive' talks over the debt. Credit: ITV Tyne Tees

Asked by Lib Dem councillor Peter Lovatt about long-term loans, specifically at the Crowne Plaza, at an audit committee meeting on 6 February, council finance chief Mark Nicholson confirmed: “There are a number of loans, and you have mentioned one there, where the council has been in discussions with the borrower about the repayment terms.

"I can’t go into specific detail around that, but it is one of the loans where we are having fairly intensive and ongoing discussions with the borrower to agree appropriate repayment terms.”

The council later confirmed to the Local Democracy Reporting Service that the current amount owed to the council in relation to the Stephenson Quarter hotel is £38.2m, including interest.

The cash-strapped authority, which has slashed £369m from its budget since 2010 and is now grappling with how to make another £60m worth of savings over the next three years, previously insisted in 2020 that its loans to the Crowne Plaza would come at “no cost to the taxpayer” because of the interest they would generate.

A spokesman for the Clouston Group said on Friday that its subsidiary, Stephenson Hotel Limited, was repaying the council “on a monthly basis” but that discussions were being held with the civic centre “as the terms require adjustment to reflect the reality of the economy in 2024”.

They added: “The Crowne Plaza Newcastle is a great North East success story. It is one of the highest-performing hotels in the UK four-star market, sharing joint first place in its comparative set, with exceptional guest satisfaction scores and occupancy levels.

"It is multi award winning and every year it attracts tens of thousands of delegates and guests from across the globe.

“Our subsidiary, Stephenson Hotel Limited, has a commercial loan with Newcastle City Council that is currently being repaid on a monthly basis. We are in discussions with the council as the terms require adjustment to reflect the reality of the economy in 2024.”

Clouston Group was meant to be spearheading the wider regeneration of the Stephenson Quarter, before the city council pulled the plug on that contract in 2018 and subsequently launched a joint venture with developers PfPigloo for the remainder of the site.

It placed the hotel under new management in 2019, terminating an agreement with IHG, in order to “improve trading performance and hotel value”.

The most recent set of accounts for Stephenson Hotel Limited, a subsidiary of Clouston Group, show the company reported a net loss of £1.3m in 2021 and £3.1m in 2020 – years that were both heavily impacted by Covid-19 lockdown restrictions.

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Those accounts state its directors were in discussions with the council at the time, when liabilities to the local authority totalled £38m, to “reschedule capital and interest repayments” that would “allow the company to maintain financial headroom for the foreseeable future”.

It adds that trading performance since the hotel was able to fully reopen in July 2021 had been “encouraging” and that a “positive trajectory continued throughout 2022” – but that there remained a “material uncertainty that casts significant doubt upon the company’s ability to continue as a going concern”.

The accounts, published in March 2023, state: “Whilst the directors acknowledge that that hotel industry is volatile in the current economic climate, they believe it will achieve improved financial performance and have prepared financial forecasts, taking into account of anticipated developments in the business and reasonably possible changes in trading performance, which show an improving financial performance sufficient to allow the company to meet its overheads and service its debt in line with the revised repayment profile that the directors expect to agree with NCC (Newcastle City Council).”