Multi-million pound loans to support Coombe Abbey Hotel and Indigo Hotel have been approved in Coventry – despite criticism they amounted to a ‘taxpayer bailout’.
Council loans have been agreed for the authority-owned Coombe Abbey Hotel and developer Castlebridge Group for the construction of Hotel Indigo at Friargate.
Coombe has been hit hard by Covid-19 with revenue falling 70 per cent with the authority stating it has exhausted cash flows and may cease trading without fresh support.
Councillors have been told Castlebridge are investing £16m into Hotel Indigo in Friargate but need more funding to ensure the four-star hotel gets off the ground.
Loan amounts have been kept private but public council reports show Coombe will have been loaned £5.8m as of March 31, which includes a £1m loan last year.
Labour councillors said the loans would support jobs and the economy.
Only Independent Cllr Glenn Williams voted against both, blasting the authority was loaning money “as if it was going out of fashion”, adding: “It’s absolute madness we find ourselves in a position of having to bail out companies to cover for our own bad investments.”
Coombe had been unable to access help from the government’s Coronavirus Business Interruption Loan Scheme (CBILS) as it is owned by the council.
Speaking at full council on Tuesday, March 16, finance cabinet member Cllr Richard Brown said: “In short this is about putting an arm around a much-loved asset, safeguarding jobs and allowing Coombe to bounce back as fast as it can.”
Opposition Conservatives also backed Coombe’s loan, but leader Cllr Gary Ridley said this was done “through very gritted teeth” to ensure the council’s investment – having purchased the site for a reported price of £9.5m in 2017 – isn’t lost.
But he said the hotel had become a “drain on the taxpayer” since its purchase.
He added: “The irony is if this had been a private company it would have been bailed out by the government and not the taxpayer of Coventry.
“We will support this as if we don’t we’ll lose everything put into it so far. In the long-term I seriously question if we will get the 10 per cent promised to us [when it was purchased].”
Conservatives did oppose a loan towards Hotel Indigo however, with Cllr Peter Male arguing it would “further expose the authority to risk – a risk that the private sector is unwilling to countenance under current market conditions”.
Cabinet member for jobs and regeneration Cllr Jim O’Boyle said it was a small risk to take to secure jobs and a high-quality hotel.
Cllr O’Boyle: “This is about investing in our future, our city and our people. Not to do this now would be to throw away a massive amount of private investment.
“This is £16m investment and it’s estimated it will bring in £40m to the economy just building it.
“This [loan] will be a small amount of money in the context of the £16m build costs and the return will be very generous to the local authority which can then be reinvested into public services in our city.”
The 100-bed Hotel Indigo will be the first four-star hotel in the city centre for almost 50 years. It was hoped to be complete in spring 2021 but work is severely delayed.
The historic Coombe is hoping to open its outdoor terrace for afternoon tea from next month, ahead of its full reopening on May 17.
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