Sitting in the bar of the funky Gibson Hotel in Dublin's docklands, Frankie Whelehan is positively beaming.
Just two weeks ago his Choice Hotel Group was given the nod on a restructuring plan, essentially from the National Asset Management Agency, that could give it a new lease of life.
Cork-based Whelehan was a poster boy of the boom years in the Irish hotel industry, which mushroomed thanks to government tax breaks and frenzied building by developers.
The crash in 2008 wiped out his wealth and left him with debts to pay. After five years on the ropes, he’s now ready to rumble again.
“Suffice as to say they’ve taken our debt and given us a workout over the next five years,” Whelehan says of Choice’s agreed restructuring plan.
It owes €8.5 million to €9 million, he says, based on rental obligations attaching to the eight hotels that it currently runs. Nama’s involvement with Choice stems from the fact that the group owed rent to landlord developers who had their loans transferred to the state agency.
Nama is its de facto landlord, according to Whelehan.
“They’ve given me [he means the group] an opportunity of paying that down over five years,” he says.
No haircut?
“That depends because I’m not going to retain all eight hotels.”
This is where the story gets a little complicated, thanks to the convoluted financial and operating structures that the Celtic Tiger years blessed us with.
Whelehan’s Choice is a hotel operator and manager of third-party properties through lease and management contracts. It is also the master franchise holder for Ireland for the Clarion, Quality and Comfort Inn brands.
Planning to expand
For the purposes of this interview, the focus is on the following hotels – the Clarions in the IFSC, Dublin Airport, Limerick, Cork and Liffey Valley, Carton House in Kildare, the Croydon Park Hotel in London (where Whelehan began his career in hotel management in 1989) and the Gibson.
Choice is set to lose the IFSC from the portfolio following a recent change in ownership while a question mark hangs over its continued involvement in Dublin Airport.
“I can count on probably three or four to stay with me in the long term, hopeful of another two and we’ll probably lose two,” is how Whelehan sums up the situation.
With the workout agreed, Whelehan is once again planning to expand Choice – in Ireland, the UK and Germany.
“My hands are now free to get back out into the market place and start taking on new hotels. I haven’t been able to do anything over the past three or four years because literally it’s been like throwing water in on top of a colander. The structure wasn’t there to do it. We’re free of the shackles at this stage and can move forward.”
The workout has included a drop in most of its rents to “market rates”, although the Gibson’s remains to be agreed, he says.
In the fallow years of the crash, with Choice effectively in limbo, Whelehan diverted his energies into building up related services companies.
He’s behind a company called Hotels In One Ltd, which operates Lidl’s travel breaks.
Then there’s First Choice Purchasing Ltd, a Cork-based company set up three years ago that is involved in purchasing and procurement for more than 140 nursing homes and 60 hotels.
“We can sell you a franchise, we can sell you management, we can sell you procurement, we can sell you online bookings . . . what d’ya you want?
“We’re like the fella with all the watches,” he says theatrically while opening both sides of his suit jacket like some wideboy London spiv.
Merzolt Ltd is the new overarching company for Choice Hotel Group, replacing Kasterlee, a company that was deemed to be in receivership for technical reasons that would make your eyes water.
When asked what turnover and profits the eight-hotel group is likely to do this year, Whelehan looks at the ceiling, hums and haws, ponders what’s turnover and what’s not turnover, and says the best figure to use is a projected pre-tax profit of €1.35 million for 2014.
That’s roughly half the level of its peak in 2007.
Whelehan could have joined the exodus to the UK to claim a quickie bankruptcy but personal pride and a belief that the company’s fortunes could be turned around made him stick with his work-out plan.
Speculation about going the bankruptcy route was rife a couple of years back when his address in the companies office was changed to the UK.
“Never considered from my point of view,” he says. “I know a lot of guys who have done it. Is is right, is it wrong? I don’t know. It was never something for me. I’m not being pious about it. If I felt it was the right option for me I’d have done it.”
He was listed as a director of five companies in London because Choice in the US was looking at building out its operations there with Whelehan as part of its team.
“Part of that was that I’d have to be located in London [working three days a week] and they looked for a commitment from me to do that,” he says.
Raised in Rochfortbridge in Co Westmeath, Whelehan was one of nine children and the second eldest son. “You got an education and a bus ticket,” he jokes.
'Stupidly' reinvested
The family ran a pub, a grocery store, a betting shop, a "disco" and an undertakers.
He did hotel management in Shannon for four years, beginning his career in Croydon where he met his wife. “It’s where all love stories start,” he quips.
Whelehan came back to Ireland, working in the Great Southern Hotels for seven years before moving to Morrisons Island, a 42-bed hotel in Cork. He got a call from property developer Paddy Kelly that would change the course of his life.
“I’ll never forget it. He said: ‘Hi, I’m Paddy Kelly and I’d like to buy the hotel. I don’t know if you know this Frankie, but the hotel is on the market for £1.3 million and there’s £3 million of allowances.
“I said: ’God almighty, what are allowances Paddy?’
“I would have been better off if he’d never told me what they were. But anyway. Three phone calls later – and he’s never came down to see the hotel – he offered me the opportunity to be his partner.
“I said: ‘Paddy I’d love to be your partner but I’ve no money’ .
“He sent me down a bank draft for £80,000 at the time with a post-it on it saying pay me back when you can.”
In financier speak, Whelehan now had some skin in the game.
Over time, the business grew to 23 hotels before a trade sale to Pat McCann’s Dalata.
Whelehan made €12 million, which was “stupidly” reinvested in various property and hotel investments. It’s now “gone, gone”.
Whelehan also borrowed during the boom, money he now has to repay.
How much?
“I’m not telling you,” he says with a chuckle.
Are we talking millions of euro?
“We are. If we were talking less than a million euro we wouldn’t just be having two coffees here. Look it, there’s significant commitments there, but I’m confident in my own ability to sort that out and get the company up and running again. I’m in workout mode and will be for some time to come.”
Now, with the backing of Choice Hotels in the US and private funds in the UK who are willing to back its expansion, Whelehan is eyeing new opportunities.
His preference is a hotel with 150-plus bedrooms, corporate business and downtown. Dublin and London are favoured locations, and he’d “like to get Galway, Kilkenny and Wexford”.
He has his eye on a couple of hotels in Ireland but won’t divulge the names. “Feck off, ha , ha.”
He is prepared to say that he wants to bring the Gibson brand to other markets.
“I’d love to see five to seven Gibsons around the world. Generally capital cities. But Germany could take a Munich, Berlin, Frankfurt.”
At 44, he’s happy to be back on his feet with some “road in front of me again”. The energy and passion remains but the mindset is different.
"World domination, for the moment, is off the agenda. We've got a second chance of life here and we're going to make sure we hold on."
CV Frankie Whelehan
Name: Frankie Whelehan
Job: Group managing director, Choice Hotel Group
Lives: Innishshannon, Co Cork
Family: Married with three daughters
Hobbies: Running and horse racing
Something we might expect: "My idea of a good break is staying in a target hotel, that's in a hotel we'd like to take over."
Something that might surprise: He was a co-founder in 2005 of the Daisychain Foundation, which offers free hotel breaks to parents of children with disabilities. It provides about 1,000 bed nights a year, primarily via the Choice Hotel Group.
