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Tourist Accommodation Retention Supplementary Planning Document

Tourist Accommodation Retention Supplementary Planning Document

5 Assessment of Viability

5.1 When assessing a proposal for the change of use or redevelopment of tourist accommodation, the key consideration is whether or not the continuing use of the land as tourist accommodation is viable and economically sustainable.

5.2 An application for change of use concerns the premises rather than the owner. In order to demonstrate viability and establish whether a tourist accommodation premises has any prospect of continuing as tourist accommodation, evidence will be required to demonstrate that the premises are not economically viable in their current use, and are incapable of being made viable in its current use.

5.3 If tourist accommodation is assessed as being viable, or capable of being viable, then this will indicate the potential to meet current and future demand for visitors, resulting in a direct economic benefit from income and employment generation, and indirect benefit from visitors spending money on goods and services within the town. In contrast, where tourist accommodation is shown to be unviable, and with no potential of becoming viable, it clearly will not provide a useful contribution and therefore its loss will cause no harm.

5.4 This SPD sets out the criteria that should be taken into account in assessing the viability or potential viability of tourist accommodation. Any application should provide evidence to show how the relevant criteria have been met, or include a reasoned justification as to why the information cannot be supplied. Applications that provide inadequate or insufficient information, or do not provide a reasoned justification as to why information cannot be supplied, will be refused.

5.5 It is envisaged that a consultative group could be formed to assess the calibre of the application and whether or not the criteria have been met. It will be strongly recommended that any applicant should engage with this group before submission of an application. Any recommendation made by the consultative group will be a material consideration in the determination of the application.

5.6 The criteria and evidence required will differ between the Primary and Secondary Sectors, so to reflect that fact that that nature of the Tourist Accommodation Area has changed since it was designated. The SPD sets the principle that a lower level of evidence is needed in the Secondary Sector to demonstrate that tourist accommodation is unviable. However this does not necessarily mean that proposals for the loss of tourist accommodation in the Secondary Sector will automatically be granted planning permission. Similarly, proposals for loss of tourist accommodation within the Primary Sector will not automatically be refused planning permission. Applications will be assessed against the criteria set out in this SPD using the evidence submitted as part of the application in accordance with the requirements of the SPD.

5.7 It should be noted that within both Sectors, the key indicator of an establishment's viability will be its market value, which should take into account its trading potential. The market for tourist accommodation has been fairly active over recent years from a property transaction perspective, and therefore viable tourist accommodation is likely to be in demand. This should be tested by the establishment being put on the market at a price that reflects its use as tourist accommodation, for a period appropriate to the area within which it is located. The lack of interest in premises that have been marketed for a value that reflects a potential residential use will not be considered to have satisfied the marketing test.

5.8 It is important to ensure that any previous tourism related planning approval has been given a reasonable time to become commercially established, and any claims that these changes are no longer financially viable must show the relationship between the original business planning and the current situation.

5.9 It is recognised that within the Tourist Accommodation Area, and particularly the Secondary Sector, a number of tourist accommodation establishments will be run as 'lifestyle businesses'. A 'lifestyle business' is a mixture of home and business, set up with the aim of achieving a sustainable level of income. Commercial viability arguments are more difficult for 'lifestyle businesses' due to businesses being a blend of home plus income.

5.10 It is considered that an appropriate threshold for 'lifestyle businesses' is 15 bedrooms. Establishments that are over 15 rooms are less likely to be run as 'lifestyle businesses' and would be expected to operate in a more commercial manner. Therefore such businesses would be expected to have business plans and marketing tools that would not necessarily be available to 'lifestyle businesses'. Therefore the council will apply additional flexibility when examining evidence provided by a "lifestyle business.

Proposals within the Primary Sector of the Tourist Accommodation Area

5.11 There is a two-stage process for assessing proposals for the partial or complete loss of tourist accommodation within the Primary Sector of the Tourist Accommodation Area. Any application for the loss of tourist accommodation within the Primary Sector will be required to:

  • STAGE 1 - Meet criteria demonstrating that the existing tourist accommodation is not viable through the submission of specified evidence.
  • STAGE 2 - Consider the implementation of other tourist accommodation uses through a sequential approach to alternative uses.

 

Stage 1 - Demonstrating that continuing the existing tourist accommodation within the Primary Sector of the Tourist Accommodation Area is not viable

5.12 In order to demonstrate that continuing the existing tourist accommodation use within the Primary Sector of the Tourist Accommodation Area is not viable, proposals for the complete or partial loss of tourist accommodation should satisfy the following criteria:

  • Criteria A - There is no interest in the tourist accommodation business being bought as a going concern;
  • Criteria B - The tourism accommodation business has been run in a reasonable and professional manner, and a serious and sustained effort has been made to save the business;
  • Criteria C - The physical condition and cost of repair of the building would be prohibitive to running a viable business; and
  • Criteria D - The running costs of the business cannot be covered.

5.13 Any application promoting the loss of tourist accommodation would need to be accompanied by evidence in order for that application to be fully assessed against the criteria set out above. Evidence should be submitted against the following:

Criteria A - There is no interest in the tourist accommodation business being bought as a going concern


(A1) Evidence that the Tourist Accommodation establishment has been on the market at a price that reflects its tourist accommodation use and condition for reasonable period (which the Council would expect to be a period of a minimum of 2 years). The type of material that should be submitted to satisfy this includes:

  • Details of the agent used to market the business for sale, including whether they have any local or specialist expertise, and evidence of active marketing;
  • Where and when the site was advertised, including copies of advertising material, sale particulars, website entries, brochures, etc.;
  • Details of responses received, what interest has been shown and why any offers have been rejected (if known);
  • Details of the agreed sale price, including any reductions made in asking price during the course of marketing.
Criteria B - The tourism accommodation business has been run in a reasonable and professional manner, and a serious and sustained effort has been made to save the business

(B1) Evidence of occupancy and room rates for comparison with competitors, including:

  • Number of trading weeks per year over the last 3 years
  • Total number of available room nights per year over the last 3 years
  • Details of occupancy per trading week over the last 3 years
  • Average room rate for each trading week over the last 3 years
  • RevPAR for each trading week over the last 3 years

(B2) Owner's Personal Statement, outlining the following areas:

  • Length of ownership
  • Their personal background before running the business
  • Their explanation as to why they believe the business is not sustainable
  • An outline of what they believe they have done to make the business viable (which will be further expanded on by reference to the evidence referred to in the following sections)
  • Reference to be made to online reviews - positive and negative. If negative an indication of how issues have been addressed and if they cannot be - why not?
  • An indication of the change in business trends they have witnessed and how they have tried to adapt the business to follow those trends or explain why they could not.
  • Any anecdotal information they have from neighbouring businesses that affirms the personal statement.

(B3) Evidence of marketing and business promotion, including but not limited to:

  • Engagement with Eastbourne Borough Council's Tourism Department (or a statement indicating why assistance was not sought)
  • Evidence of marketing activity over last 12 months
  • Evidence of regularly updated website for the establishment
  • Evidence of the establishment being placed with Online Travel Agents (OTAs)
  • Evidence of how social media has been used to promote business (or why social media was not appropriate to the business model)
  • Copies of brochures, adverts and entries in accommodation guides
  • A plan for marketing activity over the next 12 months

(B4) Evidence of annual business plan, including financial budget and sales/marketing strategy (for 'lifestyle businesses' where establishments are under 15 rooms it is accepted that business plans may not be available).

Criteria C - The physical condition and cost of repair of the building would be prohibitive to running a viable business


(C1) Evidence from a surveyors report prepared by a suitably qualified person that details the physical condition of the building, including cost of repairs, and the age and condition of the building and length of time in tourism use

(C2) Evidence of investment on refurbishment and maintenance to the property for each year over the last 5 years

Criteria D - The running costs of the business cannot be covered


(D1) Evidence of costs of running the business, including:

  • Profit and Loss Accounts covering the previous three years
  • Net income from rooms
  • Net income from food and beverages
  • Any other net income generated from the business
  • Trading profit before interest, tax, depreciation and amortisation
  • Breakdown of annual running costs for the business over the last 3 years including: commissions, wages, utilities, rates, food, beverage, additional guest services, administration costs, laundry, insurance, business to customer marketing, bank interest/charges, staff training and any other operating costs
  • Number of people employed including applicant and applicants family split full time and part time

 

Stage 2 - Consider the implementation of other tourist accommodation uses through a sequential approach to alternative uses

5.14 Where it can be demonstrated that the existing tourist accommodation use is unviable through Stage 1, consideration should be given to retaining an element of tourist accommodation use. The retention of an element of tourist accommodation use should be considered on a sequential basis, as identified below and should be evidenced within the application:

  1. partial conversion to unserviced accommodation with a clear link in terms of the ownership of the serviced and non-serviced accommodation
  2. full conversion to unserviced accommodation;
  3. partial conversion to non-tourism uses that would be compatible with the Tourist Accommodation Area (including residential) where there is an agreement to invest in the remaining tourist accommodation.

5.15 The sequential approach means that criterion (a) should be met before criterion (b) is considered, and so on. Only where it can be demonstrated that all criteria are satisfied and there is no potential for conversion to other tourist uses will a complete loss of tourist accommodation be a possibility.

5.16 Applications for the partial loss of tourist accommodation should satisfy all criteria in Stage 1, and the criteria in Stage 2 that is ahead of the proposal in the sequential process. Applications that include unserviced accommodation should take into account considerations for unserviced accommodation outlined in paras 5.21 and 5.22.

5.17 To ensure that any unserviced tourist accommodation created is used for tourist accommodation purposes only, or to ensure investment in remaining tourist accommodation as a result of partial conversion to non-tourism related uses, the Council will look to secure this by use of a condition on the planning permission or through a Section 106 legal agreement.

5.18 In order to demonstrate that alternative tourist accommodation uses have been considered, the following should be submitted but not limited to:

Criteria E


(E1) Evidence from independent experts that tourism alternative uses have been fully considered, including justification to clearly explain why other tourism accommodation uses are not viable, based on a sequential approach to alternative uses:

  1. partial conversion to unserviced accommodation
  2. full conversion to unserviced accommodation
  3. partial conversion to non-tourism uses (including residential) where there is an agreement to invest in the remaining tourist accommodation.

5.19 The evidence from independent experts that is needed to meet these requirements could be in the form of a specialist viability report, or it could be evidence from a number of different specialists in a report compiled by the applicant.

Establishments with no trading history

5.20 Where no trading history for the tourist accommodation establishment exists, applicants should submit evidence under (A1), (C1), (C2) and (E1), alongside a forward business plan with cash flow projections, including information required to secure a bank loan/financial investment, with a clear demonstration that an attempt has been made to implement it.

Conversion to unserviced accommodation

5.21 Where partial or complete conversion to unserviced accommodation is proposed within the Primary Sector of the Tourist Accommodation Area, the unserviced accommodation must aspire to be high end holiday flats, and should be designed and sited so as to maximise the on-going attractiveness of the holiday flats to visitors to ensure that it is viable. Therefore, proposals should include details of how holiday flats will be accessed, designing out shared accesses and corridors with residential units, and evidence of a business plan to show that the business can be operated as sustainable tourist accommodation.

5.22 In light of this, evidence should be provided to demonstrate that the following have been considered:

  • Providing a separate entrance from any tourist accommodation or residential uses.
  • Designing internal layouts to cluster holiday flats together for ease of management and minimise potential noise impacts and conflicts with other uses
  • Ensuring that main bedspaces are located within bedrooms and not within lounges or other non-bedroom spaces, although sofa beds would be permitted to maximise occupancy potential;
  • Ensuring that holiday flats have all of the facilities that would be required by a visitor, ensuring that holiday flats meet the requirements for Visit Britain/AA self-catering accommodation standards.

Proposals within the Secondary Sector of the Tourist Accommodation Area

Proposals for partial loss of tourist accommodation

5.23 Within the Secondary Sector, proposals for partial or full conversion of serviced accommodation to unserviced accommodation will be supported where the principles identified in paras 5.21 and 5.22 are taken into consideration.

5.24 In addition, proposals for part conversion to other uses that are compatible with the Tourist Accommodation Area will be supported if investment is made in improving the remaining tourist accommodation. This will be secured by a Section 106 legal agreement.

Proposals for complete loss of tourist accommodation

5.25 In order to demonstrate that continuing the tourist accommodation use within the Secondary Sector of the Tourist Accommodation Area is not viable, all proposals for the complete loss of tourist accommodation will be required to satisfy the following criteria:

  • Criteria F - There is no interest in the tourist accommodation business being bought as a going concern;
  • Criteria G - The tourism accommodation business has been run in a reasonable and professional manner; and
  • Criteria H - The running costs of the business cannot be covered.

5.26 In order to allow a proposal for the loss of tourist accommodation to be assessed against the criteria set out above, evidence should be submitted against the following:

Criteria F - There is no interest in the tourist accommodation business being bought as a going concern


(F1) Evidence that the Tourist Accommodation establishment has been on the market at a price that reflects its tourist accommodation use and condition for reasonable period (which the Council would expect to be a period of a minimum of 1 year). The type of material that should be submitted to satisfy this includes:

  • Details of the agent used to market the business for sale, including whether they have any local or specialist expertise, and evidence of active marketing;
  • Where and when the site was advertised, including copies of advertising material, sale particulars, website entries, brochures, etc.;
  • Details of responses received, what interest has been shown and why any offers have been rejected (if known);
  • Details of the agreed sale price, including any reductions made in asking price during the course of marketing.
Criteria G - The tourism accommodation business has been run in a reasonable and professional manner


(G1) Evidence of occupancy and rooms rates for comparison with competitors, including:

  • Number of trading weeks per year over the last 3 years
  • Total number of available room nights per year over the last 3 years
  • Details of occupancy per trading week over the last 3 years
  • Average room rate for each trading week over the last 3 years
  • RevPAR for each trading week over the last 3 years

(G2) Evidence of efforts to sustain the business, including

  • Engagement with Eastbourne Borough Council's Tourism Department (or a statement indicating why assistance was not sought)
  • Evidence of marketing activity over last 12 months

5.27 Tourist accommodation establishments within the Secondary Sector with 15 bedrooms or more should also provide the following evidence:

5.28 (G3) Evidence of annual business plan, including financial budget and sale and marketing strategy 

Criteria H -The running costs of the business cannot be covered


(H1) Evidence of costs of running the business, including:

  • Profit and Loss Accounts covering the previous three years

Consultation System