Why the WRU is getting into hospitality is actually a smart move that’s good for Welsh rugby – Sion Barry

There has been much speculation about the future structure and funding of professional rugby in Wales.

And with passions running high, there was also plenty of heated talk on social media about Welsh Rugby Union’s involvement in a new luxury hotel – the Parkgate – next to the stadium. Principality and which opened its doors last year.

I’ve seen a lot of comments asking why the WRU is investing millions in a project, when it urgently needs to invest in the game. Tweets abound like, “The WRU should focus on its core business rather than engage in vanity projects like hotels and travel services” and “The WRU don’t care, they love hotels now”.

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However, to me the hotel is a smart business that hasn’t required a penny of investment from the WRU and promises to deliver a future annual revenue stream well north of £1m. This is a significant, if not transformational margin that can be reinvested by the WRU into the game at all levels.

The syndicate owns a 75% stake in the hotel through a company called Parkgate Hotel Cardiff Ltd. It is a joint venture with Cardiff-based property development company Rightacres, whose projects include the one million square foot Central Square office project in the center of the capital outside Central Station from Cardiff. Rightacres holds the remaining equity.

The new hotel has seen the transformation of the former Post Office and adjoining County Court Buildings on Westgate Street, while retaining and enhancing their listed facades and historic interior features.

The previously empty county court building was already owned by the WRU. As part of the deal, Rightacres acquired the building, providing a cash boost for the WRU. This more than offset the legal and other costs WRU incurred in completing the joint venture with Rightacres.

So how was the financing for the hotel structured? The acquisition of the post office building and the construction of the hotel were financed by financial services giant Legal & General with £45 million of long-term repayable capital.

Using its pension funds, L&G is no stranger to funding property and infrastructure projects in Wales. It has already provided £750million in term funding for programs that include not only Central Square but also Aston Martin’s car factory in the Vale of Glamorgan and a new 135,000 square foot building for the ministry of Work and Pensions in Nantgarw.

The agreement was structured so that the joint venture would have to repay principal and interest over a term of more than 40 years.

One of Europe’s leading hotel operators, Celtic Collection, whose interests include Celtic Manor Resort in Newport, operates the hotel on behalf of the joint venture. The goal is to reach full occupancy within two years.

Although the terms of the agreement were not disclosed, the joint venture is confident that it will be comfortably able to fund the L&G loan, pay the agreed hotel running costs to Celtic Collection, while leaving a margin well north of £1million for the WRU. reinvest in the game each year. This will only increase with hotel room inflation and capital reduction.

For L&G, in addition to secure income – and it has full ownership of the building with the joint venture having entered into a long-term lease – this is another example of how it deploys capital for job-creating regeneration projects.

After all, the pension funds managed and invested by financial institutions like L&G are ‘our money’ and the more invested in Wales the better. From Wales plc’s perspective, it is also good to see that the WRU and Rightacres have chosen a very successful indigenous hotel operator from the Celtic Collection to run the Parkgate Hotel.

WRU chief executive Steve Phillips, who has come under fire in recent months, deserves credit for leading the deal, first revealed in 2018 when he was the union’s chief financial officer, and leveraging Rightacres’ expertise and its existing funding relationship with L&G for a project that will not only provide him with much-needed new income, but create a broader boost for the regional economy.

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