Response from Chief Executive

Below is a letter of response from Malcolm Burr Chief Executive of CnES, text in blue are my comments. – Graham

Dear Mr McLellan,

I refer to our recent correspondence following your open letter of 18 February 2014. I will also make this response available publicly.

I am pleased that this letter is to be made public, I shall do the same   GAM

The regeneration of Lews Castle has been a long-standing ambition of the Comhairle and its partners.  The vision to bring this iconic building back into operation through a mixed-use heritage and hospitality scheme has been well publicised over many years and was encapsulated in the last Area Tourism Partnership (ATP) Visitor Strategy.

ATP was not aware that there were problems securing original tender. GAM

The support of the community and the potential of the project to deliver significant long term benefits across the islands were major factors that enabled the Comhairle to secure over £9m of external funding for the project, an exceptional level of support.  Funding bodies have made it clear that the new museum and archive, public access to the Castle and a commercially viable hospitality operation are all critical to the overall success of the project.

The present proposal does not have the support of the community   GAM

These elements make this a unique project and, ironically perhaps, also explain why the Comhairle had only limited success in attracting serious interest from the private sector in the early stages of the project.  It was clear from discussions with potential investors that the small scale of the development, the requirement for public access to the Castle and the adjacent museum and archive were seen as issues that would affect the viability of an exclusive hotel development.

There is absolutely nothing “unique” in these proposals. More of the same.

A complete lack of imagination and wit. GAM

It is vitally important to understand the whole context in considering the current proposals for the development of the upper floors of the Castle.  It is also important to understand that the operation of the upper floors and the ground floor public rooms – which will provide public facilities, including a café, open to all visitors and a range of outstanding rooms for functions – are linked and are part of the hospitality opportunity for which the Comhairle has sought a private sector partner.

It is vitally important that you and all concerned understand the economic impact of your proposals on existing businesses GAM

Two separate procurement exercises were undertaken over the past three years in order to attract a private sector partner.  Both procurements allowed flexibility to enable the market to respond to the opportunities offered within the Castle.  Indeed, from the outset the tender documentation made clear that although the potential for hotel use had been identified, other commercial options would be considered. The exact nature of the private sector proposals for the upper floors was always going to be market-led, within the broad requirement of being compatible with the heritage elements of the project.

No one was aware the first tender had failed and that a second tender was being sought GAM

The first process resulted in a proposal for a small 4-star hotel and a preferred bidder was identified.  Unfortunately, the preferred bidder later withdrew their interest in the project and the Comhairle recommenced the procurement process.  Following a review, the hospitality element was reviewed by the Project Board.  The hotel concept (4-star minimum) was retained, whilst also allowing the market to propose other high quality accommodation models, such as serviced apartments and self-catering, the latter required to be 5-star.It is simply not correct to say that the procurement was changed in the manner you suggest.  The Comhairle agreed to a second tendering on the basis of a Report considered in public on 6 September 2012.

Nigel Scott must have missed this public report. It was not released in the press or was it? The present councillors are not aware of it.  They have been briefed since and told all was well, the project given a “thumbs up”. They were still expecting a luxury hotel to be delivered. Have they all been asleep at these briefings? GAM 

In both procurement processes, the Comhairle met its legal obligations in full, by advertising through Procurement Contracts Scotland and the Official Journal of the European Union. That is the proper process for all public sector tendering exercises and is well known to the market.  It was, of course, open to any business, local or otherwise, to tender if they so wished.  I am satisfied that the procurement processes were fair, transparent, compliant and not underhand or corrupt in any way.  Your comments in this regard are misleading, ill-judged and as they impugn the reputation of named officers of the Comhairle should be withdrawn in writing immediately.

We elect council members and trustees to the Stornoway Trust. If they are kept in the dark by council officers, then I consider the democratic process to have been corrupted. GAM

In response to the second procurement process the Comhairle received one proposal from an international leisure operator.  I can confirm that the proposal for the upper floors is for luxury accommodation with 26 bedrooms and 9 living/kitchen spaces which allow for self-catering if required.  The accommodation also allows bedrooms to be let as conventional en-suite hotel rooms.  The restored ground floor of the Castle will feature a dedicated reception space for guest check-in and the operator will operate the museum cafeteria and shop.  The public rooms will provide an outstanding venue for weddings, conferences and other celebrations.  The proposal will create up to 30 direct jobs.

I have been in correspondence with Joe MacPhee since October 2013. Check his e- mails back to me. You won’t be able to as he has put nothing in black and white to me.  Your 30 jobs is well short of reality. Most will be seasonal and part time. 26 rooms and 30 jobs… you wouldn’t be in business for long!

Also, these jobs will in any case will only be replacing ones that will be lost in the existing accommodation sector.  Perhaps some of the respondants on my blog will find employement there, they will need the wage not only to live on but to pay their bank loans.

The staff from the Stornoway Trust’s Woodland Centre café might be glad to find alternative employment in the Castle Museum Café.  GAM

The assertion that the proposal amounts to a 100-bed self-catering operation is false.

As recently as Wednesday 5th Feb, at the OHTIA AGM, I asked Joe MacPhee, how many rooms and kitchens? Complete prevarication from him… “not so easy a thing to say, depends on this and that.” Strange answer as at that time detailed plans had already been submitted by Natural Retreats for listed building ammendments for self catering.

He did though say 26 large family rooms, hence a reasonable enough assumption of 100 bedspaces.  He has had five months to give answers to e-mails and phone calls, and finally in an open forum. Any errors in detail are down to him alone. GAM

The Comhairle has taken advice on State Aid issues in relation to the overall regeneration project which has always involved the Castle being regenerated with public funding and ownership remaining with the Comhairle.  Public funds are being use to renovate the Castle and to put it into a condition to enable any potential operator to use it.  The project was made available to all interested parties, and the private sector partner will be required to pay a commercial rent and to invest significant sums into the project.

Does common sense and decency impact on The Comhairle’s decision making? GAM

The Comhairle shares the concerns expressed by the industry regarding transport capacity, particularly ferries.  These matters are currently being addressed, and industry representatives have recently been invited to participate in a Ferries Task Group led by the Comhairle.  However, the new ferry on the Stornoway to Ullapool route is a very welcome development and, subject to final timetabling being confirmed, should provide additional capacity.

You recognise the bottleneck we have. GAM

Please also recognise the accommodation overcapacity that has built up via the investment of private capital.  This proposal is bringing nothing new and will be in direct competition with ALL existing accommodation provision, not merely self-catering GAM

The recent positive press publicity regarding the growth in the tourism sector, with Lewis and Harris being named as the best island destination in Europe and the opportunities arising from the new Tourism 2020 Strategy suggests that there are significant opportunities for expansion of the tourism potential of the Outer Hebrides.  Doing nothing with the upper floors of the Castle is not an option.  Using the opportunity to support further growth as well as adding to the quality and diversity of the existing product is an imperative to realise the full economic benefits of the Lews Castle Museum and Archive project.

I disagree. Find a fitting use, but do not jump upon the rolling bandwagon the private sector has created GAM

I would point out that the Comhairle is still in discussion with the preferred partner and operator regarding the details of the commercial package. Assurances have already been given that all relevant issues will be shared with the Outer Hebrides Tourism Industry Association in due course.

Joe MacPhee has given me the same assurances, several times, including at the OHTIA AGM.  His promises to keep me informed have proved worthless. As I say, he has given me nothing but verbal “assurances”. Not good enough. GAM

Yours sincerely,

Malcolm Burr

Chief Executive

Open letter re Lewis Castle Development

Lews Castle Castle Grounds Stornoway Isle Of Lewis HS2 0XP

Ref. No: 14/00044/LBC | Received: Mon 03 Feb 2014 |

Internal alteration to create self-catering apartments on the Mezzanine, First, Second and Third floors, ancillary to the use of Lews Castle as a hotel. Works are part of a wider scope of development.

In terms of the number of available bed-spaces, the tourism sector of the Outer Hebrides has been expanding rapidly. The graph below shows this expansion over a two year period over the whole of the Outer Hebrides, by sector. (Statistics collated by the Outer Hebrides Tourism Industry Association (OHTIA)).


Specifically, in 2011/12 alone, the actual number of self-catering bed-spaces in Lewis rose by 33% from 619 to 825. Further increases in the number of self-catering units available on Lewis have been recorded for 2012/13

This has been done through the investment of private funds. HIE for example, with regard to the tourism industry, have not invested in anything but infrastructure projects for the last eight years as this would cause displacement of existing businesses (Basically an existing business would be being put at an economic disadvantage due to a third party gaining public funding).

Additionally, the island ferries are fully booked for some four months in summer. The new ferry, while being bigger, might not necessarily carry many more cars (The freight ferry is being removed, and apart from an articulated lorry taking up 20 metres deck space, it also prevents the mezzanine deck from being deployed at all). The Harris ferry takes some of this oversupply, but to the detriment of Harris tourism providers. There is a bottleneck here that limits the number of visitors (and of course islanders) travelling on and off the islands.

Visit Scotland (VS) and OHTIA will not give letters of support for further accommodation building. Such a letter is based on an area need or market gap and is required, for example, to obtain Business Gateway funding.

The market is saturated. I myself have withdrawn 2 properties from self- catering within the past eighteen months as they were becoming too difficult to fill.

I have no complaint with this situation; it is after all a free marketplace, anyone can join in. What is unacceptable is that the Economic Development Department of CNES are proposing assisting an off island company, Natural Retreats, in setting up a (potentially) one hundred bed self-catering operation on the upper floors of Lewis Castle. (Any profits made will not be kept on the island but go to off island directors and shareholders).

Quite simply, in terms of the rules of state aid, where a private business or businesses are providing a service, no finance from the public purse should be available to one business over another.

Please look at my website, , or indeed any other local self -catering website, and compare it to that of Natural Retreats. All are self- catering, aiming at much the same guests. In short, we are all fishing in the same pool for guests, and so there is a very definite and defined displacement risk.

The Castle upper floors development was presented to the OHTIA by Iain Macleod (CNES) two years ago as being a luxury 14 bedroomed hotel aiming at very top end guests. This would have added something massively different to the accommodation provision already available on the island. An investment of £5,000,000 was being asked for by CNES of this new hotelier to do the fit out of the upper floors when the structural work had been completed.

No successful bidders for this project were found. The project was then changed to self-catering, unilaterally, by CNES Economic Development Department, the investment sought from the developer reduced to £500,000, albeit along with (allegedly) a three year rent free grace period. Fourteen rooms have become twenty six units. Luxury hotel accommodation has become self- catering accommodation. No consultation or any involvement of any members of the Area Tourism Partnership (ATP) was undertaken by CNES (which is of course itself a partner along with OHTIA, VS, and SNH, HIE etc.).

The Economic Development Department of CNES considers these changes (the doubling of number of rooms available, private investment dropping to 10% of original sum sought, change of accommodation type) not to be “hugely significant”.

Referring again to State Aid Rules, “In terms of providing a fit for purpose building for the use of any business, where public money has been utilised in the preparation of the asset, it should be offered at the market value for sale or offered to all interested parties in an open tendering process.

A second tender was issued on the Government Procurement Portal for this changed project. There was no additional local advertising. Not to have advertised the tender locally further adds to my assertion that this whole process, involving vast sums of public money, has been underhand and carried out in a very corrupt fashion. Why were local businesses not considered suitable to run the Castle accommodation? Who has made this judgment?

The tendering process itself has thus been concluded in a way that probably breaches state aid rules.

To summarise

  1. There is no need for public funds to be invested in tourism accommodation provision on the islands. The private sector is managing this investment on its own. No support, financial or otherwise, is available from any of the ATP agencies.
  2. Public funding, if available, should be used to help fill the existing surplus of tourism accommodation already on the market, not to provide more.
  3. All island accommodation providers will experience varying degrees of displacement if CNES push this proposal through. Now is not the time. There is already surplus capacity which cannot be filled until a major improvement in ferry capacity is achieved and a major increase in visitor numbers seen as sustainable.
  4. No full economic impact assessment on tourism accommodation has been carried out since 2005. Even then, this report was seriously flawed (It did not include the Caladh Inn, Stornoway’s largest hotel).
  5. I appreciate that CNES do not wish to be spending money on the Castle going forward. My understanding is that they are trying to find an economic partner to back up their Heritage Lottery Funding (HLF). This though should not be at the expense of established local businesses.
  6. That said, CNES Economic Development Department needs to identify a proper, sustainable, use for the upper floors. I say again, tourism accommodation provision is not the answer at this time.
  7. If the upper floors are left undeveloped for the immediate future, that is regrettable but they have been that way for the past twenty years. They will have been made secure, wind and watertight by the work already being done. A fit and proper use for them will be found in due course.
  8. Changing course from delivering a unique hotel experience to more of the same self- catering units is selling the whole Castle Project short.
  9. The procurement and tendering has been underhand and corrupt.
  10. I appeal to councillors and others not to proceed with these plans. State Aid rules are likely to have been breached and to go further will lead to conflict. To carry on will have a disastrous negative impact on all existing self -catering, guest house and B and B accommodation on Lewis and Harris.

Graham McLellan
07917 035295