Tendering and procurement of Lews Castle plan was “underhand” and “corrupt”

Opposition is growing to controversial plans to convert Lews Castle into self-catering holiday accommodation.

The move has sparked outright fury among local holiday accommodation providers who have accused Western Isles Council of setting up in competition against them with a private company as partner.

One furious island businessman wrote to councillors branding the tendering and procurement process as “underhand” and “corrupt”.

Graham McLellan fears his business will be ruined

In 2006, the local authority unveiled ambitious plans to make it a luxury hotel complex with an associated museum development as Museum nan Eilean has outgrown its accommodation. There had been no word the plans had changed although it has now been confirmed a preferred partner is already in place for self-catering.

Businessman Graham McLellan owns luxury chalets and other letting properties in the Stornoway area. He and other fellow operators are stunned at the move in what they say is a limited market and they fear it could drive them out of business.

He said that in 2011/12, the number of self-catering bed-spaces in Lewis rose by 33% from 619 to 825 and further increases in the number of self-catering units available on Lewis were recorded last year, a fact he put down solely to moves by the private sector.

Pointing out that Highlands and Islands Enterprise has not invested in anything but infrastructure projects for the last eight years in case it causes displacement of existing businesses, he said the council seem to have no such concerns. A new larger ferry due to arrive in late summer will not increase capacity, he thinks, as it will also carry lorries currently shipped on a dedicated freight ferry.

“The new ferry, while being bigger, might not necessarily carry many more cars. There is a bottleneck here that limits the number of visitors (and, of course, islanders) travelling on and off the islands.”

He said the market was “saturated” and he had already withdrawn two properties from self-catering in the past 18 months as they were becoming difficult to fill.

While accepting it was a free marketplace, he thinks it unacceptable that the council’s economic development department propose helping an off-island company in setting up a potential 100-bed self-catering operation in Lews Castle. Any profits would obviously go off-island to directors and shareholders, he said.

“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,” he said.

The castle upper floors development was presented to the Outer Hebrides Tourism Industry Association just two years ago as being a luxury 14-bedroom hotel aiming at top-end guests. No successful bidders were found and the project was, at some point, changed to self-catering with no public notice.

Mr McLellan is furious it was changed unilaterally by the development department and the investment sought from the developer reduced to £500,000, with, he believes, a three-year rent-free grace period.

Western Isles Council refused to discuss the operators’ concerns at the weekend insisting they would respond to them in due course. However, Joe MacPhee, its head of economic development, was last week reported as saying they had gone out to tender in September 2012 for a private sector partner “to deliver the vision for the development of Lews Castle as a sustainable, high-quality hospitality and heritage destination”.

That process had identified a preferred partner for the project which could include hotel bedroom suites and flexible guest apartments with self-catering provision. Restored rooms on the ground floor would be available for functions and the partner company would also operate the museum shop and cafe.

The England-based holidays operator which is understood to be the preferred bidder offers two-night stays in the north of Scotland from little over £120 per person. However, those rates, according to Mr McLellan, puts it in direct competition with his business and many others on the island.

Mr McLellan said: “If you had the choice to stay in a luxury chalet or in a prestigious castle for roughly the same money, where would you stay? It is unfair and is not what public money should be used for.”

In his written submission to all 31 councillors, Mr McLellan appealed to them not to proceed. He said: “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&B accommodation on Lewis and Harris.”

He added: “The procurement and tendering has been underhand and corrupt.”

Cheshire-based Natural Retreats, the apparent preferred operator, did not respond to a request to comment.

Although none of the island councillors approached would go on the record, it is understood some are unhappy that they did not know of the changed plans until last week.

In a reference to the council’s head of economic development, one unhappy local holiday operator said: “I have no doubt his crazy plan will put many local operators out of business. Oban has McCaig’s Folly and, if this goes ahead, Stornoway will have MacPhee’s Folly.”