A dramatic slowdown in sales during its final quarter and rising costs, meant last year was “disappointing” for Peel Hotels.

For the year to 12 February the group reported static pre-tax profit of £1.18m (2005: £1.18m).

Although turnover grew by 19.1% to £14.9m, operating profit fell by 1.8% to £2.4m thanks to the £221,093 loss in income from management contracts.

Both figures stemmed from the May 2005 acquisition of three leasehold hotels – the Strathdon in Nottingham, the Crown and Mitre in Carlisle and the King Malcolm in Dunfermline – which Peel had managed for Grace Hotels.

Chairman Robert Peel said the slowdown in turnover growth, a 40% rise in energy costs and a negative hit from the seasonal business of the three acquisitions “changed what would have been a very satisfactory year into a disappointing result”.

Although the group's nine three-star hotels turned in mixed results, overall revenue per available room grew by 4.1% thanks to a 7.1% rise in average room rate, which offset a 2.8% fall in occupancy.

During the year, Peel Hotels opened the 100-seat Bridge Café at the Avon Gorge hotel, where it has lodged five planning applications to develop the site.

The plans include 10 new bedrooms, an orangery, a health spa, a glass pavilion above the ballroom, the redevelopment of two houses and extended car parking.

Peel is also seeking planning permission to convert a site in Bradford into 105 residential apartments.

The group ended the financial year with net debt of  £17m.

By Angela Frewin

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