BIG HOTEL SALE: Hurtigruten may sell its three lodges and other Svalbard properties, joining Mary Ann’s Polarrigg and Svalbar as notable tourism businesses on the market

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Update 2:45 p.m.: Store Norske is among the companies interested in buying Hurtigruten’s local operations, according to reports.

Original story: A huge sale at local hotels and other tourism businesses is in the making as the crippling economic effects of the COVID-19 pandemic persist, as Hurtigruten announced Tuesday is it considering selling or entering a partnership for its three hotels and other land-based properties in Svalbard.

The announcement comes as at least two other notable tourism-oriented businesses, Mary Ann’s Polarrigg and Svalbar, are also up for sale. However, plans for those sales were underway before the pandemic and Hurtigruten noted their exploratory efforts “may or may not result in a transaction.”

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A major upgrade to the lounge, restaurant and other areas of the Radisson Blu Polar Hotel Spitsbergen was completed early last year. However, among other difficulties, the hotel was forced to close for a period due to labor and safety code violations by subcontractors performing the work on the project. Photo courtesy of Hurtigruten Svalbard.

The announcement also comes just a week after the purely speculative possibility of Hurtigruten being purchased by Chinese government and/or private interests interested in Svalbard as a strategic foothold set of a minor media firestorm.

Hurigruten Svalbard, the parent company’s local subsidiary, operates the Radisson Blu Polar Hotel Spitsbergen and Funken Lodge – both full-serve hotels that received major remodelling upgrades the past few years – plus the more rustic hostel-like Coal Miners’ Cabins. All three feature restaurants, and the company’s other land-based businesses also include Rabalder Cafe and Bakery at Kulturhuset, Longyear 78 sports retail shop, and Ingeniør G. Paulsen (IGP) snowmobiles and rentals.

“Hurtigruten is considering strategic alternatives for the real-estate portfolio on Svalbard,” the parent company’s announcement states. “Based on interest for the Svalbard business from several external parties, the company has decided to initiate a process to consider strategic alternatives for the real-estate portfolio on Svalbard,” the parent company’s announcement states. “During the process the company will engage with interested parties in Norway and internationally, and review various options for partnerships.

“Hurtigruten Group’s long-term strategic commitment to a land-based Svalbard operation through Hurtigruten Svalbard will not be changed as a result of this process. The process may or may not result in a transaction.”

Store Norske, which is trying to transition to tourism and other industries due to the collapse of coal mining, is among the potential buyers/partners expressing a strong interest, according to High North News. Jan Morten Ertsaas, managing director of the company owned entirely by the Noweegian government, told the news site the company is familiar with Hurtgruten’s operations and is well positioned to discuss a potential acqusition.

“We have cooperated with them here in Svalbard,” he said. “They are a local actor who has the same ambitions as us when it comes to sustainability and using renewable energy. We think it would be exciting to facilitate interesting discussions in such a process.”

Hurtigruten Svalbard in recent “normal” times employed about 200 people and in 2019 earned a pre-tax profit of 52 million kroner on 300 million kroner in sales in 2019. However, two-thirds of the company’s employees have been laid off due to the pandemic – a figure that was much higher during the onset of the crisis this spring – and At the end of September, and as of September gross income was 100 million kroner less than at this time in 2019.

The parent company has received 90 million kroner in virus-related crisis aid from the Norwegian government, 2.5 million of which has been allocated to its Svalbard subsidiary, according to E24. Per Brochmann, Hurtigruten Svalbard administrative director, told the Norwegian news agency the possibility of a sale was considered before the pandemic, but the impact of that crisis – which has left the parent company with a negative equity of 170 million – plus interest expressed by potential buyers/partners has further motivated those efforts.

“These are tough times, no doubt about it,” he said. “But the world will not look like this forever.”

The announcement comes weeks after Svalbar received global headlines when it was put on the market for a “cool” one million Euro (although that’s just for the right to operate the establishment, and doesn’t include the inventory and other costs), which is still in the works. Also pending is the planned sale of Mary Ann’s Polarrig, which has been in an on-again, off-again status for the past couple of years following the illness and death of its founder and longtime owner.