Growing gracefully
Anthony Harris is showing none of his self-confessed weakness, impatience. Instead, in a tailor-made Italian suit, he carefully delivers the corporate line in response to the question: "Is Stakis about to buy Thistle?"
"We will look at every opportunity that is in the marketplace responsibly and if we truly believe we can add value then it would be our duty to our shareholders to make some sort of proposition, and that is all that I will say about that," says Stakis's managing director.
It is a fairly safe assumption that Stakis has been one of the dozen companies that have made presentations to Thistle's board. They are all, it is assumed, bidding for the 46% of Thistle currently held by Brierley Investments. Thistle says a shortlist was drawn up in mid-July, with an announcement expected in August.
City confidence
But while further details are not forthcoming from Harris or Thistle, City analysts are happy to speculate, describing Stakis as "a company in waiting". Last October chief executive David Michels said: "It would be foolish to expand until Stakis has proved itself to the City." Now, it seems, the City feels confident, reflects Harris.
"Our share price is a reflection of confidence, and our performance up to the interims reflects that we are competent in managing all three of our businesses [Stakis Hotels, Casinos, and LivingWell health and leisure clubs]. Our ability to merge the Metropole operation into our operation and at the same time open three new hotels proved that, operationally, we could manage expansion and development quite seamlessly."
But while Stakis's handling of the Metropole estate has soothed the City, Thistle would be an entirely different story. Metropole was bought from Lonrho in a deal worth £327m and comprised five hotels. Thistle is valued at about £1.8b, with 90 hotels that reported profit after tax in 1997 of £76.3m on a turnover of £319.7m.
With a smile, and just the slightest trace of irony, Harris comments: "Both David [Michels] and I were approached to run Thistle, so it would seem that we are competent!"
But both opted to stay put at Stakis and now, perhaps, have their sights set on what would surely be the hotel sale of 1998.
Stakis on its own would be unable to afford Thistle, and a partner, perhaps a US firm, would be necessary to fund the venture. The obvious, although as yet unestablished, connection is Strategic Hotel Capital Inc (SHCI), a US investment company that bought London St Ermin's Stakis in March for £47.75m and contracted Stakis to manage the operation.
Refusing to connect SHCI with the Thistle deal, Harris comments only on what the St Ermin's sale means. "This was a way to start the relationship. They needed to enter the UK; we found a way of coming to a deal that would satisfy our ambitions. This way we have a strategic partner to work with us. It fuels our ability to grow organically."
It also adds capital to the fund for development. Stakis funds its growth through cash-flow and has said it will not go above 50% gearing. According to Harris, the company has £100m of potential development awaiting the capital to proceed.
Financially, the 52-hotel chain is strong, reporting a profit before tax of £43.8m on a £136.4m turnover in the six months to 31 March 1998. Occupancy of hotel rooms sits at 73.7%, up 9% on the same six months of 1997, and average room rate is £60.48, up 10% on last year.
The investment of £90m in the London Metropole hotel on the Edgware Road to develop it as a premier conference and meeting centre was fueled by three things, says Harris.
"First, we currently turn away £12m-worth of domestic business every year, it is too big for us. Second, we looked at Europe, and within the UK there is no single conference venue that can meet, eat and sleep 1,000 people, let alone the 2,000 we will be able to do. Finally, the banqueting environment in London is equally lacking, there are only four or five which do anything of any dimension at all, and none of them can sleep the people," he says.
Growth in Paddington
But Harris modestly concedes that they were entirely lucky with the Heathrow Express link and the Government deciding to inject capital into the Paddington Basin. The train link should bring a further six million people into the area, according to Harris.
The hotel is expected to generate 40% more turnover in a 10-year period, with occupancy rates of more than 80% after the first year. The occupancy of meeting rooms is also expected to exceed 70%, up 10 percentage points from the present.
Harris and his team - and he stresses it is a team effort - endeavour to keep the new projects constantly rolling to fuel the organic growth he believes is vital for the company. Projects must stand on their own merits and produce returns of more than 15-16% for new builds and 25-30% for extensions before a go-ahead is given.
This year's hotel openings include the 130-bedroom hotel and leisure facility in Templepatrick outside Belfast, which opened at the end of June; a 111-bedroom hotel with a leisure complex at the Strathclyde Business Park outside Glasgow, due to open in October; and, for the end of 1999, Stakis has announced a £14m development in Milton Keynes.
In Dublin Stakis has its first international hotel, but Harris is keen to ensure the infrastructure is there before expanding further internationally.
"We need to brand our products, from the Scottish breakfast through to the meetings programme through to restaurants, to our coffee bars in the lobby, so you begin, as a customer, to walk in and say, ‘I know this hotel, it is a Stakis hotel.' This allows us to cement the brand," he emphasises.
Branding, once the darling of the industry, has become a dirty word to some companies.
Branded concepts
"We are only branding things we believe add value to the customer," says Harris, listing the example of Stakis's branded meeting product, Assured Meetings. It takes the anxiety out of organising meetings, he believes. On the restaurant front, Stakis has developed two concepts, Millers and Barbacoa. The former has increased turnover by 40% at the four hotels in which it has been installed, and the later, newly installed in Sheffield, has queues to gain entry.
"You'd think it was crazy, a Caribbean-Australian barbecue in Sheffield, but we have queues every night, and we don't have queues at many of our restaurants, so we know this one is working," laughs Harris.
Strongly in favour of listening to his own front-line staff, Harris finds the traditional aspect of hotels the antithesis of entrepreneurial spirit.
"Those in the hotel industry do not have sufficient conviction to break new ground. We don't think outside the box. We try to import other ideas instead of being good at it ourselves. Every company I have worked for needed outside injections to bring in ideas, whereas all the experiences are inside the organisation. You just need to challenge people and get them to step beyond the threshold and say, ‘I'm going to take the chance.'"
Harris cites the example of Stakis printing its own letterhead instead of buying it in. One person realised the new technology provided a cost saving, and now Stakis stands to save more than £100,000 annually "because someone had the courage to try it and bring it forward".
Therefore, employing the right people is crucial, and the training is something Harris is willing to invest in.
"We are recruiting attitude. If you are smart, you like people and you smile a lot, we will give you a job. And we will train all the skills. And the more skills you learn, the more we will pay you. That is our multi-skilling programme."
And there is a commitment to bringing in new staff. For example, 80 chefs each year will be offered the opportunity to train with Stakis.
Asked about initiatives such as the New Deal, Harris reflects that they are laudable but do not solve the problems of a skills shortage. "New Deal is about unemployment, but the areas of unemployment are not necessarily where we need staff. In areas like Sheffield and Scotland we can find people, but go to London, the South-east, and it is impossible to find someone. Go to Arundel, West Sussex, there are three people on the unemployment list."
But neither does he place the blame for the skills shortage at the doors of the Palace of Westminster. "Government should be involved in the provision of tax incentives for businesses to invest in people. This Government is certainly trying to provide that, but the rest is up to the industry."
Positive attitude
Harris came to Stakis two years ago from the Italian luxury hotel group Ciga, owned by Sheraton, bringing with him a positive attitude, creativity and lots of stamina, not to mention a good stock of coffee, pasta and olive oil.
"Every now and then you come across a company where the people all share the same ambition for the company. I joined Stakis because I believe it has the ability to do anything it wants to do. That was two years ago and it was half the size it is today - then we were worth £400m and today we are worth over £1b."
His working principle is to spend as much time as possible in the hotels and as little as possible in his Glasgow office. He scrutinises each area of the operation, constantly reviewing costs and, more crucially, the efficiency and the working methods.
"I build good people around me. I believe in teams. We work and play hard. I am relatively inclusive and very, very determined. There is no limit to where next - anything is possible."
