Herriot's law

Michael Herriot is out to persuade independent hoteliers that the Virgin name can be as strong in hotels as it is in other areas. As managing director of the Virgin Hotel Collection, he wants to sign management contracts and marketing agreements with hotels all over the UK and in some overseas markets.

At present, there are 39 hotels in the collection, including seven owned by the group and three under Virgin management. The rest, all signed since 1994, are independently owned and run, but have joined the Virgin Hotel Collection for sales and marketing purposes.

As the Virgin Hotels Collection enters its second decade, Herriot is seeking to expand the portfolio to around 50 properties. However, he notes: "We will never want to be the biggest hotel company in the world."

Hoteliers interested in allying themselves with the Virgin brand will find that Herriot has very set views on the type of property he wants. The criteria are that hotels offer a country house-style product and are in some way physically or historically unique. They must have at least three stars from the AA and RAC, and a minimum service rating of 70%.

The unspoken qualification for membership is an ambience which satisfies Herriot's demands. "I am the sole judge and jury," he says, adding that he has good experience of what three- and four-star hotels in the UK have to offer.

When Virgin first decided to move into marketing and management as well as ownership of hotels, Herriot assigned his daughter Mhairi, who had just left university, the task of going through every hotel guide and drawing up a list of all the hotels which, on paper, could fit the Virgin criteria. There were 367 in all. She then phoned all of them to ask for a brochure. "Two-and-a-half years later, some brochures still haven't arrived," Herriot remarks grimly.

Only 15 phoned Mhairi to pursue her enquiry. Herriot singles out Woolley Grange Hotel, Bradford-on-Avon, as the only one to keep her on its mailing list.

Herriot insists he has steadily worked his way through the list, in some cases just calling in for a quick visit. He says that within a few minutes he will have decided whether the hotel is right for Virgin. "I have been in this industry for 30 years," he says, "and I know within five minutes if there is a problem. I can feel it in my waters."

Hotels instantly discounted are those where there is a tired and worn look to the decor, the service is lacklustre, and no effort is made to encourage the visitor to spend money. "I have the attitude that if someone comes into a hotel with £10," he says, "I want £9.99 of it."

Hoteliers who pass the Herriot test can expect an intense sales pitch. Herriot claims to have researched what is on offer from every other hotel marketing and representation company in the UK, and he pledges that the Virgin package offers more in the way of personal back-up from the head office sales force.

Herriot reckons that Virgin's closest rivals among the myriad hotel representation companies operating in the UK are Pride of Britain and Small Luxury Hotels of the World, in terms of the style of property they represent.

If a hotel is big enough to justify the fee, then what Virgin really wants is a management contract. Virgin has total control, and the earnings are potentially significantly higher than a straightforward sales and marketing fee.

"We have proved in what we have done that we can earn a lot more money for an owner than they can make on their own," Herriot says. "I make more money per bedroom than any operator of country house hotels." He is cagey about giving figures, but comes up with a per-bedroom revenue figure of £60,000 a year.

He says that managed hotels benefit from being able to tap into Virgin's purchasing deals, and from having a strong in-house sales force.

A prime example of Virgin management turning a business around is the case of the three hotels which Virgin acquired from Welsh Water earlier this summer, after having managed the properties since 1994. Herriot says that at Seiont Manor Hotel, Coed-y-Mwstwr Hotel and Cwrt Bleddyn Hotel the average rate was £31 when Virgin took control three years ago. This year, the average rate has increased to £63, which explains why Virgin was keen to buy them when the water authority decided to sell in order to concentrate on its core business.

At this point, the only management contracts Virgin has in the UK are with the Close, near Tetbury in the Cotswolds, and Mickleover Court in Derby. Independent hoteliers have more choice when it comes to getting feedback on being a marketing member.

Among those who have signed up is John Appleyard, owner of Haley's Hotel and Restaurant in Leeds. He is preparing to add a £400,000 extension to his hotel on the strength of getting £15,000-worth of business last year from Virgin.

He is supremely confident that Virgin will bring him considerably more business next year, and in the future. It is this belief in the power of the brand which has persuaded him to buy the house next door, to add a meeting room and increase the number of bedrooms from 22 to 29. Appleyard says that being linked to the Virgin brand also gave him credibility with his bank when he went looking for the money he needed for the project.

He has been a member of the Virgin Hotel Collection since April 1995. When he first opened in 1990, he wanted to join an organisation that could market his hotel nationally and internationally, but had already ruled out both Best Western and Consort. Appleyard says: "I am not criticising them, but at Haley's we are offering a much higher standard than their typical hotel."

Appleyard also looked at Small Luxury Hotels of the World and Pride of Britain but felt that his hotel, with its strong corporate market, did not fit with the "pretty fabulous" country resorts featured in their portfolios. However, he says: "When I read in Caterer that Virgin was going into marketing hotels, I immediately felt that this could be what I was looking for. I felt that Virgin could not be a bad brand to be associated with."

In the first year of membership, Virgin produced £6,000 in revenue for the hotel. In the second year, this soared to £15,000, mostly from a mix of conference and leisure break business. Next year, he expects this to increase to £25,000.

"I can wholly recommend Virgin," Appleyard says. "The only caveat I would add is that hoteliers should be sure that Virgin can bring them the business they have gaps for. If Virgin can offer corporate business from Monday to Thursday, and you are already full on those nights, there is not much point."