Independents day
Zoffany - it's not an easily forgettable word, and that's the point. When MSI Hotels rebranded more than a year ago, it wanted a name that would stay with people. The word itself could be borrowed from the English 18th-century artist, Johann Zoffany; it also appears in Gilbert &Sullivan's comic opera Pirates of Penzance, and it's the name of a rather expensive wallpaper, but otherwise "Zoffany" applies to a fast-growing group of hotels.
How fast was highlighted in the Sunday Times‘s annual Fast Track 100 list of companies, when the group moved from 20th position in 1998 to 14th position in December 1999. The survey measures growth of private companies based on annual sales growth, and Zoffany was the only hotel company in the top 40.
Turnover for the group for the year ending March 2000 was £12m, and chief executive Niall Caven forecasts that it will reach £14.5m in the current financial year. Average achieved room rate is currently £48, with occupancy sitting at 68%. But most significant is the room yield, which has increased by 6% year-on-year, according to Caven.
However, most people could be forgiven for not recognising the name. There's no real branding in the group, which consists of 10 hotels, mostly in secondary city centres.
Zoffany began life when Caven and two friends, Peter Collins and Richard Edwards, thought about setting up a hotel company. Various deals came and went and, in the spring of 1992, the trio were working as Management Services International (MSI), turning around hotels that had gone into receivership for the banks that had become the owners of the properties.
In the spring of 1993, Richard Koch, founder of management consultancy LEK, decided to retire and bought the Westcliff hotel in Southend-on-Sea, Essex. Needing someone to run it, he called in MSI. By 1995, Caven, Collins and Nick Sonley, who joined when Edwards left to work for the World Bank in 1994, realised that they had learnt a bit about what worked and what didn't. Knowing they were at the end of a recession and deciding that there was no long-term future in managing hotels for banks, MSI became MSI Hotels, with Koch as the primary financial backer.
Early in 1995, the Goddard Arms in Swindon, Wiltshire, and the Red Lion hotel in Basingstoke, Hampshire, were bought from Forte, just weeks before its takeover by Granada. The most recent acquisition was the £1.1m Arno's Manor hotel in Bristol in September 2000. Zoffany will spend between £1m and £1.5m converting it from the existing 24 bedrooms to the 50-70 that are more standard in the group's other hotels. Refurbishment begins this month and should be completed by the end of the summer.
"Bristol has been on the list for a while," says Caven. "We decided early on there was no point in competing in primary destinations, so we looked for strong commercial secondary locations." For Zoffany, hotels need a bit of character, 50-plus bedrooms, or the potential to create them, and Caven admits the properties need to be a bit run-down in for him to acquire them at a sensible price.
For the first two years of ownership, Zoffany has a strategy. After the purchase, the directors come in, observe and get to know the staff. They work on the hotel in the first year to show they mean to initiate change, then, with some of the cash flow from year one, the major refurbishment takes place during year two, by the end of which the hotel has usually moved into profitability.
The amount invested in individual properties naturally depends on the state of the hotel. At the Goddard Arms in Swindon, £750,000 has been spent in five years, and there is a continuing refurbishment programme. But £1m has been spent since 1995 making the two-star, 65-bedroom Grand hotel in Northampton into a three-star, 56-bedroom property with a trendy bar and a restaurant that boasts an AA rosette.
Word-of-mouth publicity
Project development on all new purchases is done by the directors and the general manager. This serves two purposes. First, it means that the group has a core of contractors to call on when needed, and it builds a relationship with local service providers, which is good for word-of-mouth publicity. And second, it saves money - Caven estimates that his development costs are 25%-50% cheaper than those of operators who hand the work to someone else.
General managers are effectively managing directors of their own hotels. They have central office support in sales and marketing and financial training, and a central conference booking line, but otherwise they're on their own.
"Monday to Thursday, more than 50% of the business at the hotels are regular repeat customers who come to the area on business, or are in the local business community," says Caven. For this reason he does not agree with the view widely held, especially by venture capitalists, that the three-star market is dead.
"I don't believe in labels," he says. "To say we're not four-star may just mean we don't have a lift. I think, if you're in a strong business market, not everyone will want to spend £120 a night and they won't always want to be in a modern box. We're in towns, so people can wander around and they're not stuck out on some carriageway."
While big hotel companies which Zoffany buys from may struggle to make the properties work, Caven believes a smaller company has an easier time. "Big companies are good at running big hotels but not good at the smaller ones, where you really have to work for the business," he says. As an example, he points to the Red Lion in Basingstoke, which had an average achieved room rate of about £20 when Zoffany bought it in 1995, and is now achieving about £60.
The company's goal is to acquire 20 hotels, but Caven says he will not buy for the sake of it. "It is a question of sticking to our principles, and finding the right price and right location," he says.
FACTS:
Zoffany Hotels
35 Kingfisher Court, Newbury, Berkshire
Tel: 01635 35494
Hotels: 10
Ownership: Richard Koch (majority shareholder), Nick Sonley and Niall Caven (Peter Collins retired in 1999)
Central conference line: 0870 606 6065
Source: Caterer & Hotelkeeper magazine, 11-17 January 2000
