Jarvis: ready to go international?
You might think there would be a hint of emotion among senior executives at Jarvis Hotels over the erosion of a name that the company spent the best part of a decade building into a recognised brand. If there is, it's well hidden. Following the 20-year franchise deal struck with Marriott International in 2001, most of the mid-market group's 68 UK properties have been renamed Ramada Jarvis. Only a handful retain the old badge - four of these are up for sale and the plan is to phase out the Jarvis name entirely.
Whatever personal feelings company founder John Jarvis may have about the name change, chief executive Richard Thomason, who joined the company when it was set up in 1990, clearly has no regrets. He says that the tie-up with Marriott was a good deal. "It didn't involve us having to invest, it gave us worldwide representation, and it connected us to one of the best worldwide distribution systems," he says, adding that the name change is about commercial astuteness.
The deal means that Jarvis is now linked to Marriott's central reservation system, MARSHA, which, its operators claim, increased international bookings by 50% in April and May last year, compared with the same period the year before. The other main benefit to Jarvis is to gain a brand name that is internationally recognised, particularly among US customers. Jarvis is also pinning its hopes on Ramada expanding in Europe as well, to give it even wider recognition.
Ramada is established in the USA through franchise company Cendant, which operates the Days Inn chain. But it was not well known in Europe until Marriott, which owns the Ramada name outside of North America, struck two important deals. The first was to hook up Marriott with German group Treff Hotels and Resorts, which led to the conversion of some 80 hotels to the Ramada brand in 2001. The second was with Jarvis a year later. These deals gave Ramada a significant presence in two of Europe's most important destinations for business and leisure visitors.
It is understood that talks between Marriott and two further major hotel groups in other European countries could come to fruition within the next 12 months.
Unlike the deal with Treff, Marriott's agreement with Jarvis does not restrict it to opening a set number of hotels within an agreed timescale. If Jarvis wishes, it can retain just the 57 hotels under the Ramada name. The agreement also allows Marriott to recruit other operators to use the Ramada name in the UK, while Jarvis is free to use other brand names.
But what has the deal meant to Jarvis in financial terms? Payback appears to be a long time coming, and Thomason regards the deal as having a "neutral" impact on last year's income. He is quick to point out that there was no entry fee to the franchise agreement so "it certainly didn't have any negative impact". The group does, however, expect to see increased bookings from its association with Marriott within 18 months.
Jarvis, as with the majority of stock-listed hotel groups, has had a rough ride over the past two years. In its most recent set of interim results, pre-tax profit fell by 16% during the six months to 12 October. The ever-important business travellers were thin on the ground, but Jarvis boasts that an increase in leisure guest numbers helped keep occupancy to a steady 70%, while keeping revenue per available room to £36.59. Mind you, this represented a 3% dip compared with the same period the previous year.
Room pricing is left entirely to Jarvis and Marriott has no say about whether it discounts rooms or not - although, tough year ahead or not, doing so is not on the agenda. "Once you start discounting," says Thomason, "it is very hard to get room rates back up again."
Refurbishment is likely to cost the company about £13m this year. As much as 40% of this will be spent behind the scenes - for example, replacing old plumbing in some of the older buildings, and doing maintenance work that the company would have carried out with or without the Ramada association. There is, though, a lengthy list of requirements attached to the Ramada brand, such as installing electronic door locks, and providing wooden coat-hangers and a set number of towels in all rooms.
Thomason says, however, that one of the attractions of the Ramada brand was that the Jarvis hotels didn't need a great deal of work to bring them up to scratch. "It's not prescriptive of what we have to do," he says, "and they are enhancements that we were going to do anyway. In many cases, we have already gone beyond the brand standards. Ramada still uses sheets and blankets, but we use continental quilts in 5,000 of our bedrooms, which they are delighted about."
Time scales for improvements, he adds, vary from hotel to hotel and tend to be by verbal agreement, rather than being set in stone.
One huge project which had been put on hold was the £20m refurbishment of the 272-bedroom Jarvis Piccadilly Hotel in Manchester, but Thomason says this now looks likely to go ahead next year. The hotel, a leased property, may lend itself to another brand, and Thomason is not prepared to commit it to the Ramada brand until the refurbishment is complete. "What the brand will be is still very much under discussion," he says. "We are not tied to the Ramada brand. It could become one of several."
In the long term, the Ramada name should help Jarvis expand overseas. Thomason insists that there are "no immediate plans" to expand into continental Europe, but there are opportunities on the horizon that may not have appeared before the deal was struck. Once Ramada has become more established in Europe, Jarvis will look at taking on operational deals with hotel groups with no fewer than 10 properties.
In the meantime, the focus is clearly on expanding its leased portfolio in the UK. Jarvis' hospitality management division is currently negotiating for various sites with a view to operating them under the Ramada brand. Thomason says: "I don't want to buy the bricks, I want to operate them. There are opportunities and we are taking them."
The big plan is to become a hotel management services company which manages instead of owns its hotels. It has already made inroads with a £150m sale-and-leaseback deal on nine of its own hotels last year. A consortium of private investors bought the properties, allowing Jarvis to return £85m to its shareholders and bring its proportion of owned properties down to 70%.
Further such deals will follow, says Thomason, but he wants to ensure that these will be individual sales, choosing hotels that will give Jarvis the best returns and won't mean inflated rents, rather than letting go a group of hotels in a rush to raise cash. "We are very careful to pick mature, well-located hotels that are fully capitalised," he says.
"Careful", "cautious" and "sitting tight" are the buzzwords among operators in the current economic climate, and Jarvis is no exception. But one thing is certain: the move to Ramada has meant that more opportunities are likely to present themselves to the group, and it won't be slow on the uptake.
The history
1990 John Jarvis and David Thomas buy 41 hotels from Allied Lyons in the industry's largest management buy-in
1994 Acquires 20 properties from Resort Hotels
1996 Floats on the London stock market
2001 Signs a deal with Marriott International to see 56 of its 65-strong estate renamed under the Ramada name
2001 Takes on first Travelodge franchise, at Glasgow Airport
2002 Signs a £150m sale-and-leaseback deal on nine of its hotels
Number of hotels: 68
Bedrooms: 6,800
Number of employees: 6,103
Average room rate: £52.29
Revenue per available room (revpar): £36.59
Occupancy: 70%
Before you go, Richard…
What was your first job in hospitality? Control clerk at the Mandeville Hotel in London.
What's your favourite hotel? The Carlton in Cannes. It's a beautiful hotel. I worked there as sales director for the incentives department in the 1970s. I used to look after large groups of corporate Americans. It was a very tough job - you were up at 6am and in bed at 11pm, but I got enough time off to get a sun tan.
What annoys you most about hotels? Managers getting too involved. Things go wrong when teams aren't working well, and too often managers don't take that step back to see what's going wrong.
What's this about you and the water tank? I fell in. I was deputy manager at the Green Park Hotel [in London] and there was a problem with the water, so I went to see if the tank was filling up. I leant over and fell in. Luckily, I was a young strapping lad and able to climb out, but it was very cold.
