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In this week's issue... Play it again, Sam Sam Harrison returns to the floor at Hammersmith’s Riverside Studios, where his brasserie is set to be a blockbuster
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Luxury is child's play

01 January 2000
Luxury is child's play

There would have been no doubt about Toad's comment: "Bah!". In the house that is thought to have inspired Toad Hall of Wind in the Willows fame, the laughter - and screams - of children can easily be heard. Fowey Hall in Cornwall has been turned into a luxury family hotel, and since it threw open its doors on 31 July, has been 95% full. That's 18 bedrooms with an average room rate of £118.

This has exceeded the expectations of director Nicholas Dickinson and Luxury Family Hotels, which bought Fowey Hall for £575,000 in 1997 and spent £1.1m on refurbishing it.

"A luxury hotel that provides sophisticated comforts to both adults and children in a relaxed but stylish environment," is how Dickinson describes the vision for Fowey Hall.

Dickinson and co-director Nigel Chapman have ensured Fowey's early success by targeting customers who stay at Woolley Grange in Bradford-on-Avon, another hotel in the Luxury Family Hotels group. Dickinson reasoned that, of the three hotels in the group, the Woolley Grange clientele would like the luxury of Fowey and would appreciate seeing a different part of the country.

A direct-mail campaign targeted 12,000 guests on the Woolley Grange database. In doing this, there was a danger that the customers would merely decamp from one hotel to the other, but early signs are that this has not happened.

Penny Simpson, in charge of strategic marketing, believes this is because guests tend to book for a week when they come to Cornwall, but usually book for weekends at Woolley Grange - so they now use both hotels in different ways.

Further marketing was done through Families Group magazines, which target parents in different parts of London. Some 9,000 names were cherry-picked, targeting families in Kensington, Notting Hill Gate, Kingston and Richmond.

The drive to fill the hotel in its first month was born of financial necessity. Fowey Hall should have opened in May, in time for the local Daphne du Maurier festival. It would then have ironed out any operational bugs during June, and would have been running smoothly in time for the school holidays. But Dickinson sought in vain for builders, and asked eight to tender before he finally found one who could do the work - starting three months late, in April.

He set the builders the near-impossible task of finishing the work for the beginning of August. But they could not complete all of the work - refurbishment of the main house's 18 bedrooms, an extension to the restaurant, and conversion of the coach house into eight suites.

Something had to give, and Dickinson sacrificed the coach house to ensure that the main house would be ready for opening. He also had to accept that even after opening, the builders would still be on site to finish the coach house.

In May, Dickinson recalculated his budget and the sums looked reasonable. Opening on 2 August, Fowey Hall would have 728 room-nights available for that month, with an estimated 75% occupancy. This meant 546 room-nights would be let at an average of £95, yielding £51,870 in the first month.

But this was based on 26 rooms, including the coach house. Sacrificing the coach house means Fowey needs to be 92% full in August to achieve the forecast revenue.

The August revenue is crucial to the operating profit for the rest of 1998. Before opening, the hotel had an operating loss of £43,197, effectively the costs incurred, such as the salary of the caretaker and the general manager. By December, Dickinson forecasts Fowey Hall will have reduced the loss to £13,982. Crucial to doing so is the forecast August operating profit of £28,483.

But now Dickinson believes he will exceed the budget on the basis of the 95% occupancy in August and the room rates being higher than expected. The spacious rooms at Fowey Hall can command higher rates than the £100-200 he had originally estimated. Rates begin at £125 and suites with interconnecting rooms can command £295, increasing the forecast average room rate by about 25%.

Oddly, not opening in May has actually had a positive effect on the balance sheet. "We were going to open and lose money in May," says Dickinson. "The equity bought the hall, so the bank's money was used for the refurbishment, so we weren't then paying the interest."

Fowey Hall has been financed with a £700,000 commercial loan from Barclays Bank and £1.125m of equity from 60 private shareholders. Some of the shareholders have been guests of the other hotels in the group, and Chapman and Dickinson hold some shares, as does non-executive chairman David Newling Ward.

Fowey Hall was actually on the market for £550,000, but there was competition and Dickinson and Chapman knew they wanted it, and so they bid £575,000.

Added to the purchase price was £25,000 in costs, leaving £125,000 in working capital.

The loss in year one will be recouped in the second year, and by the end of 1999, Dickinson has forecast an operating profit of £178,656 on revenue of £855,658.

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