Peel's new skin

01 January 2000
Peel's new skin

WHETHER you are running an £18-a-night B&B or a five-star marble palace, it is the small details that guests really care about, according to Robert Peel, chairman and chief executive of Peel Hotels.

Take fresh orange juice, a subject very close to his heart. "Tell me, how many hotels serve proper fresh orange juice for breakfast?" he asks. "There will be meetings in companies about saving money where they will spend three hours trying to decide what is the best of the shittiest orange juice. I say, sod that."

Involving himself in the nitty-gritty earned him much scorn from critics in his former role as chief executive of Thistle Hotels. Now in charge of running the 29 provincial hotels sold by Thistle to global investment bank Lehman Brothers for £62.7m, Peel hasn't changed.

For the managers of those hotels, Peel's idiosyncrasies will be all too familiar. During the past month, Peel has embarked on a mission to scrutinise every last detail in the properties - from the grout between the tiles to the stains on the carpets. In Portsmouth's Hospitality Inn, for example, he spent seven hours examining all of the 115 bedrooms.

Following his departure from Thistle last November, Peel founded Peel Hotels, buying the Bull hotel in Peterborough for £3.85m. His deal with Lehman Brothers is a two-year management contract giving his company an income which will allow it to accumulate capital to be used in turn to expand its owned portfolio. It has also given Peel the finances to recruit an administration team.

This team consists of 16 former Thistle staff who will run a centralised sales and administration office at the Golden Lion hotel in Leeds - located, ironically, and conveniently for the staff who have jumped ship, just across the road from Thistle's own head office.

The team includes Peel's most trusted directors from Thistle: Norbert Petersen, who left his post as senior operations director to be chief operations officer, and John Perkins, who moved from operations director of accounts to financial director.

To the punter, all the hotels - whether owned by Peel or Lehman's - will come under the umbrella of Peel Hotels for sales purposes, but legally the former Thistle Hotels are owned by Grace Hotels, a subsidiary of the merchant bank. Although all 29 hotels are profitable, generating about £8m last year, a request for overall performance figures seems to hit a raw nerve. "Everyone likes putting the occupancy and average room rate as a whole and it looks crap," says Peel. "That's why Thistle's occupancy and growth rate will look good, because they are taking all these hotels out."

Average figures are "meaningless" for this group, he explains, because some of the hotels are seasonal and therefore close for the winter. In fact, many achieve high occupancy levels, such as the Ship in Weybridge, which achieved 80% occupancy last year. Overall, the group of mainly three-star properties, ranging from seaside hotels to city-centre inns, has an average of 66 bedrooms, and last year achieved an average room rate of £51.20 with overall occupancy of 57.4%.

Peel estimates that about £5m over the next two years will be needed to bring the hotels up to scratch, and it is his task in the meantime to boost sales through the centralised sales team and by improving each hotel's reputation within its local community.

But if there are improvements to be made, why didn't Peel make them when he was at Thistle? It all comes back to his obsession with detail. "At Thistle," he says, "I was running whatever it was important for me to run wherever there was a problem. With 100 hotels, it was physically impossible to get into the kind of detail I can now."

Dismissing as "nonsense" the widely held notion that he was reluctant to sell the provincial hotels when at Thistle, Peel recalls that his plan was to sell them "in time", not to make the quick sale that the major shareholder wanted - and achieved, once Peel was out of the picture.

Motivating staff, who may have been feeling insecure in the lead-up to the sale of the hotels, is the key to generating revenue, in Peel's book. Coming from the man who ran the UK's second-largest hotel group, it is a refreshing theory of his that staff enthusiasm can only be achieved by working alongside them, not by issuing a bunch of meaningless corporate catch-phrases.

Peel does not appear to be overly bothered about the impact a recession may have on his business. Actually, he believes that it will be more of a "demand blip" than a fully realised recession. And, let's face it, it was not Peel Hotels which stumped up the £62.7m for the Thistle properties.

He sees the three-star hotel market as safe ground for weathering the storm, but concedes that there is bound to be pressure on rates. "It just means you have to think of bright ways to create more business," he says.

One of the ways he has boosted sales in his own hotel, the Bull, has been to install an Internet system linked to the televisions in each room. This, he claims, has already increased sales to corporate customers, who are charged at local telephone rates for use of the system. Peel Hotels is considering taking a 33% stake in Virtual 9, the company that set up the system, and is about to help launch it to UK hotel chains.

Since acquiring the 103-bedroom Bull hotel in March, Peel has made several changes. As part of a £150,000 improvement programme, walls have been knocked down to open up and expand the restaurant area, and the first phase of public area renovation is now complete. The company has also taken on the lease for an adjacent building covering 9,000sq ft. Some £250,000 is to be spent converting it into a conference centre with seven suites, the largest having a capacity for 300 people.

Peel is on the lookout for further hotels, and has two properties in mind, but he is cautious about the timing of his acquisitions. "I could do a big deal tomorrow and get institutional backing," he says, "but I want to build it slowly - slowly through strength, rising share price and good results."

Peel modestly describes the performance of his company's shares as "no great huffs and puffs", but the figures speak for themselves. After flotation on the Alternative Investment Market in March share values in Peel Hotels soared from 25p to 110p within a couple of weeks. Last month's announcement of the Lehman's deal sent them to 142p before they settled back to a respectable 132.5p as Caterer went to press.

To get Peel Hotels off the ground, Peel, who owns 60% of the shares, put in £750,000 of his own money and raised £500,000 at the flotation. A bank loan secured a further £3m.

Peel is determined not to be left in the same position as he was at Thistle. He built up Thistle Hotels, formerly Mount Charlotte Investments, during the 1980s but in 1990, shortly after the acquisition of Thistle Hotels from Scottish & Newcastle, the company became the subject of a hostile bid from New Zealand group Brierley.

"One thing I don't want to do," he says gravely, "is to get into a position where I will be a minority shareholder of a huge company and an employee again."

Of course, Peel could have retired comfortably, having left Thistle with about £1m. But that's not his style. "It would have been wonderful to have reached retirement still growing Thistle," he reflects. "Maybe I can build something worthwhile again." n

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