Royal restoration

For most people, owning their own hotel is a long-held ambition which takes great thought and experience to achieve. Gordon Shepherd, however, readily admits that his entry into the hotel business last year was with no long-term planning and no experience. But where Granada gave up on the Grimsby Posthouse and put it up for sale, he is gradually turning it into a success. And he believes that other unwanted Posthouses could also prosper under private ownership.

While Granada has not formally put a "for sale" sign over the door of all its Posthouses, there is widespread speculation that the company sees its future in the hotel business polarising between budget lodge accommodation and the four-star market. In lieu of any wholesale sale announcement, Granada has been quietly selling off provincial Posthouses which don't fit into its hotel portfolio.

Shepherd is best known in the catering industry as the person who, in the early 1990s, bought and turned around ailing catering equipment company Viscount Catering, with its Moorwood Vulcan and Sadia refrigeration brands. He sold the Sheffield-based firm last year for just over £10m to Berisford, whose equipment brands include Garland and Convotherm.

But at an age when most self-made multi-millionaires would look to the sun and the golf course, 63-year-old Shepherd was determined to get into another catering business. Buying the Grimsby Posthouse came quickly. After seeing an advertisement in Caterer, he made an anonymous visit to the hotel and immediately recognised that, while it was tired, it had potential. Grimsby itself is under-hoteled and has the largest concentration of food manufacturing in Europe.

Within weeks of that first visit his bid of £900,000 for the 52-bedroom hotel had been accepted, and he became the owner in February last year. He was confident that, with no hotel experience save checking in, he would succeed where Forte's management had given up.

"Turning round businesses is something I've been doing for a long time, long before I took on Viscount," he says. "People said to me that the hotel business is not like any other - which is exactly what I've been told in any other business I've gone into. Then I got told that hotels are a people industry. I ask you, what industry isn't a people industry? It doesn't matter what you are doing, you are dealing with people."

Inexperience in the day-to-day operation of a hotel is an advantage, says Shepherd, as long as you have a sound understanding of how to run a business. "You come to it with a different set of eyes - no prejudices," he says. "You ask stupid and basic questions, and so often when you ask someone why they are doing something that way, they say, ‘Because that's the way we've always done it'."

Trading was already slowing down when the sale of the hotel went through, and when it was withdrawn from the Forte group room sell, occupancy plummeted to single figures. So Shepherd found himself the owner of a hotel with a desperate trading performance and a demoralised staff, badly in need of heavy refurbishment and in a town shunned by almost every national hotel chain.

His turnaround began with a name change. The classic 1960s-design hotel had formerly been known as the Humber Royal, and a reversion to that name was part of a £250,000 refurbishment programme, now nearing completion. And Shepherd has gone on a charm offensive with the townspeople and businesses of Grimsby to explain that the Posthouse is no more, the Humber Royal is back.

But anyone wanting to turn around an ailing hotel needs to follow some basic business recovery rules, says Shepherd. His first rule is not to drive cost out of the business, but to drive quality in. "Offer incredible value for money and people will come back," he says. "That's what's wrong with a lot of businesses these days - they want to chase the fast buck, never look to build for the long term."

Shepherd has done this first by cutting the room rate from the Posthouse price of £69 to £49 a night. He is, he says, offering a hotel with all its facilities for not much more than the cost of a lodge. That is cutting his margins very tight, but his plan is first to win the customers and let them see the offer, then start to tweak prices back up.

Having bought the hotel without any bank borrowings, Shepherd admits that he has the reserves to take a short-term hit in the way that anyone buying a similarly redundant Posthouse through loans might not. Yet he still believes that many more Posthouses could have life after Forte under private ownership.

The food operation has had a dramatic overhaul. Out has gone the formula of a chain operation and in have come fresh ingredients and a simple, traditional menu. The reaction from the kitchen, says Shepherd, was: "Wonderful! When do we start?"

Another example of how cost-plussing instead of cost-cutting can bring a trading benefit was when Shepherd decided to employ a full-time bar person, instead of a bell on the bar to summon someone from elsewhere in the hotel. "Would you walk up to a bar and want to buy a drink when there was nobody there?" he asks. "We tripled takings just by having somebody there all the time."

He adds: "This is it with cost-cutting - it's a self-fulfilling prophecy. The accountant says, ‘Cut the staff.' Then business drops, so the accountant says he was right, and let's cut staff again. I could do that. I could turn all the lights off, the heating off, close the kitchen - and costs would be nothing, just like the business."

The most obvious cost saving that private hoteliers lose out on is purchasing - the clout of a big chain will always get better discounts. Shepherd shakes his head. "It all depends how good you are at buying and dealing," he responds. "For one thing, I pay my bills on the day they are due. What's the point of a big order if you have to fund the debt?

"I'm not using expensive national contracts, but local businesses, which are cheaper, more responsive and just as good or better. I'll give you an example: the lift maintenance contract for this hotel used to be £3,500 a year with a national company; I've done it with a local firm and the contract is £900."

While the rooms need to be sold to visitors, Shepherd points to the size of the target. "There are masses of factories in Grimsby, all having people coming to see them," he says. "All I have to do is get 50 people a night to stay here. Look at it like that and it's easy."

Local leisure use of the hotel has grown enormously in the past year. With a licence for civil weddings, a dance floor with weekly sequence dances for the grey market, business meetings, society meetings, banqueting and a restaurant that overlooks an adjacent golf course, the Humber Royal has already regained its position in Grimsby as a smart place to hold an event.

This, says Shepherd, is what comes from giving "ownership" of the hotel back to the community. He concludes: "I've given the Humber Royal back to Grimsby - and it's working."

Source: Caterer & Hotelkeeper magazine, 20-26 July 2000