Thistle sharpens up its act

A troupe of Thistle's general managers file out of new chief executive Arun Amarsi's office, leaving him just a couple of hours before he has to catch his flight back to Singapore.

Amarsi, originally from New Zealand, is spending 90% of his time in London and the rest in Singapore at the head office of BIL International, Thistle's new parent company and former majority shareholder.

Thistle's takeover last month by the investment firm takes Thistle private after seven years of underperformance on the stock market and was followed by the swift exit of former chief executive Ian Burke and his board of directors.

But any direct questions about the previous management are waved away by Amarsi. "I don't want to go through all that; there is no point in criticising the past," he says quietly.

The five who have just left his office, he reveals, are Thistle's new "super-GMs". This group of general managers, selected from Thistle's key four- and five-star properties, have been given new powers of responsibility for a cluster of London hotels.

It is part of Amarsi's regime to breathe new life into the flagging group. His background, although a non-executive director on the Thistle board for two years, is not in hotels but finance. Before joining BIL, Amarsi was chief financial officer for the Electricity Corporation of New Zealand and formerly a partner at Ernst & Young in New Zealand.

His approach to Thistle is simple. "Those who live and breathe the hotels are better placed to run the businesses," he says. "Empowerment had gone away from the general managers to central departments; we want those who run the hotels to have more accountability."

The scheme gives each cluster its own finance and personnel operations, both of which were previously centralised functions. Those who have worked in the industry long enough will recognise it as an idea that is more cyclical than radical and its introduction has not been without casualties.

Change at the top
The shift in responsibilities has stripped out a layer of management and placed operations managers - now called "hotel managers" - in charge of the day-to-day running of hotels. Five of Thistle's general managers have been made redundant, including those from the Royal Horse Guards and the Thistle Piccadilly.

It is the most dramatic change BIL has imposed since last month's takeover - and probably the most dramatic it will ever need to make. Thistle Hotels has long been a thorn in the side of BIL, which has been a majority stakeholder in the business for more than a decade. As an investment firm, a profitable exit after five years would have been a reasonable expectation, but the return on its investment has remained elusive.

Having floated on the stock market in 1996, Thistle failed to achieve a price deemed reasonable by BIL. A series of missed financial targets saw the ousting of chief executive Robert Peel and the appointment of Ian Burke. But despite Burke's best efforts, the company's performance continued to disappoint, its share price failing to give BIL its desired return.

Being so reliant on the London market, and with a brand widely recognised only in the UK, Thistle has struggled further in the downturn of the past two years. "When everyone went down, Thistle went down further and there was no reason for it. It needed better management," Amarsi says.

Simply to replace one chief executive with another would not have been financially beneficial to BIL. As Peter Joseph, analyst at KBC Peel Hunt, points out, BIL, as a majority shareholder, could have insisted on radical changes without taking over the company.

"I don't think Thistle did particularly worse than any other hotel company," he says. "The management couldn't have done anything more dynamic. And if there was a quick fix to be had, BIL would have leant on Ian Burke to do it over the past decade. They bought the company on the cheap, because they could," he adds.

BIL waited until the hotel industry was at its lowest ebb and put in a cheeky bid in March at 115p per share. However, shareholders held out until it upped its offer to a slightly more respectable 130p, which they accepted last month.

Industry observers expect BIL to team up with another hotel group to introduce an internationally recognised brand to the hotel company, such as Marriott or Ramada.

It would be an obvious move but one that would certainly erode profits in the short term. Amarsi admits that there have been approaches by "all the big names" and won't rule it out as an option in the future.

For the moment, however, he seems more attracted to the idea of focusing on the individuality of the group's hotels. "The company tried too much to adopt a ‘one size fits all' rule," Amarsi says. "These are very individual hotels and they need special focus."

The cluster general managers have been tasked with identifying areas for improvement within the hotels. These are likely to include recruiting more front-of-house staff to improve customer service at check-in and check-out times, revamping hotel restaurants and continuing work on the use of technology to improve service. "So many of the bookings are made through websites and it's a matter of using these properly and efficiently," Amarsi says.

As for disposals, Amarsi is still assessing the portfolio and concedes that there may be one or two hotel sales. However, he is adamant that the entire group will not be sold. He is reluctant to put a timescale on BIL's involvement in the business but insists: "We haven't bought it to sell it."

For the next three months, at least, he expects to continue a high level of personal involvement in Thistle's operations. After that he could spend just 50% of his time in London while the super-GMs are left to run the show. And that would suit him fine.

"A lot of organisations have good people in them," he says. "Once I sense they have the same sense of ownership that we feel, and the right strategies are in place, it will be less relevant that I am here."

The thistle story

• 1989 - Mount Charlotte hotel group, headed by Robert Peel, buys 34 Thistle hotels from Scottish & Newcastle and the Thistle brand name for £645m.
• 1990 - New Zealand-based Brierley Investments (now called BIL) buys the company for £664m.
• 1991 - Brierley sells 30% of its investment, leaving it a majority shareholding of 46%.
• 1996 - Thistle enters the stock market at 170p per share.
• 1997 - Chief executive Robert Peel is ousted.
• 1998 - Ian Burke is appointed chief executive.
• 1998 - Thistle sells 30 provincial hotels to Peel Hotels for £66.5m.
• 2002 - Thistle sells 37 hotels to Jersey-based investment firm Orb Estates for £598.6m but retains management contracts at all hotels.

This year's turn of events

• March - BIL, Thistle's majority shareholder, launches a hostile bid with an 115p-a-share offer, valuing the company at £555m. Shareholders reject the offer.
• April - Thistle responds, offering to return £241m to shareholders if they reject the bid, claiming it is too low.
• May - BIL comes back with a 130p-a-share offer, which is accepted. Chairman Ian Burke, chief executive David Newbigging and three other executive directors are ousted. Quek Leng Chan, chairman of BIL, is appointed chairman of Thistle, while Arun Amarsi, BIL's chief executive, becomes chief executive and managing director of the hotel group.

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