Better business: the Grove of Narberth

The couple found the hotel while searching for a development opportunity for a self-catering cottage business in Devon, and had even submitted a bid on another property. However, a fortuitous spot by Neil's sister in an estate agents' window on a family trip to Tenby, as well as a spontaneous detour on the way home, took them in a rather different direction.

e Grove of Narberth is nestled in the countryside overlooking the Preseli Hills. The site dates to the 15th century, when it was owned by the bailiff of Tenby, and the main house is believed to have been built in the 1680s. In 1874, Arts and Crafts architect John Pollard Seddon was employed to make renovations and alterations to the building, but by the time Neil and Zoe came along, the house was derelict and trees were growing through the roof.

The couple acquired the Grove in October 2007 for £785,000 with funding from RBS and opened the property in June 2008 with just one housekeeper and four bedrooms. The kitchen was converted for commercial use six months later and the business has now grown to 14 bedrooms in the main house and 12 in the cottages. It achieved its current three AA rosettes in 2014 and four red AA stars in 2015, with total investment approaching £4m.

The challenge

Throughout the past 10 years, Neil and Zoe have remained the only directors of the business. Without a private investor with deep pockets backing the project, expansion has had to be funded by themselves or through grants and loans, which has meant slow but steady development and keeping the costs down.

"We have explored and even talked to possible business partners to inject more capital into the wider business," says Neil. However, they have decided to prioritise creating a business that aligns with their vision, rather than worrying about delivering returns to shareholders.

"Building a business this way is tough and often frustrating because you would sometimes like to move quicker. It has its limitations and it does mean that it has to be built on solid performance and consistent levels of delivery over many years," he adds.

The solution

Things started off on shaky ground - following the financial crisis, RBS immediately requested extra funds even before the first drawdown on the signed development loan had taken place.

The business has, therefore, to an extent been shaped out of necessity and in response to demand from locals and guests. While the intention had been to focus on self-catering, the financial crisis meant that had to be rethought, so they opened four bedrooms on a bed and breakfast basis, with Neil assuming the role of chef. Excellent early revenues from the self-catering cottages which opened in July 2008 were also a key part of maintaining bank support, which encouraged them to open the restaurant six months later and add two more rooms.

ome from local diners was also critical in the early days, and they had to work hard to promote the new restaurant in Narberth and the wider Pembrokeshire community by offering a differentiated, high-end menu. Since then, the hotel has always been a food-led venue, with F&B revenues typically contributing 55%-60% of turnover each year. Allister Barsby has been overseeing food and beverage at the hotel as executive chef since 2016.

Other business ventures across the Seren Collection include Coast, a two-AA-rosette seafront restaurant and café in nearby Saundersfoot, which was launched in 2014 with Will Holland as head chef. Holland departed the business to join the Atlantic hotel in Jersey last year, and since October 2017 Tom Hine has been establishing a more informal, fish-focused menu.

n 2016 Neil and Zoe opened the Beach House in Oxwich Beach on the Gower Peninsula with Hywel Griffith as head chef, which has also achieved two AA rosettes. Enjoying widespread coastal views, it was named AA Restaurant of the Year - Wales 2017-18, which is an impressive double whammy considering Coast held the same title in 2015-16. Neil says that, similarly to Coast, Beach House will generate a "sensible" bottom-line profit in its second year.

To ensure each site has its own individual feel, each chef is allowed to express their creativity and style.

"Our hotel and restaurants are in rural, out-of-the-way locations, and so they have to be destinations in their own right," says Neil. "It is vital that the leaders in the venues feel real ownership and become the personalities with which the venues are associated."

ever, the more the Grove moved into fine dining due to the demand from hotel guests, the more local custom drifted away. The recent £350,000 refurbishment of the ground floor, which included the bar, lounge, the relaunch of the restaurant as the Fernery and the opening of the more informal Artisan Rooms (three dining rooms at the rear of the hotel) sought to address that.

The new casual dining option is hoped to encourage local diners back to the Grove and provide a differentiated offering to guests with the aim of keeping them dining in-house for at least an extra night (guests stay at the hotel for an average of 2.1 nights). "We are already seeing the impact we had hoped for," says Neil.

Having clinched awards including Pride of Britain Hotel of the Year 2015, AA Red Stars Inspectors' Choice Award 2012-15, Good Hotel Guide Welsh Hotel of the Year 2016, and being ranked 53 in The Caterer's Hoteliers' Hotels Top 100 in 2017, both Neil and Zoe continue to plough their profit into improvements to the hotel. The most recent ground floor refurbishment marks their third collaboration with interior designer Martin Hulbert, following the launch of Beach House and the conversion of the self-catering cottages into six suites at the Grove in 2016, taking the hotel to 26 rooms.

"The big challenge in delivering this project was controlling costs, because we simply cannot afford to spend the sums of money that we often see reported in the industry press," says Neil. "We selectively spend on more expensive items where it delivers comfort, such as chairs and sofas, but the layers of design superimposed on top don't have to be expensive."

A lot of the furniture has simply been refreshed. Some items like curtains were bought off the shelf, and decorations such as local pottery were sourced from nearby antique shops, giving an eclectic feel and a sense of place. The Fernery is simply decorated with ferns that have been handpicked from the surrounding hedgerows and pressed.

This project was completed in just four months, with the hotel staying open throughout. "We don't have the money, economic model or the financial support to close, given the huge overheads and high number of full-time salaried staff," says Neil.

Of the six phases of development the hotel has undergone, the same team of small, local contractors have been retained on an ongoing basis, with the couple overseeing project management and procurement.

"Everybody is paid an hourly rate, so there is real flexibility to change ideas as we work through the scheme without the pressure of re-costing and nasty change orders. Working this way, I have no doubt that it has saved the business millions of pounds," says Neil.

Staffing levels have similarly had to increase incrementally. The Grove's rural location means staff need a car, which can hinder recruitment. Neil and Zoe launched the Seren Academy in 2016 in partnership with three Welsh colleges, offering work placements and bursaries.

Bucking the trend of most hospitality businesses, approximately 90% of the group's staff are local, while those in senior roles with previous experience at the likes of Gidleigh Park, Cliveden House, the Bath Priory and Gleneagles, help to upskill the wider workforce. The Grove now has 39 full-time salaried members of staff and 53 full-time equivalents to cover seasonal demand, including 10 chefs.

"We have grown that steadily so as to not stretch our operating margins," says Neil. "Putting one-off start-up costs aside in year one, the Grove has always made a bottom-line profit, but to achieve that we have had to be patient watching the quality levels grow." In recent years the business' earnings margins have been squeezed significantly from the long list of well-publicised additional costs the sector is having to take on, such as increases in food costs and the National Minimum Wage. In 2017, the couple's business rates alone increased 280%, so while growth is significant, the bottom line is standing still. "It has left us feeling that we have been penalised for our success," says Neil. "We take so very little in terms of financial drawings ourselves and instead have ploughed nearly every penny of our profits back into the business. We already run a tight ship but there is only one response to the continued squeeze and that is to become more operationally efficient and reduce our overheads." Part of this strategy is the removal of tablecloths from the Artisan Rooms to reduce laundry bills, and the couple are looking at installing more electronic point of sale touchscreens for front of house staff to improve workflow. A new rota management system has also been rolled out to better track and control hours against budgets. When it comes to securing additional investment, the disparities in business valuations in rural areas of the country has been a challenge. "In our experience, most hotel valuers use an adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) multiple as a basis to value hotels, but these multiples vary greatly depending on where you are and the comparable sales in the region. "For a business like ours, that is almost unique in the region, this offers a huge challenge in that there are few if any comparables. Hence, our earnings would attract a multiple up to 30% less than a hotel of exactly the same earnings, grading and reputation as ours in Devon or Cornwall, for example. Given that our ability to obtain lending is based on our business valuation, this makes it extremely hard to achieve funding for capital investment." Government grant scheme - some EU-funded - are available and have been an important element, but only represent approximately 10% of the total £4m investment that the couple have made. "I can't help but think that Wales shot itself in the foot when it opted to leave Europe, but hopefully the government is developing comprehensive plans to replace these funding schemes for the rural economy," says Neil. "Without it, investment will stagnate and hospitality businesses will struggle to make a step change in the region." The couple's challenge now is growing occupancy, having recently added another six bedrooms. In 2017 they hit 57% occupancy and this year have changed their pricing strategy to try and bump it up to 62%. To help it grow beyond 70%, they also hope to address the seasonality of business in Pembrokeshire with the development of a spa.

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The Seren CollectionThe Grove of Narberth Molleston, Narberth SA67 8BX thegrove-narberth.co.uk Owners Neil and Zoe Kedward Bedrooms 26 Staff 39 full-time Group F&B manager Alice Bussi Occupancy 57% Starting room rate £190 Coast Coppet Hall Beach, Saundersfoot Pembrokeshire SA69 9AJ coastsaundersfoot.co.uk Head chef Tom Hine Restaurant manager Rhianna Chilton Covers 60 or 70-75 including the terrace Beach House Oxwich Beach, Gower, Swansea SA3 1LS beachhouseoxwich.co.uk Head chef Hywel Griffith Restaurant manager Katherine Morgant Covers 60

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The Seren timeline

October 2007 Neil and Zoe Kedward acquire a derelict country house near Narberth in Pembrokeshire. June 2008 The hotel opens with four bedrooms. A restaurant is added six months later. August 2012 The Grove's new wing opens, taking the hotel to 20 bedrooms April 2014 The Kedwards open Coast in Saundersfoot with Will Holland as head chef. Kiosk Café opened underneath the restaurant two months later. 2015 The hotel wins Pride of Britain Hotel of the Year and Good Hotel Guide Welsh Hotel of the Year. 2016 The Grove's self-catering cottages are converted into six suites and Beach House opens - the start of its long-term relationship with designer Martin Hulbert. The Seren Academy hospitality training programme is launched. 2017 The Grove appoints its first general manager, Louise Lewis. Tom Hine replaces Will Holland at Coast as head chef. Beach House is awarded AA Restaurant of the Year - Wales. April 2018 The Grove completes a £350,000 refurbishment of its ground floor.