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The Caterer

Donald Macdonald

12 May 2005
Donald Macdonald

Overall ranking: 67

Hoteliers ranking: 20

Snapshot

Donald Macdonald is the executive chairman and co-founder of Macdonald Hotels, a Scottish-based group that owns, jointly owns or manages 64 three- and (predominantly) four-star hotels in the UK. The company, which employs more than 5,000 staff, also runs ten leisure resorts.

Career guide

Macdonald created the group in 1990 with co-founders Sandy Orr and Donald MacDonald (no relation) who are both now with the City Inn group.

He floated Macdonald Hotels in 1996 but took it private again in 2003 by means of a £590m management buy-out in concert with long-term backer the Bank of Scotland (BoS).

Macdonald served as chief executive until just before the management buy-out in 2003, when he became executive chairman.

What we think

The most prolific growth occurred in 2001, when Macdonald Hotels and joint-venture partner BoS spent £235m on the 48 Heritage hotels that Compass inherited from its merger with Granada.

The same month Macdonald Hotels bought out the remaining 50% stake in timeshare group Barratt Leisure for £8.5m to gain full control of a business that added timeshare sales, lodge rental and leisure packages to the sales mix. There are now four resorts in Spain, four in Scotland, one in Wales and one in England.

Although Macdonald Hotels had achieved 12 consecutive years of growth by 2002, Macdonald that felt its share price - which had swung between 130p and 240p - was consistently undervalued. He explained to Caterer & Hotelkeeper magazine in 2003: "The amount of time spent being a public company was disproportionate to the benefits we got from it."

So he and fellow directors formed Skye Leisure Ventures to buy back the company. Their initial £145m bid was upgraded to £157m after a re-evaluation of the estate and the price rose to a total £590m with the buy-back of BoS's stake in the Heritage hotels.

The buy-back was Scotland's largest privatisation deal to date but it has had an impact on the group's bottom line. The £4.4m loss it reported for the 11 months up to privatisation deepened into a loss of £19.1m on sales of £189m for the 18 months to September 2004. An operating surplus of £31m was wiped out by £50m of interest payments.

But going private has allowed Macdonald Hotels to invest more heavily in developing the estate and offloading non-core properties. It has sold 17 hotels since the buy-back and, in May 2004, announced plans to spend £150m over the following two years to develop new properties and upgrade existing ones. This will include the addition or revamp of conference facilities and Vital spa and leisure clubs.

Last winter saw the completion of the six-year, £30m redevelopment of the Aviemore Highlands Resort, a joint venture where Macdonald Hotels manages four hotels following its acquisition of two properties from Hilton last October, 18 self-catering lodges and the 1,000-capacity Aviemore Highland Conference Centre.

A nine-year, £20m project to develop Pittrodrie House hotel in Aberdeen is gathering pace. The group has planning permission for 40 new bedrooms and a health club, and outline planning for up to 90 timeshare units and a golf course.

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