Donald Macdonald on returning to private ownership

29 November 2007 by
Donald Macdonald on returning to private ownership

As a new era dawns for Macdonald Hotels, executive chairman Donald Macdonald talks to Janet Harmer about the company's change in fortunes since returning to private ownership, and his optimism about the future

Winning the AA Hotel Group of the Year award for 2007-08 marks an ongoing programme of major consolidation and development for Macdonald Hotels & Resorts. In particular, it gives recognition to the commitment made by the company to drive forward a major programme of improvements to its properties and customer services since being taken off the London Stock Exchange and back into private ownership four years ago.

Winning a group hotel award requires not only outstanding levels of effort to improve and develop its individual hotels, but also consistently high standards across the group.

Further evidence of Macdonald's upward projectory came just 24 hours after its success at the AA Awards when the company scooped the National Customer Services Award for Leisure and Tourism, which recognises improvements in the quality and consistency of service to customers. "These accolades reflect the journey the organisation has been on under the guidance of the senior management team, and the many achievements we've made so far," says Donald Macdonald, executive chairman of Macdonald Hotels & Resorts, which operates 59 properties in the UK and Spain.

Hindsight is a wonderful thing, but Macdonald clearly sees now that floating the company on the stock market in 1996, at a time when it operated 100 hotels and resorts with an annual turnover of £240m, was a mistake. "It cost us plenty - in terms of the quality of the product - to take the business to market," he says. "Now we're able to take a long-term view of the company and make investments in our properties, which have helped us achieve guests' expectations, rather than be constrained by a six-month reporting structure to the City. When it comes to creating a sustainable hotel business, developing our people and our hotels is much more important than any short-term profit. Four years ago we had to start to recover seven years of lost ground."

When Macdonald bought the company back into private hands in 2003 through a management-led buyout in a joint venture with the Bank of Scotland it was - at £620m - one of the biggest public-to-private deals ever seen in Scotland. The bank now owns 50% of the equity, with the remainder held by the management.

The ongoing improvements and refurbishments since 2003 were given a boost earlier this year with the sale of 24 of its UK hotels to Moorfield Real Estate Fund for more than £400m. Planned by the company since the return to private ownership, the sale has provided more funds to further establish a solid footing in the four- and five-star markets. About £50m is being spent on development in the current financial year.

The investment in upgrading existing properties and building new hotels includes a major commitment to the growth of the leisure market, with spas being included in all new hotels and major refurbishments and golf courses being developed alongside properties where there's sufficient land. "Having a golf course and spa combination is a tremendous draw for guests," says deputy chief executive David Guile, who expects to appoint two full-time members of staff to look after the burgeoning spa and golf business. "Spa days for non-residential guests is a particularly big growth area."

Alongside the improvements to the fabric of the properties, considerable attention is also being paid to the development of the company's staff. Macdonald and Guile both passionately believe that a good, professional and enthusiastic workforce is vital to the success of their business. "We've put a lot of focus on recruiting the best people and putting them through structured training," says Guile. New personnel initiatives include the Stairway to Success programme, which is aimed at every member of staff from craft to senior executive level. An internally managed structured training programme involving general managers and heads of department, it enables high-flyers to maximise their potential and move up the career ladder. Courses include subjects such as "recruiting for excellence", "performance excellence" and "leading and developing teams".

Individual training

Individual training programmes have also been set up in response to widespread industry shortages of experienced managers and chefs. As well as an apprentice chef scheme, a fast-track restaurant managers' programme run by catering development manager Glenn Fitchew provides supervisors with the potential to become restaurant managers within a year.

Over the past three years, an 18-month graduate training scheme has seen 24 employees successfully pass through its programme. Training in all departments is covered and includes craft, supervisory and management development, supported by a series of off-the-job training modules such as finance, recruitment, trainer skills and appraisal. The graduates are also presented with a project that will eventually add value to the business. On completion of their training, the graduates are appointed to a supervisory or head of department position.

In recognition of the value Macdonald places on it staff, the company plans to introduce a form of equity participation in a scheme that's believed to be unique for a large hotel operation. "We want to share the future prosperity of the business and distribution of profits with our staff," says Macdonald. "It's important that good people within the company can have a share of the money to help them fulfil their ambition."

Details are still being worked out, but it's expected to be open to all levels of staff and will be in place by the end of January. Earlier this year, Macdonald launched its first joint venture with a chef-patron when Dean Timpson at the Compleat Angler opened after a £1m refurbishment of the restaurants at the company's 64-bedroom hotel in Marlow, Buckinghamshire - indicating a firm endorsement of their confidence in Timpson's talent.

Efforts to raise the standard of food throughout the company's hotels are being made through a workshop developed by catering director Alan Swinson and supported by the AA. Through promoting local, seasonal and carefully sourced ingredients, consistency of the product on the plate is encouraged, which in turn has resulted in a dramatic rise in quality throughout all the properties, emphasised by the increase in AA rosettes now held by Macdonald hotels. Four years ago the 49 UK hotels that are still part of the company today held a total of 15 AA rosettes. Now the number's increased to 35.

Also helping to enhance the customer experience is the mystery guest programme, which has seen more than 2,000 mystery bookings being made at the group's hotels over the past three years, with each hotel receiving one visit each month. Anonymous guests - recruited from the company's database of loyal and discerning customers - audit everything, including making reservations at a hotel, checking in, and interacting with staff, as well as bedroom standards and dining experience.

The mystery guest always reveals him or herself to the hotel staff, and then discusses their experience with either the general manger or the deputy. This allows the hotel to take any immediate action, if necessary. Members of staff who are mentioned in the reports as exceeding expectations are recognised and rewarded by the general manager or regional managing director.

Culture change

Introducing the mystery guest programme was a huge culture change which has had a significant impact on the conduct of every member of staff, ensuring that guests are made to feel valued and welcomed in the hope that they will return at a later date or recommend the hotel to someone else.

"The programme has allowed us to identify where we need to focus on the business and helps us to grow and enhance service levels," says Guile. "Initiatives such as this, in tandem with a greater focus on training and employee recognition, have led to a dramatic drop in complaints year on year and an increase in positive feedback and occupancy."

Macdonald Hotels & Resorts has come a long way since Donald Macdonald left Stakis Hotels in 1990 to establish the company with the purchase of two hotels in Aberdeenshire - the Waterside Inn near Peterhead and Ardoe House in Aberdeen.

Despite the hiccough of dallying with the demands of shareholders, Macdonald is confident that the business is now heading in the right direction. The recent double awards success is proof of that. "Four years ago we were a run-of-the mill company - now we stand out in a crowd," he says.

A selection of new deveopments and refurbishments
• Macdonald Bath Spa hotel (far right) opened a £3m spa as part of a £10m total refurbishment of the five-star, 129-bedroom property in July 2006. The spa includes a 15m swimming pool, six treatments rooms - including a larger room for couples or friends - a thermal suite, and ice and aroma steam rooms.

• Macdonald Portal Hotel, Golf & Spa is a new £12m luxury hotel and leisure development in Tarporley, Cheshire (above). Opened in August 2007 on the site of an existing championship golf course, it includes 85 bedrooms, three golf courses (two 18-hole courses and a nine-hole course) and a spa with 18m swimming pool, thermal suite, 10 beauty rooms, gym and exercise studios.

• Macdonald Manchester hotel (left), which opened last month with 338 bedrooms, is now the largest hotel in the city. While offering all the luxuries and amenities of a five-star property, including spa, its room rates start at £100, ensuring that it will compete in Manchester's four-star market. The hotel is next to Piccadilly station and has been converted from a former BT call centre.

• Macdonald Old England hotel on the edge of Lake Windermere, Cumbria, is set to complete a £10m redevelopment this month to become a potential five-star property. In addition to the refurbishment of the existing 56 bedrooms, 49 new bedrooms will open alongside what is being marketed as the Lake District's most advanced spa. Facilities include a thermal suite and cooling ice room. There will also be an exclusive jetty mooring with small yachts and cruise boats.

Macdonald Hotels & Resorts

  • Registered office Whiteside House, Bathgate, West Lothian EH48 1DJ
  • Central reservations 0870 830 4819
  • Chief executive Donald Macdonald
  • Deputy chief executive David Guile
  • Number of hotels and resorts 59 (55 in UK and four in Spain)
  • Number of bedrooms 4,068
  • Number of staff 4,436
  • Annual turnover £194.7m (a rise of 16% during the 12 months to 28 September 2006, which is before the sale of 24 hotels to Moorfield Real Estate Fund)
  • Annual operating profit £24.7m (an increase of 37% on previous year's figure to 28 September 2006 and is after charging £15.1m depreciation against profit)
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