It may not be as profitable as other areas of his business empire, but Dragons' Den star Duncan Bannatyne has been gripped by hospitality. Janet Harmer finds out why he's keen to expand his group of hotels in what he describes as one of the hardest industries he knows
According to Duncan Bannatyne, running hotels is a tough business, but he has become fascinated by them and looks set to use his substantial wealth to grow his current portfolio of four properties.
"I opened my first hotel in 1993 and until three years ago, I said I would never do another one," says Bannatyne, who is best known for his involvement on the BBC's entrepreneurial Dragons' Den programme.
"But the opportunities arose to open or buy more - including our latest acquisition, Charlton House Spa Hotel - and now we are looking to expand the business further. Hotels have now gripped me and we would be happy to have hotels anywhere in the UK or around the world."
a tough industry
As a multi-millionaire entrepreneur - The Sunday Times Rich List 2010 estimates his wealth to be £320m - Bannatyne has had experience working in several industries and has found that, after running nursing homes, the hotel industry is the hardest.
"As well as dealing with guests who cancel at the last minute, leaving no opportunity to resell a room, we also have the problem of those guests who take everything they can from bedrooms, including the bathrobes. And don't get me started on booking agencies," he says.
"I don't understand why a major company like Orange, which is one of the largest in Darlington, has to book our hotel though an agency. They are local to us and know us well, but they won't come direct because that is not their company policy. As a result, we lose 10% on every booking taken by the agency."
Bannatyne's frustrations with the practical difficulties of operating hotels, perhaps, go some way towards explaining why he finds it harder to reach the level of profits he achieves in other areas of his Bannatyne Group empire, which includes 60 health clubs and 30 spas.
"I like to see each part of the business make a 20% profit on the cost we have paid for a freehold property. So for a health club that cost £4m, I expect to see a minimum profit of £800,000.
"We do even better with leasehold properties. For instance, we achieved a 30% return on the 24 health clubs that we bought as leasehold properties from Hilton in 2006. But we just don't get the same returns for hotels.
"We paid £3m for Charlton House and so, at 20% we should achieve a first-year profit of £600,000, but we will be lucky if we get £400,000."
Bannatyne says it should be possible to drive up the profits at Charlton House and will increase his chances with the initial addition of two new double rooms. He is pleased that he secured the £3m price tag; he likes to drive a bargain. The four-AA-red-star, 27-bedroom country house hotel, previously owned by Roger and Monty Saul, the founders of the Mulberry Design Company, was originally marketed at £3.5m, after going into administration.
"There were others bidding more for it, but they were unable to borrow the money. I paid cash, so I got a good deal," he says.
jewel in the crown
Charlton House is definitely the jewel in the crown of the diverse Bannatyne hotel collection and appears to have given the entrepreneur an enthusiasm to find more country house hotels, especially those with spas. Helipads are also a key requirement for the man who spends much of his time flying between different parts of his business empire.
Bannatyne describes Charlton House as "a beautiful hotel, which I believe we could make great". He goes on to say that it was difficult to find out why the property went into administration, although it has become evident since taking it over in May that standards had been allowed to drop.
"For instance, there were many aspects of the spa, such as the sauna and steam room, that had not been working properly for around six months," he explains. "There were no hairdriers in the gents' changing room and not enough in the bedrooms. Within a couple of days we were able to get the essential elements of the spa working again and have already spent around £500,000 on improvements. As a result, turnover and profit have gone up and occupancy has risen from 65% to 80%."
The hotel was full during the week of the nearby Glastonbury festival, and managed to resell the four rooms cancelled by U2 after their lead singer Bono pulled out of the festival as a result of a back injury.
Business is predominantly leisure, with couples taking most of the rooms, and families staying at weekends. "My 10-year-old daughter, Emily, has been designated director of children's menus and is providing ideas for dishes, while my son, Tom, who is eight, is director of children's entertainment and is enjoying organising cricket matches," says Bannatyne.
He has introduced a more efficient organisation of the staff and is making the space in the hotel work more profitably. "There was a huge back office that seemed to be occupied by everyone, including the deputy manager, events manager, reservations manager - even the gardener," he explains.
"I don't quite know what they did there; I think it was mostly sitting around, drinking coffee. So we've moved the staff out and turned the space into a new bedroom called Duncan's Den. We've revamped the reception desk and put the events and reservations managers there, where they are visible."
A second new double bedroom is being created from what was the hotel's only single bedroom. "It didn't make sense having a single bedroom in a hotel that is aimed at guests looking for a romantic or spa break. We're calling the room the Tiny Double and pricing it accordingly. It will be great for young couples - they don't need a lot of space," he laughs.
Bannatyne is currently talking to architects about extending Charlton House to add a further five bedrooms, creating a total of 32.
Some 10 staff have voluntarily left the hotel since Bannatyne took over. He explains that most of these were "part-time and only came in when necessary". A new general manger, Phil Brown, who has spent most of his career with Hotel du Vin and Malmaison, has just joined the hotel, with Geoff Green, the former general manager of the Bannatyne Spa Hotel in Hastings, becoming operations manager over the two properties.
New to Charlton House, and an unusual concept for a hotel, is the introduction of an annual membership. For £600, members will be allowed to use the spa - which includes a cutting edge wet-zone treatment room - at any time and receive a 15% discount on the hotel's bedrooms, restaurant and bar.
"The idea is to encourage regular customers - both locally and from further afield - and provide us with a database," says Bannatyne.
"We know and understand membership systems well, with 180,000 members across our health clubs and spas nationwide. It provides a feeling of ownership among members and helps to keep standards up and pay for extra staff. We shall limit the number of members to 50 and then review our policy."
Today, having made a fortune that he could never have dreamed about while growing up in his native Clydebank, Bannatyne is still driven to succeed at what he does and takes a personal interest in how all his businesses are doing.
DUNCAN BANNATYNE'S TIPS FOR RUNNING A SUCCESSFUL HOTEL
â- Know your customers and what they want. Find out what they like and, even more importantly, what they don't like and act upon it.
â- Live your business by staying in the hotel. It's the best way of seeing what needs fixing.
â- Motivate your staff through financial bonuses.
â- Deal with complaints immediately - don't let the problem fester by not replying to telephone call and eâ'mails. If handled efficiently, a difficult situation can win over a disgruntled customer. I recently had the most phenomenal meal at the Seafood restaurant in Padstow. There was a problem with one of the dishes and the way the staff handled the situation was amazing. I don't know where they get their staff, but I would like to find out.
THE BANNATYNE HOTELS
Recognising that his name is now a valuable brand - enhanced by the growth in his TV profile in recent years - Duncan Bannatyne has added his moniker to all of his hotels.
He says that this inspires him to ensure his businesses are the best they can possibly be. "I'm only ever going to put my name to something I believe in," he writes in his autobiography, Anyone Can Do It.
"Knowing that my brand, and my name, could be tarnished by bad publicity is a huge motivator to ensure that all my staff are professional, that all my businesses deliver and that all my customers are satisfied."
â- Bannatyne Hotel, Darlington
Three stars (VisitEngland), 60 bedrooms, Maxine's bar and restaurant
â- Bannatyne Hotel, Durham
Budget, 50 bedrooms, café-bar in adjacent Bannatyne's Health Club
â- Bannatyne Spa Hotel, Hastings
Four stars (VisitEngland), 41 bedrooms, Conservatory restaurant and Terrace bar
â- Bannatyne's Charlton House Spa Hotel, Shepton Mallet
Four AA red stars, 27 bedrooms, two-AA-rosette restaurant, private dining, conference facilities for 100 and helicopter pad
HOW DUNCAN BANNATYNE BECAME AN ENTREPRENEUR
Born in Clydebank, Scotland, in 1949, Duncan Bannatyne was raised in modest circumstances as the second of seven children. In 1964 he joined the Royal Navy on a 12-year commission, but received a dishonourable discharge for threatening to throw an officer off a boat landing jetty and served nine months in Colchester military detention centre.
After several years during his 20s jumping from job to job as a welder, hospital porter and lorry driver, Bannatyne settled down with his first wife, Gail, in Stockton-on-Tees. It was there that he began his entrepreneurial career, with an ice-cream van he bought for £450. After building up a fleet of vans, he sold the business for £28,000.
Bannatyne used the money to help found a chain of nursing homes - Quality Care Homes - which he sold in 1996 for £26m. Another business he built up, the Just Learning children's nursery group, was sold for £22m.
Today, the Bannaytne Group concentrates on its 60 health clubs, 40 spas and four hotels. He now devotes around 60% of his working time to charities, which includes his role as a UNICEF UK ambassador and lists 30 charities that he supports on his website. In 2008 he established the Bannatyne Charitable Foundation with a personal injection of £1m.
Bannatyne has written four books: Anyone Can Do It, Wake Up And Change Your Life, How To Be Smart With Your Money, and How To Be Smart With Your Time.
Bannatyne is now married to his second wife, Joanna, and has six children, four with his first wife and two with his second. He divides his time between homes in Wynard, County Durham, London's Covent Garden and the south of France.