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Has the AA lost its way?

15 January 2009 by
Has the AA lost its way?

It's one of the country's pre-eminent hotel and restaurant ratings guides, but this year things have been rather different at the AA, with the dismissed inspector Jayne Wyatt winning her case against the company, casting aspersions in her wake and following a string of top names out of the door. The question now being asked is: has money-making tainted the ratings service? Tom Vaughan reports

Things have become X-rated at the AA, quite literally. Last month former senior hotel inspector Jayne Wyatt won her claim for unfair dismissal against the AA's holding company, Acromas, following a row over new terms and conditions of employment. Now a subsequent dispute is set to cross the line from the professional to the personal. On the back of her victory, Wyatt intends to pursue legal action against an AA manager for defamation of character. The dispute centres on a rather grubby accusation that, in the run-up to her dismissal, she e-mailed hardcore pornography to him as some grimy means of protest.

As well as airing the AA's dirty laundry, the dispute has dragged into public the actions of a company that, since being bought by private equity firms CVC and Permira in 2004 has undergone substantial and controversial restructuring at the expense of experienced staff. With the private equity owners hoping to plump up the AA's profits, they have dragged the company into the murky ground that separates impartial accreditors from fee-charging consultants. More than this, a defamation of character decision that's currently ongoing could force one of the biggest identity crises in the AA's 103-year history. A decision in Wyatt's favour could leave the integrity of a company once renowned for its honesty, trust and transparency hanging by a thread.

Unfortunately, the AA doesn't wish to comment on any of the last few years' goings-on.This could be the response either of a company unable to defend its ruthless streamlining or of one impervious to industry tittle-tattle. It therefore makes it a lot harder to sift through the sea of accusations levelled at it by former employees and the GMB - the union recognised by the AA until the CVC and Permira take-over - which include claims of bullying, affecting pensionable salaries and corporate profiteering.

"This is typical of American-style private equity actions," says Paul Maloney, GMB national secretary, AA section. "‘We've got a company we're going to strip it of what we like in order to turn a profit.'"

Targets

However, amidst all the acrimony and private equity shenanigans, two facts stand out as particularly pertinent for the hospitality industry. The first is the new terms and conditions of employment implemented in the Hotel Services division - to which Wyatt took strong umbrage - placing greater emphasis on consultancy and training sales, and giving inspectors targets to meet. "We weren't trained or previously expected to sell," says Peter Wass, a former area manager who left last year. "There's as much emphasis on that now as on inspecting. Everyone is targeted and appraised on their selling."

While the AA did break its silence to confirm that two inspectors are still on old terms and conditions, Wyatt's treatment showed that resisting change wasn't exactly smiled upon.

The second is that, in the fallout from new terms and conditions, the treatment of Wyatt and a spate of early retirements and redundancies, scores of collective years of experience have left the company with departing inspectors. Apart from Wyatt, who had served the AA for 30 years, Wass had 12 years under his belt before leaving over Wyatt's treatment, which he described as "abominable" former inspector Richard Stirling was an employee of 27 years before taking early retirement in 2007 Peter Birnie, an inspector for 20 years and chief hotel and restaurant inspector at the AA for five of those, was made redundant in January 2008 Albert Hampson, a business manager of 20 years' experience who was appointed MBE for services to the hospitality industry, took early retirement in 2007, three years after five inspectors with an average of 40 years' experience were offered early retirement following the CVC and Permira buyout.

All of these departures came on the back of the 2002 exits of Simon Wright, editor of the AA Restaurant Guide chief hotels inspector David Young Karen Brazier, editor of the AA Hotel Guide and senior food inspector Sarah Peart. As Stirling says: "Employees with hundreds of years of experience between them went - and you just can't replace that overnight."

So, with the onset of 2009 comes an AA hoping to run more consultancy visits with fewer experienced staff. CVC and Permira will argue that drastic changes were needed to turn the company profitable, and in that case we should consider them in transition to a 21st-century operation. Speaking to the BBC's The Money Programme in June 2007, Permira partner Charles Sherwood defended the firm's actions, which at that point included trimming the AA's 10,000-strong workforce by a third, saying, "There are some businesses where you have to take an initial step backward before you can take a business forward."

Whatever the commercial realities, these aren't going to reassure the hospitality industry. In the light of recent changes, is it time to get alarmed at the company's modus operandi?

It's worth bearing in mind, at this point, how the AA guide used to operate. Until the late 1990s the AA guide was viewed as a prestige item for the company - although not particularly profitable, its importance was in the esteem it brought to the AA brand.

This is currently the view taken by the owners of the AA guide's closest rival, the Michelin guide. "We are under no financial pressure," says Michelin. "The powers that be here want us to make the best guide we can make. We are fortunate to be part of a large tyre company, and we are left alone to make our guide. It is a lot easier making a guide where there's no money involved, because we don't need to justify our decisions. We're not a consultancy we're not even a free consultancy we're there to judge places and pass on our decisions."

This issue of consultancy was the biggest change in tack for the AA. The switch to more consultancy sales wasn't a unique initiative by Acromas (the holding company created by CVC and Permira to operate the AA and Saga in 2007). "Going back to when we were funded by membership, we had these arguments [over more consultancy work] with the management and we resisted and resisted and resisted, playing the integrity card," says Young, now chef-proprietor of Scottish hotel and restaurant the Cross at Kingussie. "It hasn't all happened suddenly it's been a slow dilution of values and integrity."

Originally the guidebooks were subsidised by AA membership fees, but by the end of the last century pressure came for it to be more self-sufficient, and training classes were started to explain how the AA scheme worked and consultancy was offered to businesses who wanted a certain part of their operations audited objectively. It has been only since the turn of the millennium, and in the past few years in particular, that the scale of training and consultancy on offer has mushroomed, with advice currently available on how to gain stars and rosettes - at a price, of course.

The idea of declining integrity is the major cause of worry for the industry. Apart from the murky goings-on in the disposal of staff, a company that is part-consultant, part-accreditor is, arguably, flawed. "I think the two things have to be kept different," says Wright. "You cannot have a credible and independent guide for the consumer and at the same time be engaged in that level of commercial relationship [of selling consultancy]. It's understandable that there are commercial realities that the company has to face up to, but you can't tackle them in this way without undermining the credibility of the restaurant guide."

Charge them more?

Young adds that, furthermore, "When you are selling consultancy and accrediting, at what point do you say to the establishment that has spent X hundred pounds with you that they'll never get to the next level. Or do you keep charging them more money?"

The AA might argue that balance and objectivity can be maintained. However, things become more complicated still with the AA's terms and conditions for inspectors. With money to be accrued via consultancy selling, bumping up an establishment's rating could mean less commission for inspectors. The assured integrity of yesteryear is suddenly less clear-cut. And also, with consultancy now so important and no great increase in staff, will inspectors have enough time to properly inspect as well as conduct the money-making consultations?

"Looking at it purely from a hotelier's perspective, I have concerns," says Young. "Quite aside from this Jayne [Wyatt] situation, what concerns me is the opinions of Scottish hoteliers. I now get phone calls from hoteliers who say they haven't had a visit, or a satisfactory visit, or who say that to get from, say, two stars to three, they've been told they need to buy consultancy. It comes back to the idea of integrity."

The opinion of former inspector for the Egon Ronay guide Peter Chapman, who, after 10 months as an inspector for the AA, left, disillusioned, just over a year ago, sums up the current situation. "I didn't like the politics of the AA. I felt the AA is no longer about the quality of the work they do it's about the quantity. I'm not saying it shouldn't be about commerciality but, looking back, I'd much prefer to work for the Egon Ronay than the AA. It never takes money from an establishment - because, once you do, it's hard to stay unbiased."

There are two ways to view Acromas's running of the AA in the light of the Jayne Wyatt case and inspectors' new terms and conditions of employment. Either it's been the updating and streamlining of an antiquated company that's now secure for the future, or the ruthless profiteering and social negligence of a private equity firm keen to line its own back pockets. Whatever the case, it's safe to say that an integrity once radiated by an industry rock is now in serious question. None of this has been helped by the suspect actions at AA headquarters that the Wyatt victory has exposed and the defamation of character case could exacerbate.

Doubtless there'll be those out in the industry who have seen no dip in standards by the AA, and to some extent they are selling the industry a coveted commodity: reliable and objective advice. What there is now, however, that there never was before, is an ungainly emphasis on money-making and, worse still, a question mark over the impartiality of the guide. In the words of Richard Stirling, "That is very sad - very sad indeed - because it was a pillar of our industry."

Find out who won what in the 2009 AA guide here >>

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Jayne Wyatt's unfair dismissal claim

The roots of Jayne Wyatt's claim against the AA began in the autumn of 2006 when CVC and Permira, the AA's private-equity owners, appointed a new manager at the Hotels Division and changed the terms and conditions of employment, most importantly removing a rule that allowed inspectors to accrue a supplementary £7,500 a year by completing 35 extra overnight stays, replacing it instead with commission based on consultancy sales.

Wyatt made clear her opposition to the changes in an e-mail to staff on 6 February 2007, after which she was victimised, according to the GMB union.

The GMB, which is not recognised by the AA as its official union, claimed that Wyatt was isolated, marginalised and eventually dismissed by the AA. Among the accusations levelled at her was that she made publicly disparaging and possibly defamatory remarks about her line manager and senior members of the management team, and even eâ€'mailed hardcore pornography to a manager, which is now resulting in a defamation of character case. Three of the AA staff closely involved in her dismissal have since been promoted to senior management.

Wyatt took her dismissal to an employment tribunal, and it found that the AA did not have enough grounds to dismiss her. Speaking at the time, Wyatt said: "I am delighted and relieved that after nearly two years of internal hearings and court appearances, the facts surrounding my departure from the AA have been aired in front of a tribunal and I have been found to have been unfairly dismissed."

In a statement last December, the AA said that the tribunal ruled that Wyatt had partly contributed to her dismissal by her actions. But Wyatt pointed out that the manner in which she needed to "robustly defend" herself in the face of "very serious allegations" was ruled not blameworthy by the tribunal. It found that there was material which gave her some reason to believe there may have been collusion and that the AA's investigations had been "unreasonable, defective and unfair".

"Questions now need to be answered by all those involved," says Wyatt.

A brief history of the AA

  • 1905: The Automobile Association is formed by a group of motoring enthusiasts to help motorists avoid police speed traps.
  • 1912: The AA begins inspecting hotels and restaurants, issuing the coveted AA Star Classification to those deemed to be of sufficient quality.
  • 1949: The AA launches its breakdown and recovery service.
  • 1994: The AA's membership sits at eight million (current estimates place the figure at over 12 million members).
  • 1999: The AA is demutualised and sold to Centrica, the holding company of British Gas.
  • 2002: The AA Motoring Trust is formed to take over the non-commercial activities of the AA.
  • 2003: The AA's profits stand at £93m for the year.
  • 2004: The AA is sold for £1.75b to two European private equity firms, CVC and Permira.
  • October 2004: 1,300 jobs cut.
  • April 2005: 400 jobs cut.
  • July 2005: The GMB union holds a demonstration to lobby the AA's head office over the way it treats disabled people through its Performance Management Process.
  • 2006: Profits for 2005 are released and have risen to £200m.
  • May 2007: The AA is the focus of the BBC's The Money Programme. The sale of the company to CVC and Permira is criticised and the detrimental effect on the company's performance is exposed - following the 2004 buyout the company was saddled with £1.3b of debt and a third of the 10,000 staff were cut in order to "improve efficiency".
  • June 2007: The company announces that it is to merge with Charterhouse's Saga, another private equity-owned company, which provides services including insurance and holidays to the over-50s. The new holding company, Acromas Holdings, is owned by CVC, Permira, Charterhouse and staff. The deal values the AA at £3.35b and the combined company is valued at more than £6b. The new owners share a pot of at least £2b in dividends, £40m of which goes to chief executive Tim Parker, who stands down following the deal. Profits for 2006 are announced as £252m.
  • December 2008: An employment tribunal finds in favour of former hotel inspector Jayne Wyatt in her claim of unfair dismissal against Acromas.
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