How Starwood's new Principal brand will shake up city centres nationwide

01 November 2016 by
How Starwood's new Principal brand will shake up city centres nationwide

Principal may not be a new name to the UK hotel market, but the newly launched brand's distinctive philosophy and finance could shake up city centres nationwide. Janet Harmer checks in to check it out

When you are creating what is shaping up to be the most significant new collection of city centre hotels in the UK for some time, you generate plenty of anticipation. So when it was announced in September that the brand name for the urban lifestyle properties created by American private investment firm Starwood Capital Group, with an initial investment of £150m, would be Principal, many felt underwhelmed.

Principal, after all, is not a new name to the UK hotel market. It was first introduced in 1984, when the foundations were laid for what, until the start of this month, was the Principal Hayley Group (see panel).

With its long history in hotel ownership, the investment firm has an inherent understanding of how the sector operates and takes an active role in major decisions involved in the newly launched umbrella company Principal Hotel Company (PHC). The company is made up of Principal city centre hotels alongside sister brand De Vere, which will officially be launched in spring 2017 as the country house brand. It is headed by Tony Troy as chief executive, who is supported by two chief operating officers: David Taylor at Principal and Laurie Nicol at De Vere.

Name-dropping Why, then, given its intention of making such a bold statement with its city centre hotels, did Starwood Capital stick with a name that has been around for so long? It certainly wasn't for want of trying to come up with something new. "At the start of this process, we were open-minded about the name," says Taylor. "We worked with two independent marketing agencies, who were instructed to go out and talk to consumers."

It was decided that the De Vere name would be retained as it was already well known in the meetings market, being distinctive and easy to remember. While it took longer to confirm the Principal branding, it was decided that it perfectly described the value behind the brand of the hotels being the foremost and stand-out properties in their respective cities. There was also the feeling that it was a solid name, with a sense of gravitas and an inherent Britishness to it, which was important as the aim is to have a solid link to each locality.

The reality is that while Principal and latterly Principal Hayley have been around for some time, the names were never at the forefront of the customer's mind. That will now change. Whereas the first three hotels to join the brand were previously known as the Palace hotel in Manchester, the Royal York hotel in York and the George hotel in Edinburgh, they are now known respectively as the Principal Manchester, Principal York and the Principal Edinburgh George Street.

However, while the intention has been to create a brand with a strong identity, there is an equally staunch belief that guests want individuality. Therefore every hotel looks different, and each offers unique food and beverage outlets.

From the outset of Principal's creation, Starwood has recognised the importance of bringing together a management team of individuals at the top of their game and with experience of creating and driving forward innovative hotel brands. Having been part of the opening team of the groundbreaking Hoxton hotel in 2006 and then the launch general manager of the London Edition - one of the capital's most significant new hotels in recent years - Taylor was an inspired choice as chief operating officer. Joining him in putting together the brand's DNA have been Sean Wheeler to lead the transformation in the people culture (see panel) and Simon Willis, one-time creative and communications director for Sir Terence Conran, as brand director.

An initial meeting in summer 2015 resulted not only in the formation of Principal's brand values - generous, warm, intuitive, distinctive and local - but also drew up a raft of touchpoints that will exist in every Principal hotel.

So expect to see a weather flag hoisted each morning to provide guests with the forecast for the day ahead, the occasional splash of red (whether that is wellington boots or classic telephones), vintage letterboxes in the lobbies, a selection of Penguin books in the bedrooms, knitted tea cosies in suites and wild flowers.

Mini-bars are out, with just water and fresh milk available in the in-room fridges. Instead, each bedroom has a tuck box offering free local treats - there are Yorkie bars in the York hotel, McVitie's biscuits in Manchester, and Tunnock's teacakes in Edinburgh. A corner shop in reception will offer wine and nibbles at retail prices. "This is all part of our aim to be generous. We don't want to be seen to be overcharging the mini-bar prices you often see," says Taylor. "It also removes the time-consuming task of checking and refilling mini-bars."

Fresh start Behind the scenes, the fabric of each Principal hotel has been, or is in the process of being, upgraded, and major investment in revenue and IT systems is taking place. The customer facing side of the business has also been overhauled with fresh designs that seek to enhance the original design aesthetics of the original, often Victorian or Edwardian, buildings Interior design firm Goddard Littlefair has worked on the York and Edinburgh hotels, while the Manchester property has loft-style bedrooms created by Michaelis Boyd Architects.

An essential ingredient is the food and beverage outlets that will provide heart and soul to each hotel and resonate with locals as well as guests. The first two restaurant concepts - Refectory Kitchen & Terrace in York, which
reflects the produce and local dishes of Yorkshire, and the Printing Press Bar & Kitchen in Edinburgh, where Scottish produce comes to the fore - were created by chef-restaurateur Des McDonald. Robbie Bargh of the Gorgeous Group has since been involved in finding food and beverage partners in Manchester and London, and will be working on the other hotels.

In Manchester, the Refuge Public Bar & Dining Room has been created in partnership with Luke Cowdrey and Justin Crawford, the owners of the city's Volta restaurant. Refuge, a 10,000 sq ft space, consisting of a 140-seat restaurant, 120-seat bar, winter garden and DJ sets every Friday and Saturday night - is buzzing. Michael Purtill, general manager of the Principal Manchester, who arrived earlier this year from Four Seasons Hotels & Resorts, says it was "a stroke of genius" to team up with Cowdrey and Crawford. "They bring a sense of true northern hospitality to the hotel that is no-nonsense and involves no airs and graces. Hence, our tag line, is 'come as you are'."

London calling Taylor hopes the same sort of vibe created in Manchester will transfer to what will become the flagship hotel of the group - the 330-bedroom Principal London. The Russell Square property will open in spring 2017 following its transformation from the 373-bedroom Hotel Russell and will feature what he describes as "the original Burr & Co on steroids". Burr & Co first opened as an artisan coffee shop at the Edinburgh hotel but the site at the Principal London will be a step up, with small plates and craft beers served in the evening.

With a total investment of £70m, the Principal London is expected to make a major splash in the capital's hotel sector next year, with interior designs for the bedrooms and public spaces conceived by Tara Bernerd & Partners, and food and beverage spaces from Russell Sage. "As well as creating bustling 120-seat destination restaurant, we are renovating the Palm Court, which will offer a unique winter garden space for afternoon teas," Taylor says. Troy is excited by the creation of the Principal London, having bought the hotel for Principal back in 1999 from Granada for £60m.

"It is property that has been hammered, having consistently enjoyed occupancies of 98%, but we've never had the capex to do the work before. "It will give me great pleasure to reopen the hotel next year."

The aspiration is for each hotel to become a red-AA-star property. All hold at least four AA stars, with Blythswood in Glasgow and St David's in Cardiff rated by the AA as five-star hotels. It is hoped that the Principal London will also attain five AA stars. "The hotels are already great-looking properties; we're now working on creating great, consistent hospitality within them," says Taylor.

Following refurbishment of the first three hotels, revenue per available room in York and Edinburgh is up 25% and in Manchester by 20%. Meanwhile, group EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to climb from £80m last year to over £100m by 2019.

Troy says that the Principal hotels - along with the De Vere portfolio - suffered through lack of investment during the recession, but that now, with the backing of Starwood Capital Group, they are getting the attention they

"The owners truly understand the investment that is required," he explains. "They bought the hotels at the right price, as a time when there was still uncertainty in the economy, and they are very confident that the quality of the refurbishments, combined with a strong brand positioning and people strategy, will ensure this has been a good investment."

Old name, new vibe The Principal name was first introduced in 1984 with the launch of Principal Hotels, which, within eight years, grew into a publicly listed regional group with 18 properties across the UK. Heavy debts combined with the recession drove the group into administration in 1992, followed by a period of takeovers, acquisitions and disposals.

In 1994, Tony Troy, former operations director of the group, led a management buyout of the company, which 13 years later acquired Hayley Conference Hotels to become the Principal Hayley Group.

Having gone through the recession with minimal investment, Principal Hayley Group's 22 four-AA-star hotels (and one near Paris) were snapped up for £356m by Starwood Capital Group in 2013. Starwood then swiftly expanded its UK hotel portfolio by buying De Vere Venues (23 regional and several London properties) for £231m, Four Pillars (five hotels) for £90m, and two hotels in Scotland within the Town House Collection (for an undisclosed sum).

Having sold off a number of properties surplus to its requirements, Starwood has now consolidated into two distinct brands under the Principal Hotel Company. Principal, launched on 1 November, is the moniker of the city hotels, and sits alongside its country house compatriot, De Vere.

Starwood Capital Group was founded in 1991 by Barry Sternlicht, who went on to create Starwood Hotels & Resorts four years later. During his 10-year tenure as chairman and chief executive of Starwood Hotels & Resorts, he built the company up to 895 properties and launched the W boutique brand. After stepping away from Starwood Hotels in 2005, Sternlicht spent several years focused on property development before founding SH Group, a hotel management company which today operates the luxury Baccarat Hotels & Resorts and the lifestyle, eco-brand 1 Hotels in the USA.

Project 1898: happy staff = happy guests = happy owners Creating an exceptional brand of city centre hotels was an ambition that was always going to require much more than the renovation of a collection of stand-out properties. Hence, the focus from the outset for Principal has been to build a strong service environment, driven by a caring and inspiring people culture.

The appointment of Sean Wheeler, one of the most highly respected HR operators in the business, as director of people development, highlights Principal's intention of taking people development seriously. Wheeler's experience speaks volumes: he has worked as area director of human resources with the Dorchester Collection for five years, and had also been with Malmaison and Hotel du Vin as group director of people development.

"We could have launched the brand months earlier, but it is absolutely essential to the values and energy of the brand to ensure that the people values were in place first," says Wheeler. "It takes an enormous amount of
time to get these things right. It is still an ongoing process and is why we are launching with just three hotels. Give me three years and everything will be in place."

Wheeler set the ball rolling in transforming the people culture by initially bringing together four or five staff from each hotel - at all levels and across all departments - in the surprising setting of the monkey den at Edinburgh Zoo.

"Our discussions were all about evolution, so it was an appropriate location," he explains. The individuals - dubbed change gurus - were chosen because they were already living the values of the brand, in terms of having a
positive attitude and being a good team player.

"We discussed the changes and how they could be implemented. The intention was that they would go away and write a programme about how they would personalise the changes and then roll them out to their colleagues."

A key aim of Principal's service philosophy is to "surprise and delight" by empowering staff to engage with guests and take steps to make their stay better. "So this means allowing a housekeeper to order Champagne if she
realises the guest is celebrating a birthday, or arranging for honey and lemon to be sent up to a bedroom where a guest is suffering from a cold," says Wheeler. "At first some staff were fearful of taking decisions for themselves, but engagement has definitely improved and in the case of our Manchester hotel has helped move it up 70 places on TripAdvisor."

It is no surprise that happy, well-engaged staff creates happy guests, and Wheeler has taken every step to ensure that this is the case. "This means being brilliant at the basics, including good staff food and uniforms as well as decent lockers and chill-out areas," he says. Spotlight to Shine is an initiative where team members are encouraged to highlight colleagues who are spotted delivering one of the brand's key values and recommend they receive a reward - anything from afternoon tea to lunch or dinner in the restaurant, or even an overnight stay.

With the Principal name now launched, the working title of the brand - Project 1898 (referring to the year the Hotel Russell opened) - has been retained as the people brand within the company. "The name has already gained
momentum and established itself as an exciting place to work. After six months we have engaged with nearly 750,000 on social media, which has really helped drive recruitment," says Wheeler.

The first three hotels to join the Principal brand have all increased their head count to ensure the brand's values are delivered consistently. In Manchester, for instance, the team has grown from 180 to around 300.

For Wheeler, the success of Principal as a brand will be through the staff. "Our key focus is to make our people happy and to enjoy working with us and each other at Principal. We aim to do this by weaving our values throughout the business and ensuring our people promises are put into practice. "If our people are happy, that rubs off on guests; and if guests are happy, they come back again, book direct and tell their friends, so our owners are happy too."

Principal's key people and properties

Parent company Principal Hotel Company
Owner Starwood Capital Group
Chief executive Tony Troy
Chief operating officer David Taylor
Brand director Simon Willis
Director of people development Sean Wheeler
Group development chef Adam Bateman
Food and beverage director Craig Cunningham
General managers
Michael Purtill (Manchester)
Richard Mansell (York)
Andreas Maszczyk (Edinburgh George Street)

Hotels Principal Manchester (270 bedrooms)
Principal York (155 bedrooms)
Principal Edinburgh George Street (240 bedrooms)

Partner hotels first wave (to be rebranded when refurbishment and repositioning is complete in 2017) Hotel Russell, London
St David's Hotel & Spa, Cardiff
Bonham, Edinburgh
Roxburgh, Edinburgh
Blythswood, Glasgow
Grand Central, Glasgow

Partner hotels second wave (to be rebranded when refurbishment and repositioning is complete in 2018) The Met, Leeds
The Principal Liverpool (being developed from the city's former Grade II-listed Martin's bank building)

Negotiations are also under way for the acquisition of further properties.

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