Local interaction pays off as City Inn goes international

Sitting on the vast, open, waterside deck of the Glasgow City Inn in a chilly summer's breeze, one of only two people occupying the outdoor area that has become a hallmark of the chain, chief executive David Orr revealed one of the secrets of the group's success.

"Our hotels aim to interact with the city," he said. "[We believe] you won't get the long-term profit without providing a continuity of service within your local community."

For City Inn, interacting with the community happens in a lot of different ways, but they all add up to it being much more than a mere hostelry that provides a room for the night. For instance, City Inn Westminster hired students from the Chelsea School of Art to produce last year's Christmas decorations. On another occasion, it tapped their talent to design the hotel's wine labels.

Focal points

Indeed, interaction with the community is embedded in the overall strategy. Orr, who is something of a hotel historian, recalls the days when the old railway inns were focal points of their communities. Similarly, when the latest City Inn opened in Manchester in May, it made sure it hosted various events during the International Festival and booked jazz groups.

Launched by a Scots family of hoteliers - David, father Sandy Orr and his long-time business partner Donald MacDonald - after a few conversations around the dinner table a decade ago, the City Inn model is proving a hit. Work has just started on a second London hotel, a 584-bedroom City Inn on the 0.85-acre site of a 1960s office block near the Tower. Another is under construction in Leeds, and sites are being identified in Edinburgh.

Following five years of patient negotiations, the model is also going international, with a £100m, 550-bedroom project due to open in late 2010 on a heritage site in the heart of Amsterdam, practically next door to a new city library and concert hall.

There are also plans for City Inns in Rome, Madrid, Barcelona and other major European cities, depending on the availability of sites. They will follow the original model of new-build, waterside hotels featuring the trademarked City Café restaurant and offering "affordable luxury".

Orr said: "We are fulfilling the international fantasies we had at the very beginning."

That beginning saw the project start as a privately owned joint venture, with Bank of Scotland as 50:50 equity partner. The group does not release profits but is clearly making quite enough to fund its planned expansion. Revenue has grown from £4m in 2001 to £34m thus far in 2007.

Joint equity

It is also likely that City Inn will remain firmly in the hands of the original joint-equity partners. There are no plans, insisted Orr, to sell out to a private equity firm.

In a sense, the group already has a private equity partner in Bank of Scotland, which not only bankrolls its development but takes much more than an average lender's interest in the business. "The big benefit of a joint venture," Orr said, "is you have a partner who understands what you are doing and adds value as a provider of funds."

Although the first City Inn opened in Bristol in 1999, it was the 460-bedroom hotel at Westminster which gave the shareholders the confidence they had a winning format.

"It was a material breakthrough for us," Orr said. "Although London is our local market, it is of course also an international market." In other words, if the model worked in the UK capital, why not in other European capitals, too?

A property consultant by profession, Orr insisted that he is not a "particularly good operator" and he leaves the daily grind of an 800-staff business to director of operations Lynn Hood, another Scot.

"We continue to learn a huge amount about this business on a daily basis," Orr said. "Every part of it has got to remain appealing every day of the year."

Along City Inn's journey from Bristol to Amsterdam, the model has been steadily refined. For instance, as well as iMac computers in the rooms, the new Manchester City Inn features rooftop gardens and more of the private dining rooms which have proved popular elsewhere.

The group's expansion will be disciplined. "We do not want hundreds of these hotels," explained Orr. "We are not taken by the notion that every time you turn a corner in a city you will see one of these things. We could in theory develop in many cities, but we believe we should concentrate on relatively few."

City Inn timeline

• May 1999 City Inn opens its first hotel in Bristol
• May 2000 A second City Inn opens in Glasgow
• March 2001 City Inn Birmingham joins the fold
• September 2003 Flagship Westminster City Inn opens. Its 460 bedrooms make it the largest new-build hotel in London in 30 years
• 2007 Work begins on a second London site and a property in Leeds
• 2010 Planned opening for 550-bedroom Amsterdam property