Is the unstoppable growth of the budget sector and the fashionable appeal of the boutique brands squeezing independent hotels out of the market? Mark Lewis reports.
The latest series of The Hotel Inspector sees Alex Polizzi scooting off round the shires once again to reverse the fortunes of more of Britain's ailing hotels. Her quest to rid us of mildewy bathroom carpets, chintzy curtains and man-made fabrics takes her to properties such as the Walpole Bay in Margate, Kent, which owner Jane Bishop has filled to bursting with antique milk bottles, dismembered dolls and the other tat that constitutes her "living museum"; and where no one quite seems to grasp the concept of managing food costs. As car-crash TV, it's compelling stuff. As an advert for the UK's thousands of independent midmarket hotels, it's disastrous.
These are tough times for non-branded, independent hotels occupying the midmarket, who find themselves trapped in a pincer movement between the budget brands' relentless expansionism and the beguiling, aspirational whimsies of the boutique space.
Ironically, part of their problem lies in the fact that they all belong by default, if not to a brand, then to a nationwide collection of hotels whose fortunes are inextricably linked. It's a collection none asked to be a part of, and whose shared values none can do anything to change. Still, every time a guest has a disappointing stay at one of them and vows to revert to a trusted brand in future, all stand to suffer.
Punters face a choice between the known and the unknown, and the known will always be the lower-risk option, as Travelodge chairman, Grant Hearn points out. "People are under great time pressure these days. They want to remove complication from their lives, and don't want choices that are difficult to research. They want a simple message. They know what Travelodge and Premier Inn stand for, but not the Dog and Duck."
This element of risk is not lost on Laurence Beere, owner of the Queensberry Hotel in Bath. The answer, he says, is simple: offer quality through reinvestment. Beere well remembers Robin Hutson's speech at the 2004 General Managers Conference, in which the then-Hotelier of the Year expressed his revulsion at the swirly carpets and smoke-stained walls of certain independent hotels. Hutson's decision to create a mid-market product that offered a value proposition and design creativity resonated with Beere, and has informed his work ever since.
"I didn't want my hotel not to be three-star, but it had to be high-quality, with high service levels," he says. "The threat comes when you don't invest enough to make a value-driven proposition. The received wisdom as I grew up was to spend 4% of revenue on repairs and maintenance. Here, it's 8%. Your product starts to decline when you save money: rates drop, it's a downward spiral. Guests should think ‘I spent £100 but the place was friendly, smart, clean and a good deal'. If you have all that, people will take you over a Travelodge."
Investing in your product is never pain-free, particularly in a recession. Just ask Neil Kirby, owner of Eastbourne's Langham Hotel. For three years after buying the Langham in 2005, he and his wife worked 130-hour weeks to enable them to plough the savings on a general manager's salary back into the hotel. Andrew Coy joined as general manager last September, but they still work 90-hour weeks, with Kirby on the hotplate at breakfast and tending the bar at night.
"We put every penny of profit back into the business," he says. "I drive a 10-year old Nissan Micra; the Saab has gone. We live free in the hotel and we cut our cloth to suit the business."
The secret to reinvestment, says Kirby, is to manage your cost base. "We take on younger employees, 16- to 18-year-olds, to help the wage cash-flow. We have three kitchen porters who multiskill on maintenance. We have a bailing machine that's cut our refuse bill by £190 a month. And we're cute in our purchasing, putting suppliers head to head. You must challenge everything you buy, from fish to toilet rolls."
Good advice; but is reinvestment realistic in the current climate? Peter Hancock doubts it. The chief executive of Pride of Britain Hotels fears that today's economic climate, in which room supply exceeds demand, must inevitably lead to price wars and falling standards. His outlook for the future of the midmarket sector is therefore pessimistic.
"Cutting rates to compete with the highly organised budget chains must wipe out profits for all but the most innovative operators," he warns. "There'll be nothing to invest in refurbishment, staff training, marketing or general maintenance."
Investment may come at a cost; but character need not, and can be a key differentiator for those more innovative operators Hancock refers to.
"We don't all want boring, bland, centralised hotels, where you don't know which country you're in," says Beere. "My hotel reflects my personality, and personality is what hotelkeeping is all about. We offer personal service: we don't have in-room minibars; we'd far rather make you a fresh G&T and be personable. That's our point of distinction. Staying here is fun, there's good service and a good experience. Budget brands can never do that."
AA Hotel Services Manager, Simon Numphud believes there's scope for diverse offerings in the marketplace, and points to the fact that independents have far greater freedom to inject creativity into their product offering than the brands.
"In a downturn, people go out less frequently and spend less; when they do go out, their expectation is heightened. Good independent operators will focus on quality and their team. Teams make a place successful and unique. Be creative, make your hotel appealing, focus on experience and push as many quality touch points as possible into the marketplace. Brands are tried and trusted, but some consumers prefer uniqueness in terms of physical product and host-driven operating."
If reinvestment and personality are two must-haves a clearly targeted customer base is a third. If your hotel has personality, flaunt it. British Hospitality Association chief executive, Bob Cotton believes the hotels suffering most are those that haven't focused their sales and marketing effort effectively. "I could take you to a few hotels with swirly carpets," he offers. "What is their market? They don't appeal to anyone. Recognise who your customers are, adapt and get footfall."
Ah yes, the famous swirly carpets. Is this a fair stereotyping of independent hotels? Best Western Hotels chief executive David Clarke thinks not. "I can name lots of brands whose product has become dated. I would argue it's less likely in the independent sector; they don't have corporate stockholders demanding return on investment. They know if the asset deteriorates, their wealth deteriorates."
Like Cotton, Numphud advocates focusing on your market and making sure you are in all the distribution channels offering a route to that market. But he points to the way the country house hotels saw the US market disappear overnight due to global terrorism, and preaches diversification of the customer base. "Make sure you have broad appeal, across several markets," he says, "so you are not exposed to losing a chunk of business: develop a meeting room or leisure facilities. Give your product a broader appeal without stretching it too far."
Travelodge's Hearn favours a sharper focus: "Brands like us and Premier Inn have ambitious growth plans, so don't try to get to everyone. Good businesses find and satisfy their markets. Those in the mushy middle will lose out. What bits of the market are available to you? What is it that makes you appealing to researchers? And how do you get that message out to that chosen market? At the minimum I would join a consortium, but I'd probably take a franchise."
Joining a marketing consortium is an option, but isn't there a delicate balance to be found between taking on a shared brand and adhering to its brand guidelines while still maintaining the individuality of your property? And don't all members risk being tarred by the same brush as their worst fellow-member?
Clarke thinks not. He believes that the dynamic between brand guidelines and individuality works because his brand standards are not claustrophobic or smothering, but simply geared to associating the brand with quality."I see brand and non-brand as complementary," he says. "Look at retail. John Lewis has a whole range of own-branded products alongside other branded items. They work together. Surely hotels can be the same?"
Clarke sees the internet as key to securing the independents' futures. "Consumers are in a much more fortunate position than 10 years ago. They have three guides: stars, brands and consumer reviews and that benefits the independents. Good independents will flourish because the nature of the communications world is that people want to comment on the service they receive. It's a level playing field. Those hotels meeting expectations will go from strength to strength."
Kirby sees things differently. When he bought his three-star hotel in mid-2005, it was a Quality member and 99% reliant in the coaching market. "I decided to continue and that was the biggest mistake I ever made. They took 5.5% commission on every room, not just the business they sent us. I signed up for a five-year minimum but I got out after three years and £120,000 in commission."
What will the future hold for the independent mid-market? Hearn foresees shrinkage. "This industry is no place for amateurs," he warns. "There's still a role for the inspirational independent, but we'll see less of them, and more and more branded presence. Independent hotels will become more niche."
Hancock uses a retail analogy to make the same point. "Think of Travelodge and Premier Inn as Sainsburys and Tesco. What's happened to all the butchers and bakers that used to line every high street? Many have disappeared, but that doesn't mean the demise of specialist independent retailers. They have simply migrated to the internet, shopping malls and mail order. Hotels that offering something special can succeed, whatever their price band or star rating. Maybe we can expect more specialisation."
For Kirby, the USP remains individuality: "we're a hands-on, family business, and the family thing is coming back. Customers love being spoken to, the general manager getting off his backside and greeting guests. They love rubbing shoulders and getting niggles off their chests. It's a great selling point."
Back in Bath, Laurence Beere offers a timely reminder of a basic truth. "You should own a hotel because you want to be proud of having a hotel. Hoteliers should work harder to question the quality of what they have on offer and build guests' trust. If not, we give Grant Hearn the chance to berate us and poke fun."
- Manage your costs.
- Invest in your product.
- Accept a lower rate of return now for longer term gain.
- Offer value for money.
- Know your target market.
- Project a personality for your hotel.
BREND HOTELS FOCUS ON CUSTOMERS AND COMMUNICATIONS
When Brend Hotels won the Tourism Award at June's British Hospitality Association Luncheon, the citation praised the family-run, non-branded group's focus on quality and reinvestment. One of the top 10 employers in the South-west, the group has over many decades built a loyal customer base through its focus on quality service and product. That their hotels are delivering growth in a year as tough as this, is testament to the success of their approach.
"There's a perception that hotels outside main cities aren't that good," says director Peter Brend. "But those still standing are run by fully committed people and have had investment. Our family has been in the business for 50-odd years, and has a long list of loyal customers that see you through different periods. Reinvestment in our properties is ongoing, whether in a good or an ordinary year, on either new facilities or bedroom refurbs. Customers notice things: they'll prompt you and want to know what you are doing next!"
The group has confronted the challenge of the greater distribution reach of the brands head-on. "Word of mouth is a high scorer, but our website and Google adwords are also strong tools for picking up new people. We've invested heavily in our site. It's a wide ranging site and a marvellous communications tool for keeping customers aware of deals and helping them make up their minds late in the day."
The brands hold no fear for Brend. "We have a higher level of staff than the budget brands. We try hard to provide traditional standards of service, like full porterage and table service for drinks. There's service and there's service. Ours is the old-fashioned style and our customers see it."