Nigel Chapman, founder and chief executive of Luxury Family Hotels, became one of the biggest winners from the collapse of Von Essen Hotels when he bought seven properties from the administrators. He talks to Janet Harmer about why he decided to re-enter the UK hotel market and his joy at taking control again of his former "babies"
You stepped out of the UK hotel industry when you and your business partner, Nicholas Dickinson, sold Luxury Family Hotels (LFH) - comprising Woolley Grange, Fowey Hall, Moonfleet Manor and the Ickworth - to Von Essen in 2006. Why did you do that? We had just sold our other hotel group - Alias Hotels, comprising four properties - with the intention of concentrating on LFH as we felt we had more opportunity to develop what was a collection of classic hotels. Alias was a group of contemporary hotels in cities and towns and would have had to be reinvented every five or so years.
We had a number of investors besides Nicholas and myself and were on the verge of putting a management buyout (MBO) in place when Andrew Davis founder of Von Essen] appeared and put an offer on the table which put a strain on the MBO. The other investors - Nicholas included - wanted to go, but I didn't really want to sell. There was no fight about it, but we all eventually agreed to sell for what was a very good price - more than £30m.
[As part of the transaction, a proportion of the sale price was deferred to a later date on the basis that Von Essen complied with a number of clauses. However, civil court proceedings had to be instigated when Von Essen failed to meet the conditions, in order to recover the money.]
At the time of the Von Essen administration, did you immediately consider buying back the hotels that you had previously sold? I certainly saw it as an opportunity, but also as a threat. I knew if I didn't buy them, someone else would snap them up and maybe use them to build up a group of family hotels in the luxury sector. It is something I had just started to do again with the purchase of the Polurrian hotel in Cornwall in early 2011.
What did you do in the intervening years between selling LFH and buying Polurrian? I remained business partners with Nicholas and we went off and developed Martinhal, a luxury family resort in Sagres, Portugal. It incorporates a 38-bedroom hotel with a mix of self-catering accommodation. We still oversee the business, but are not involved in the management of the resort - we have a strong resort director in place and don't interfere.
[Dickinson has also returned to the UK hotel sector with the acquisition of another former Von Essen property, the 26-bedroom Congham Hall in Norfolk.]
What brought you back to the UK? Well, I never actually went away, as after selling LFH I moved with the family to Cornwall and commuted from there to Portugal. But having done Martinhal, I realised that with the UK being one of the main feeder markets to Portugal, it would be good to have a hotel back here again. And with property prices being the lowest they had been for the past 15 years, owing to the recession, it was a good time to buy. I knew the Polurrian well and when it came on the market, I thought it would be an excellent opportunity.
The idea was to create another family-friendly luxury group, but we couldn't use the Luxury Family Hotels name as at the time it was a sub-brand within Von Essen. We intended to grow a collection of hotels, one at a time, under the name Halcyon Hotels and Resorts.
How did you personally feel about buying back the four LFH properties? From my point of view, the sale of the hotels in 2006 had ended in tears and at the time it felt like I was saying goodbye to my babies. So the chance to buy them back seemed too good an opportunity to miss. But I don't think I could have done it without having what I regard as the best team around me, many of whom were involved in the development and early operations of Martinhal. So, with a strong team swiftly in place, we were able to move quickly and negotiate to buy not just the original four hotel, but three additional properties as well - the Elms, New Park Manor and Thornbury Castle.
I can't say what we paid for the seven hotels, but it would be true to say that the figure for the four original LFH was about half of what we sold them for. History has had the last laugh!
[It has been widely reported that the seven hotels were purchased for about £30m, well below the combined guide price of £40.5m]
Who are the key members of the LFH management team? The 10-strong team includes Paul Hudson, operations director; Adrian Burley, director of sales and marketing; Paul Clark, chief financial officer; and Carole Taylor, head of our development team, who has worked with me on eight hotels in the past, including three of the four LFH originals!
Most of the team have a background in travel as I find that the quality of management in the travel sector is generally better than within hotels. I'm an accountant by profession, but hotel development has been my occupation for 25 years now.
We don't have a head office as I believe the management team should be in the hotels. Personally, I usually visit two hotels each week.
How was the acquisition of the seven hotels from Von Essen financed? We financed the acquisition of Polurrian Bay by raising money from about 150 shareholders, but we couldn't use that source to buy more than one hotel. We spoke to several institutional investors and were very happy that Patron Capital agreed to be our majority stake-holder. The company knows and understands the hotel sector very well and we regard Josh Wyatt at Patron as a valued member of our team.
What has been the key challenges of taking on the seven hotels? We have three challenges. First, we've got to deal with the physical side of the properties as unfortunately most of them have been neglected. For instance, New Park Manor in the New Forest is really quite dilapidated. Von Essen added a huge spa, costing about £2m, to the hotel four or five years ago, which is a bonus, but strangely left the hotel alone.
Now we need to carry out substantial work including a new roof and windows, as well as replace the very dated decor, while enhancing some of the historical features of what was once a Georgian hunting lodge. The landscaping also needs to be dealt with as it is rather messy and currently hides the vistas across the forest - so we shall be doing a lot of clearing.
Second, the operational side of the business had been allowed to slide and we have replaced five of the general managers and 24 heads of department since taking on the seven hotels. Moonfleet and Woolley Grange still have the same general managers who were in place when we sold them.
And finally, we are having to rebuild the sales and marketing activity from scratch. The administrators cut out all the corporate sales managers and when we took on the hotels, there was no corporate business on the books. The family market does have an affinity with the corporate market - parents who stay with their children may often want to hold a corporate event at a later date. Corporate business also helps us fill the hotels during midweek and out of school holidays.
We are currently putting together a whole array of marketing initiatives which will help lift the business. For instance, we are planning a sales drive in Germany, having had experience of that market in Portugal. School holidays in Germany are complementary to our school holiday and German children like to speak English, so we believe it is a good focus for the group.
How strong is the luxury family hotel market in the UK? It is a robust and growing market - particularly for people who have kept their jobs during the recession and with interest rates low. There are about 1.5 million households which fill the demographics that we are aiming for, which is a huge market when you consider that we have only 250 beds to fill.
How has the luxury family market changed? I think the key thing now is that people want choice - they are not prepared to be given one option and put up with it. So, for instance, we are aiming to offer a choice of two restaurants in each hotel, one which will provide candlelit dining for couples and the other offering lighter, classic food, such as crab linguini and great burgers.
Parents and children eat together a lot more now, which results in a demand for a more free-style menu. There is still the opportunity for children to have high tea and go to bed, but that happens less often. The children may then go off to one of our movie theatres to watch a film, which allows the parents some respite.
We have a den in every hotel, except for Thornbury Castle - although we will be adding one - which are Ofsted-registered crèches with the correct staff-children ratio, as well as snugs, which are sitting rooms with games, books and toys which all the family gravitates towards. But now the older children also want all the technology, so we also have somewhere they can go to use Sony PlayStations, Nintendo Wiis and, of course, Facebook.
We have spas at the Elms, Woolley Grange, Fowey, Ickworth and New Park, which can sometimes be tricky to manage as they tend to be adult spaces. We don't allow children unlimited access, but we do ensure they have a generous amount of time in the pools.
Where does your business come from? When we had LFH before, about 90% of our business came directly to us and we certainly want to head back to that figure. Personal recommendations are by far the most important bringer of business to us - often cross-referenced against TripAdvisor. We're also using a range of different family-friendly online channels such as Tots to Travel, Mumsnet and Smith & Family.
Do you have plans to grow LFH in the future? We may look at other acquisitions in due course, but we don't intend to take on any more at the moment as we really need to digest what we have already got. Our strategy is for organic growth. For instance, we have only 24 bedrooms at New Park Manor, which has a coach house and stables in the grounds that we could develop into more rooms.
We are also keen to introduce an element of luxury self-catering accommodation to each hotel, which would provide the flexibility and choice today's guests are looking for. The result would be a number of luxury resorts with a whole range of different types of accommodation.
LUXURY FAMILY HOTELS
The eight-strong portfolio of hotels is made up of:
The Elms, Abberley, Worcestershire (23 bedrooms)
â- Fowey Hall, Fowey, Cornwall (36 bedrooms)
â- The Ickworth, near Bury St Edmunds, Suffolk (39 bedrooms)
â- Moonfleet Manor, Weymouth, Dorset (36 bedrooms)
â- New Park Manor, near Brockenhurst, Hampshire (24 bedrooms)
â- Polurrian Bay, Mullion, Cornwall (41 bedrooms)
â- Thornbury Castle, Thornbury, Gloucestershire (27 bedrooms)
â- Woolley Grange, Bradford-on-Avon, Wiltshire (26 bedrooms)
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