As managing director of QHotels, Michael Purtill aims to establish the best four-star hotel group in the UK. He tells Janet Harmer how he intends to achieve this through improved creativity and staff career development
QHotels is a well-established group of 21 four-star hotels. Where are you located and who are your guests? We have a mix of city centre hotels such as the Midland in Manchester and resort properties like Forest Pines Hotels & Golf Resort in Lincolnshire. Our guests are split between the leisure (30%), corporate (32.5%) business and conference (37.5%) sectors.
How have you grown the company from two hotels to the 21 you have today? We launched the group in 2003 by buying the Queens in Leeds and Chesford Grand in Kenilworth, Warwickshire, with financial backing from Alchemy Partners and the Anglo Irish Bank. Growth has primarily been through purchasing distressed properties, which we then improve. The Midland in Manchester is a good example. It was previously owned by InterContinental (IHG), operating under the Crowne Plaza brand and got to the point where it needed a refurbishment. IHG were considering upgrading it to a five-star InterContinental hotel, but I don't think the figures stacked up. We bought it for £34m and spent a further £14m on improving the property.
By 2006, we'd grown the company to nine, then we bought the 12-strong group, Marston Hotels, for £180m. Before then we had been largely northern based. The acquisition gave us nationwide coverage, with properties in Hampshire and Kent.
We own the freehold of 19 hotels and have the other two on medium-term leases. QHotels is a more challenging business than the previous companies I've run [Principal and Paramount] as I've wanted to raise the bar each time. We've now invested more than £160m in making improvements across the portfolio of properties.
How well has QHotels ridden the recession? We have become leaner by making around 100 staff [7% of the work force] redundant and are being very careful about filling vacancies. We've also had to be creative in terms of our sales, which has come at a cost in terms of our revpar (revenue per available room), which dropped to £44 in 2009 from £50 in 2008. We don't expect to reach 2008 levels again until 2012-13.
Which part of the business suffered most during the downturn? Undoubtedly it has been our conference business, which is a very key part of our income. Conferences are a major expense which a company can easily defer and every one of our major conference customers cut back. However, in terms of a recovery, it has recovered more quickly than our corporate business, albeit slowly. Leisure business has held up surprisingly well.
How heavily did you discount during the recession? At the nadir of the downturn, the day delegate rate dropped around 20% from the high of 2007 to £40-£50. Some of our competitors were offering day rates as low as £10-£12. You can't possibly provide a good service at that price. My view is that you cannot risk dropping service values to bring in short-term business. I think it is because we have consistently maintained our offer at the same level that business has began to drift back. Things did look very bleak at one point though - at the end of 2009, early 2010 - and we wondered whether the business would ever return.
Have you held back on refurbishments over the past couple of years? We considered it - and it would have been easy to have done so with the drop in business, but we believed it was important to continue. For instance, at the Queens hotel in Leeds, we've spent £650,000 on creating the QClub floor on the eighth floor. We have upgraded all 18 bedrooms on the floor and the original suite, which was only occupied around 30 nights a year, has been converted into an exclusive lounge with a unique outdoor heated terrace. It didn't pay a return over the first six months, but it is starting to now. And at the Midland in Manchester, we've turned a previously disused space into a new function room, at a cost of £750,000, which opened in time for last year's Labour Party conference.
How has the recession turned your mind towards your staff? The staff are our single biggest cost and in the past we probably haven't focused enough on them. The recession has really turned our minds towards developing and retaining our staff. As a result we launched a Chef Academy in 2009, which is aimed at providing work-based training for 16 to 24 year olds. It has a foundation and intermediate level and, with support from recruitment consultancy Platinum Recruitment and training provider Babcock International, we ran an Academy student of the year competition, which culminated in a cook-off and celebration dinner at the Midland.
We've also realised that we can benefit from the growing number of unemployed, highly educated youngsters and have introduced a two-year graduate training programme for front-of-house staff. Within two years, the youngsters can be earning a salary of £20,000. Last year, 15 joined the scheme and this year we have 30 new recruits.
Events like the chef's competition are just as important to me as pitching for a major new contract. If our staff are in a good place, our customers will be happy and we will be profitable.
How have you used creativity to drive business? Our food offering has been key, especially in the conference sector where the delegate rate buys all food and beverage. We have worked with a consultant, Chris Stanley of RED, since 2008, who has helped us to develop and improve the quality of our food provision.
Ten years ago, it was the volume of food which was deemed important. Now there is more consideration for healthier options and the provenance of ingredients - something conference bookers now regard as important.
We've also increased our awareness of the business by introducing initiatives such as the Yorkshire PA of the Year award, which we launched at the Queens hotel in Leeds, and is sponsored by the Yorkshire Post. It wasn't run to make a profit, but rather to work with some high-profile companies in the city. It was very successful and really lifted the staff. We shall definitely be running it again and be looking to roll it out to other areas of the country, where appropriate.
The green agenda in hospitality has become increasingly important. How have you used it to improve revenue? We believe we have played a leading role in adopting a green policy for the corporate and conference markets. As well as the company being one of the few hotel groups to be awarded Carbon Standard accreditation by the Carbon Trust, we offer delegates the chance to reduce their carbon footprint - through Carbon Clear - by adding 14p to the day rate and 40p to the 24-hour rate. Green credentials of a venue are becoming increasingly important in influencing the decisions of conference organisers.
In 2010, QHotels reduced its energy consumption by more than 10% by introducing measures such as water-flow regulators for showers and digital electric meters that can record data every half an hour.
Now that business is beginning to trickle back, are you thinking about further expansion? Although we still have the financial support of Alchemy and the bank, currently there are very few properties coming on to the market that we would be interested in. The more cost-effective way to grow at the moment is by extending existing hotels, especially those with high occupancies. We currently have planning permission to add a further 627 bedrooms to 13 of the hotels, which is equivalent to buying around four hotels.
michael purtill: CV
2004 Sold the 20-strong Paramount Hotels group to Dawnay Shore Hotels
2003 Founded QHotels (initially named Quintessential Hotels), with two colleagues from Paramount, sales director David Taylor and financial director Ian Goulding, backed by private equity company Alchemy Partners
1994 Founded Paramount Hotels with Ian Goulding with the purchase of four properties
1984 Created Principal Hotels after purchasing his first hotel in Scarborough. Grew to a group of 22 and went into receivership in 1994. He failed to buy back the company in a management buy-out
QHOTELS: THE FIGURES
Number of hotels 21
Number of bedrooms 2,966
2010 2009 2008
Turnover £120m £118m £130m
Occupancy 67% 65% 70%
EBITDA* £31m £30m £37m
Average room rate £67 £66 £72m
* EBITDA = earnings before interest, tax, depreciation and amortisation