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Union of boutique rivals will build from diversity

10 November 2004
Union of boutique rivals will build from diversity

Earlier this month saw the consolidation frenzy in the hospitality sector spread to boutique hotels with Malmaison owner MWB's £66.4m acquisition of Hotel du Vin.

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For Malmaison, the acquisition capped a year that has seen a dramatic turnaround in its fortunes under chief executive Robert Cook and owners MWB.

New hotels, such as London's Charterhouse Square, are performing well, and a programme of investment has breathed new life into the older properties and improved the food and beverage offering. More importantly, Cook reckons the firm is on track to break the £100 mark for average room rate this year, with occupancy rates pushing 80%. A confident MWB is now planning to double the number of Malmaisons within five years.

In purchasing Hotel du Vin, Malmaison has acquired a lot of goodwill, and Cook is determined not to jeopardise that by tinkering with the core product.

"The essence and the core values have to stay," says Cook. "What MWB has bought is a little gem and, as the old adage goes, if it ain't broke don't fix it. And the idea that Hotel du Vin will lose its personality and identity is absolute rubbish. We've got to keep them distinct - we don't want to confuse the customers."

In short, MWB plans to market the two as distinct offerings with separate promotional literature and websites - albeit containing links to the sister brand to promote cross-selling and drive referral business. This strategy will extend to the location of the sites. Malmaison will remain the more contemporary city brand, with Hotel du Vin more suited to cathedral towns and cities. However, Cook believes some cities, such as Bristol and Edinburgh, could handle both.

There will be some changes, however. The planned Malmaison in Durham will now become a Hotel du Vin, which Cook feels is better suited to the city, and, alongside actively looking for a site for a second Malmaison in London, Cook plans to reverse Hotel du Vin founder Robin Hutson's decision to stay out of the capital.

"Without doubt we will bring Hotel du Vin to London - like a small part of Chelsea or Little Venice - but Hotel du Vin is not West End, just like it's not Milton Keynes."

Cook hopes the two chains, while remaining separate, will help each other in areas such as training and in the sharing of ideas, such as Hotel du Vin's superior wine knowledge.

In acquiring Hotel du Vin, MWB has inherited a customer database containing some 60,000 customers, which it will use to cross-sell its Malmaison brand. The biggest win, however, will be using the combined clout to negotiate better deals with suppliers and drive purchasing discounts, from utilities to drinks and food.

Cook says they already share many of the same suppliers, "and they will be getting a call soon". He expects to drive £100,000 of savings across the two chains in branded drinks alone.

However, MWB will resist the temptation to cut costs by setting up a centralised distribution network for the two brands - an idea Cook dismisses as "too mainstream" - or by shedding jobs.

Having known about the deal for so long, he has purposely kept his management team at Malmaison "lean and mean" to reduce overlap. Both Cook and Hutson reckon that existing staff have twice the number of opportunities as before.

Only time will tell how the deal will affect the performance of Malmaison, which, despite the turnaround in its fortunes, was still in the red. MWB's full-year results, published last month, showed a pre-tax loss of £2.8m for Malmaison on a turnover of £32.6m.

However, Cook insists, "We're well, well past the recovery stage now." He stresses that Malmaison's financial year is different from its parent company's, running from January to December, and he is adamant that Mal will be back in the black this year, with the Hotel du Vin properties generating revenue and cost savings in future.

For his part, Hutson, who spent "the best part of a year" working on the deal with MWB, refuses to be pinned down on his future relations with the company. Initially, he has agreed to stay on to oversee the Hotel du Vin development in Henley-on-Thames, Oxfordshire, and help Cook to "understand the idiosyncrasies of the brand".

"We'll see if we're still friends after that. I'm not used to answering to anyone," he laughs. "But I could not be happier it's MWB, and Robert in particular. Had we sold to some faceless corporate enterprise run by bean counters I'd have been more worried, especially for the staff." n

The verdict "Overall there are some synergies, and the two brands can sit quite comfortably side by side. They're both lifestyle brands, but slightly different. It makes a lot of sense that they intend to run them as two separate brands. The price doesn't surprise me, although it will probably be regarded as high. Hotel du Vin is a very well-positioned brand with a very strong F&B offering."
Melvin Gold, of Melvin Gold Consulting
"It was well known that Robin and Gerry [Hotel du Vin director Gerard Basset] were looking to sell, but it was a bit of a surprise it was MWB. Hotel du Vin has been successful with its hands-on management team and it will be interesting to see how MWB get on. [The two brands] do kind of clash and could take business from each other, unless they stick to different locations."
Dominic Mayes, hotel partner, Knight Frank
"Best of luck to [MWB]. I think it's a terrific strategy. It really does open up towns with a population of around 100,000, and I can think of lots of those."
Chris Rouse, CBRE Hotels

CAPTION: Meeting of minds: Robert Cook (left) and Robin Hutson

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