Hotelier of the Week: Richard Balfour-Lynn (June 15)

Richard Balfour-Lynn, chief executive of Marylebone Warwick Balfour, which includes the Malmaison, Hotel du Vin, De Vere Hotels and Village Hotels brands, talks about how motivated staff can help in tough times

Richard Balfour-Lynn

These are tough times. What can a company do to survive them?

We have outperformed the rest of the hotel market in terms of revPAR (revenue per available room) for 2008 and 2009 and in terms of revenue as well because we have the rather old-fashioned view that we are in the hospitality business. So while we've managed to reduce costs, which is a necessary fact in today's world, we've also managed to drive revenue by effectively stealing customers from other hotel groups. I think a lot of hotels have got lazy. The hotel industry has shifted significantly over the last few years in that a lot of hotel companies are owned by hedge funds and private equity houses as opposed to hotel operating businesses. And a lot of debate around boardroom tables has simply been about numbers and sadly what hasn't been discussed is what the customer profile is, what the customer's needs are - have they changed and are they changing and what level of hospitality do we need to be giving? I spend quite a lot of time talking to our management and our employees driving that message home. We are in the hotel business, that is our core business, and if we don't understand then we aren't going to do very well.

A lot of those hotel chains were relying on corporate groups, and you've seen a huge deterioration in the corporate market - business travel, corporate meetings and events booking are all down, but you've also seen quite a significant growth in recent years in the leisure market. But if I'm with my wife or girlfriend and go to a hotel and it's got no soul, I won't go back. It used to be said that the only fussy people were the Americans. Well now everyone has travelled a lot and they all expect a lot. They know the service levels that they expect. Frankly not many hotels actually provide those levels of standards. The people working in the hotel, it's a job to them, no more no less, so there's no atmosphere, no great restaurant, no great bar. 

The other hotel companies have a corporate mentality in the way they operate. The management of the hotels are simply providing financial information to financial shareholders who are only interested in the financial numbers and little else. So the way they have cut costs is simply designed to bring greater profits for shareholders at the risk of damaging your underlying business. And because we've been in a boom economy globally for 15 years, people have got away with sloppy service. As the market deteriorates people have the luxury of choice, if you look at the leisure sector, some groups are doing remarkably badly, and some are doing well.

So what do you do differently with pricing?

Our attitude to pricing and where we would differ from the other groups is that their income flow comes 85-90% from bedrooms. Our income flows across our various hotels come from far more sources, be it health and fitness, spas, restaurants, bars, across all the brands - Village Hotels, De Vere and Malmaison. It's always been one of our strategies to say to ourselves that we should measure what each customer spends rather than focussing only on the bedroom rate. We tend to move the headline rate up and down, but we've just put a rate out for rooms for £10 on a Sunday night to get people in and spending in the restaurants. Our yield management is far more akin to an airline.  Also bluntly think: business travellers will phone up and say ‘I'm going to book such and such, now what's the price?' We get the example of people ringing up saying we're about to book a table for 10 in your restaurant, what deal are you going to offer?

Would they get one?

Yes, you'd be daft not to. Most people recognise that negotiation is a good thing.

Malmaison London

What about meetings? How badly has your company Searcys been hit?

The meeting market has shifted. There's been a deterioration in residential conferencing, training and meetings for obvious cost-cutting reasons, but actually there hasn't been a huge decrease in non-residential because there's been a shift from residential, and they won't travel far either and so they look for the nearest meeting venue they can get to and to where they are. Searcys benefits because it's got good food because if you're going to have a meeting you still have a breakfast or lunch or dinner.

What we've seen is a considerable shift in people booking long term out. People are taking short term decisions so it's been a shift in the pattern.  Across our group you can book meetings online and you have visibility across all the businesses, so you can look at whether there's a MWB serviced office available, for instance. It's being able to give a wide range of options for people to be able to book online so they can make those decisions. It makes it harder for us to plan our marketing, but many corporates can't react with the speed we react. We are very stream-lined in terms of management structure, a lot of the bigger groups, because of the way they are set up, can't compete with us. So we've had the benefit of being nimbler on our feet.

What synergies are there across all these different companies?

Malmaison Aberdeen

There are huge economies of scale. There are nine companies in all, including De Vere, Liberty and Malmaison and Hotel du Vin, Greens and Village Hotels. We have looked at a lot of initiatives across the nine companies so we are outsourcing across those nine companies procurement, reservations and cross marketing, joint deals, eat at Searcys, go shopping at Liberty, get married at such and such get your wedding dress at Liberty. MWB business: one is residential one is non residential, huge cross-selling across both.

Look, anyone can have lots of designer hotels, nice food and buy decent wine. But what they can't do is have people who are proud of working in the business because that's what the customer notices. It comes down right from the top to the guy behind the bar or the chambermaid. Everyone has to be passionate about what they are doing. We are in a shrinking market so we need to take business from our rivals, and that creates a strong culture.

And that wasn't there before?

No. We have made huge inroads into changing the culture of de Vere. The quality of the real estate was under invested, the brand had lost its way to the extent that one thought was that we ought to get rid of the brand altogether because from being a distinct advantage it was a distinct disadvantage. We have spent £350 million on the real estate and we still have more to do, but one result of the investment is that employees and management have seen change. We have also been tough about changing people. I made the point early on that we want people who want to work with us. If you want to work nine to five and then go home, then we are probably not the people for you. But if you're going to come in and make a difference then you are. Lots of people are remarkably busy but what do they actually achieve? And it becomes self-policing, because as people do better, and I'm totally for incentivising people with both corporate and personal goals, those who are not pulling their weight, the rest of the group encourage them to move on.

Hotel Du Vin Bristol

Is this a good time to invest in the properties?

Now is the time to be very cautious. Fortunately we did invest very heavily over the last two years which has put us in very good shape to drive in new business and bring in new business. Equally there will be a time when the clouds go away and the real estate will be in good shape for that.

Will you continue to expand?

Yes.  We have bought a site in Canterbury and a site in St Andrews which will both be Hotel du Vins. At the end of 2010 I would like to see us at the end of another four Hotel du Vins and Mals. We have also opened a couple more Village Hotels in Farnborough and Solihull, so we are cautiously expanding.

What about abroad?

One of our current strategies is to take Malmaison abroad and what we are interested in examining is partnering with one of the big hotel groups. All of them want to go into boutique brands, but they haven't a clue because they think snappy design and clever marketing will create one. It's more than that, though. It needs the confidence of one person. The reason W Hotels was successful is Barry Sternlicht did it all. For us to go abroad we need to do it on a reasonable scale because otherwise you don't get the brand pull. So we need someone with the size for the reservation and purchasing system and the skills to run people in different countries, and we would reflag those hotels to Malmaison and put in the management as part of the joint venture. It's never been done before but it's what I'm going to explore. We could also back into our customer base which is very strong.