More rooms at the inn
Despite economic clouds on the horizon, a spate of new hotels will be springing up around Yorkshire. Peter Baber finds out why.
As Insider went to press two new hotels were due to open in Leeds. Much attention within the city centre was being given to the launch of the Ellington, a five-star hotel in York Place, which owner David Pantin hopes will be the first in a group of luxury hotels headquartered in Leeds.
The 35-bedroom hotel will also feature a restaurant whose menus have been designed by Albert Roux – the second celebrity French chef to get involved in an outfit in Leeds in less than 12 months (albeit, like Raymond Blanc, without spending any of his own money).
“We are in this for the long term,” Pantin told Insider. The former managing director of Rocco Forte hotels added: “We feel Leeds has an opportunity at the upper end of the market in the same way that Manchester had when the Lowry Hotel was built.”
He is already planning his second venture in the city, having won the franchise to make Leeds the next city, after London, Moscow and Madrid, to have a Floridita restaurant and bar. “It’s a carbon copy of an old restaurant in Havana,” he says.
Meanwhile, at junction 28 of the M62, a rather different but no less daunting offering is about to open for business. The Village Hotel South Leeds is one of five the group is opening this autumn, bringing its total to 20. General manager Chris Hartley says the hotel has mined a niche by focusing much more than usual on the leisure provisions the hotel offers.
“We are very much into active links,” says Hartley. “Unlike other hotels, which might boast a gym but actually only have a couple of pieces of kit and a plunge pool, we have a 25-metre pool and fully equipped gym. It’s almost like having a Bannatyne’s gym that happens to come with luxury rooms, too. We are aiming for 5,000 members, and already have 1,000 signed up.”
To attract day traffic, the hotel also features a Starbucks and a traditional pub. And while the design of all Village Hotels follows a formula, this one has more than the usual number of meetings rooms, some of which can hold up to 200 people.
In Sheffield existing hoteliers are anxiously awaiting the opening of four branded hotels in the city in the next six months. There’s a Jury’s Inn, a Copthorne,and a Travel Inn all planned near the city centre, and a Purple Hotel out at Meadowhall.
John Broadhurst, vice chairman of local umbrella group Hospitality Sheffield, and general manager of the Royal Victoria Holiday Inn in the city, says: “These are going to add 25 per cent to bed stock when completed.”
While his hotel is benefiting from about 74 per cent occupancy, he is expecting a 2 to 3 per cent drop when all four hotels are opened, similar to what happened a couple of years ago when the McDonald, now Mercure St Paul’s, opened in the city.
But hold on. Isn’t there supposed to be a recession? Why aren’t any of the backers of these schemes worried their pet projects could come a cropper?
The latest business confidence survey from IPSOS Mori, commissioned for Yorkshire Forward, certainly identifies the hotel sector as one that is showing above-average gloom for the next six months. But Nick van Marken, Deloitte’s lead partner for the tourism, hotels and leisure sector, says it’s really more of a mixed picture.
He says there is something of a “time lag”, with hoteliers yet to see clients adjusting their spending on corporate entertaining, so, for the moment at least, they are still doing well. “We are not at double-digit growth,” he says, “but this is not like the 1990s. Customers are being a little selective on how they entertain their clients, but no one is quite sure what is to come.”
The latest monthly STR Global HotelBenchmark survey, for example, indicates that occupancy was up in Leeds by 0.9 per cent between 2007 and 2008, and in Doncaster up a staggering 6.4 per cent. Admittedly the RevPAR rate, an industry standard that measures occupancy against the average room rate, is down – by 12.8 per cent in Leeds and 14.7 per cent in Doncaster. “But you don’t look at these figures and think: ‘I see how difficult it is,’” says van Marken.
Certainly those involved in selling and buying hotels have noticed a time lag. Leigh Parsons, a partner at Knight Frank in Leeds, says that while the new-build market has been saturated by property developers trying to offload city centre sites they had initially planned for apartment blocks, trade in existing hotels is more complex.
“There is an appetite to sell and an appetite to buy,” he says, “but it is very difficult to bring them together. Buyers are looking to pick up bargains, while sellers are actually doing ok, so they are not prepared to sell cheaply. I expect something to give in the next three to six months.”
Many existing hoteliers, too, say they are getting on fine for the moment. Felicity Lister, owner of Swinton Park, one of Yorkshire’s best-known country house hotels, says she recorded an occupancy figure of 85 per cent for August. “That surprised us,” she says. But she has noticed the bookings are becoming more last-minute, so she has needed especially tempting offers to tempt people who are just looking for something for the next weekend.
It’s that attention to the offer, too, that is focusing Gordon Jackson, chairman of the Leeds Hotel Association and manager of the Thorpe Park Hotel on the edge of the city. He is also expecting a tailing off in the months ahead. “Until July the corporate side has been remarkably buoyant,” he says. “But from August we are expecting a downturn, particularly among our leisure customers.”
His own hotel, he thinks, could be relatively protected because being a spa hotel, it is more frequented by single women and hen parties. It’s those with families and more aggressive living costs, he says, who are likely to start turning away as any recession bites.
So with such a threat on the horizon, how do you prepare? Certainly not by cutting costs, says Broadhurst. He says Sheffield already regularly appears in the bottom five cities for hotel room rates in an annual PKF survey. “If we cut prices any more we would really have to cut service to the bare bone to make anything at all.”
A more frequent response is to move your hotel away from the mid-market three-star sector. It is this sector most of all, says van Marken, that is really going to be squeezed.
James Page, general manager of the Wentbridge House Hotel, is doing that. This July, with funding from Lloyds TSB, the hotel his father opened in 1993 has opened an extension to bring his bedroom tally to 41.
His hotel is a popular wedding destination, but he noticed that whenever they had a wedding on his hotel was full but so was a Travelodge down the road. “We want to keep people on site,” he says. “Running a hotel is about attention to detail and noticing that it’s not just one big sale but sales in many small transactions.”
What has really caused problems for the mid sector – the ‘warhorse’ hotels that you can still see near many railway stations in northern cities – is boutique hotels such as Malmaison and Hotel du Vin, or, in Yorkshire, the Tomahawk Group, says van Marken.
“Malmaison has refined markets that were poorly served by a few players,” he says. “It was going against the large hotels near railways where a business traveller might arrive in the evening and think: ‘Where am I going to eat? Certainly not in this hotel.’”
As a result, he says, the UK hotel sector is unusual compared with the rest of the world in being “underdemolished”. “You wonder how some of these larger hotels stay afloat with no investment in the product for a long time where they are looking awful.” There are those who would disagree. “I run what might be called a warhorse hotel,” says Broadhurst. “It celebrates its 100th birthday later this year. We have sought to improve it with an investment programme costing £3m, including £750,000 on the bedrooms.”
He concedes, however, that owners of these establishments are faced with two choices. You could get a franchise brand on board. “But that can be expensive,” he says. “We are having to install air conditioning in all of our rooms to maintain the Holiday Inn brand.”
The other option, if you are small enough, is to “go boutique”.
Michael Purtill has gone the other way. The chief executive of Leeds-based Q Hotels, which was named AA Hotel Group of the Year this year, says his business model is to make sure every hotel in the chain has at least 125 bedrooms. “That way we can benefit from economies of scale,” he says. “The only exception currently is Aldwark Manor, but we have planning permission to take that to 140 bedrooms.”
However, he also says significant investment is key, which is why the chain has spent millions on two of its flagship hotels, the Midland in Manchester and the Queens in Leeds. “We specialise in picking properties that have been suffering from under-investment,” he says. “When we took The Queens over it still had bedrooms that were straight out of the 1930s.”
Under his stewardship turnover has risen from £10.9m in 2003 to £123m in 2007. But losses have also risen, too, to nearly £15m in 2007. Purtill insists that, with a programme of acquisitions behind it and some consolidation, the company wil make a profit, and says corporate business has not diminished.
“I expect EBITDA to be about £45m this year,” he says. “We have not seen any tail off in business. There are other venues in Leeds now, but none of the others provide accommodation on site.”
All this is not to overlook the huge development at the other end of the market in the budget hotels sector. Parsons, for example, thinks some budget hotel offerings are not so sophisticated that it is hard to tell the difference between them and some supposedly more boutique offerings. “The only difference is the size of bedrooms,” he says.
Van Marken agrees, and highlights City Inn, soon to open in Leeds. “It’s focused on fundamentals such as having a decent power shower,” he says.
That makes a difference when it comes to grading hotels. People in Yorkshire used to moan about how there was only one five-star hotel in the region – Oulton Hall outside Leeds. But the consensus in the industry seems to be that grading systems are out of date, and finding the right niche is what it’s all about. Page thinks the star grading system, run by the AA and the tourist board, is still too focused on facilities, rather than standard of service.
Van Marken adds: “That need for five star is an old-fashioned benchmark,” he says. “Most people go to hotels they have been recommended. Would you worry that the Dakota Hotel in Nottingham is not five star? I don’t think so.”
So is Pantin wrong to be going for five star in Leeds? “No,” says Van Marken. “Ten years ago I may have scratched my head, but not now. He is an experienced hotelier, knows what he is doing and should be successful.”
