Richardson Hotels case by theworstone

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									CASE STUDY: Richardson Hotels

Bob Richardson owns five luxury hotels but can’t decide whether to brand them as a
group or keep their individual character. He admits that although he owns five high-
class hotels, he rarely indulges in flash, high quality rooms when he travels. “I will
bend down to pick up a penny,” says the Managing Director of Richardson Hotels,
who owns not just one but two Bentleys. “You don’t get rich by throwing your
money around.”

The straight-talking northerner - a chartered accountant by profession - came into
hotels by chance. He had a property-rental business, started in 1964 when he and his
wife, Jane, realised they would only be able to afford their first house by converting
two-thirds of it into flats to let. Then they fell in love with a Cornish village while
they were on holiday. When the local hotel came up for sale in 1988 they used their
business in Manchester as security to buy the 26-bedroom waterside retreat.

Neither had any knowledge of the hotel business but they made a success of the Idle
Rocks and went on to buy a second hotel in the Lake District, followed by a third on
the Fowey estuary in Cornwall. The portfolio now has five waterside properties,
including the four-star Grand Hotel in Torquay, whose guests have included many
celebrities such as Ben Elton, Jools Holland and Barbra Streisand. This was the hotel
in which Agatha Christie spent her honeymoon and there is a popular suite named in
her honour.

Richardson, 64, believes the success of his business rests on investing in the
infrastructure - he takes pride in carefully restoring the architecture of each building -
and giving guests good service in a relaxing environment with top-quality food. The
concept and use of e-marketing is not high on his list of priorities.

Unfortunately, finding reliable staff with the same pragmatic Richardson approach
can be difficult. “At one of my hotels there have been seven managers in the past
nine years. One lasted just 10 weeks. It’s extremely difficult to find people to run
places as I would choose,” says Richardson. It also very difficult to hire a good sales
manager.

He has a simple approach to overseeing the business. “I observe the numbers and let
them do the talking. They soon show me if there’s a problem,” he says. At one hotel
Richardson was horrified to spot the sales one August were down 32%. He
discovered the manager had increased prices by £20 per person without consulting
him.

Increasing high margin sales, staff turnover and the late take-up of e-marketing are the
organisation’s biggest challenges. At one hotel, in the 12 months leading up to March
2006, the staff turnover figure was 208% and sales had fallen 12%. Only the
Metropole in Padstow managed a staff turnover rate of less than 100%. “This isn’t a
casual business - we provide employment the whole year,” says Richardson. “We
have 294 staff and I’d like to see turnover down to well under 100% but it’s proving
tricky.”
One of the problems is that in the more remote areas, hotels provide staff with
accommodation and this can attract an itinerant population. He has tried to address
this by introducing a scheme whereby workers from nearby towns can apply for a
company scooter, which after three years’ service becomes their own. Also, in an
attempt to retain staff, the group encourages promotion from within and prides itself
on being an Investors in People business.

“We like to treat our staff well and have a good policy on training,” says Richardson.
“We pay people fairly and employ more staff so that workers aren’t stretched. Pay
accounts for 40% of our business and although it would be nice to reduce staff
turnover by offering more pay, it’s not practical.”

This is especially the case, says Richardson, after the rise in National Insurance costs.
Added to that is the rising expense of building and public liability insurance - for one
hotel the annual premium has risen from £20,000 to £80,000.

His answer is not to cut costs but to improve sales. “It’s easier to increase sales by
£500,000 than it is to make cuts of the same amount. The hotel and leisure business is
growing by 7% each year even though in recent years some hotels, especially in
London have struggled. This gives us great scope.”

Indeed, the business has expanded rapidly since 2001, when turnover was £3m. Since
then the company has acquired two more properties - one of them the 110-bedroom
Torquay Grand - which helped boost turnover for 2005 to £8m, with profits before
tax, interest, depreciation and repairs at £1.2m. Turnover for the current year (2007)
is forecast at £12m with profits of £2.5m, much of which has already been earmarked
for re-investment.

To boost occupancy, which averaged 68% last year, £500,000 was spent on sales and
marketing. This included placements with Best Western, the hotels marketing
consortium, which advertises the hotels and takes bookings for a fee. There were also
advertisements in the national and local press as well as mailshots sent out by the
individual hotels.

Ideally, Richardson would like to see the sales and marketing budget reduced to
£350,000 and is wondering whether the internet could be the key to achieving this.

“About 60% of our business is generated by repeat custom and word-of-mouth
recommendations. We have a database with details of 60,000 customers and are
increasingly collecting e-mail addresses. The internet gives great scope for more
cost-effective marketing and it’s an opportunity I don’t want to miss. So far, though,
our approach to the capabilities of the technology has been amateurish.”

The father of one, who once sold his 55ft yacht to pay for a swimming pool at one of
his hotels, knows the importance of the internet. It was through the web that he found
the skipper for the latest addition to his business; a 90ft Italian motor yacht to be used
for corporate charters and private cruises for hotel guests.
Although bookings cannot be made on the website, more and more customers are
using the internet to make inquiries. “It also seems to generate an increasing number
of calls, and the sales team can direct people to the sites for more information.

“Ideally, people could book over the internet but I just don’t know of a system that
would be flexible enough that’s affordable,” says Richardson who doubles as the
organisation’s IT manager. His own office is “virtual” because he splits his time
between the business’s HQ in Manchester, the five hotels and the two houses he has
in Torquay and the Lake District.

“At the moment our reservations teams can negotiate with people making inquiries -
we’ll haggle on rates to take the business. But I believe in investing for the future.
The question is knowing how much is reasonable for a concern of our size.”

There isn’t a group website at present. Instead a Richardson Hotels page has links to
each hotel’s website. This presents another question for Richardson - whether it
would be better to promote the business as a group or retain each hotel’s individual
identity. “All the hotels have different characters,” he says. “If we absorb them into a
group, we could lose custom because if one hotel isn’t to people’s taste, they may
shun the others.”

Instead, Richardson is trying to instil consistency of quality across the group, with
certain standards adhered to by all five establishments. For the restaurants - two of
which have two AA rosettes - he has asked a group executive chef who trained at the
Dorchester in London to write a book of standards and guidelines.

“I don’t want to risk the business by going too far with unification but equally I don’t
want to disappoint customers with vast differences between the hotels.”

Richardson is concerned, however, that if the group is not promoted, the business may
lose clout in the market as well as economies of scale such as buying power for
advertisements. Any benefits, he says, could be used to improve the establishments
further. While he may not see the need for luxury hotel rooms for himself, he
certainly sees his role as providing them for his guests.

								
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