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Starting a hotel chain

Interview with...

Haydn Fentum
Age:
---
CV:
Formerly chief executive of Furlong Hotels
Business name:
Bespoke Hotels
Goods/services:
Specialises in luxurious niche properties, growing from three hotels in 2001 to 52 hotels in 2011, totalling £225m worth of assets
Location:
UK wide, head office in Buckinghamshire
Trading for:
Eleven years

BusinessesForSale.com: Okay Haydn, can you tell me a little bit about how Bespoke Hotels was set up?

Haydn Fentum: Yes, Bespoke was set up in 2000 and we've just celebrated our 11th anniversary. I had a hotel at the time with my sister down in Bath and my current business partner, Robin Shepherd, was also running a hotel in Bath, so we just got to know each other. 

We got on well and thought our skills were complementary so we subsequently set up a business together in the Midlands.  We said "OK, well we've been talking about this management company for a while, why don't we do it?"  

So we incorporated the company and tendered for our first contract, which was a property down in Winchester, and it's grown from there. We had an element that was owned as well as operated, which we sold in 2005, and now we just concentrate on management and leasing, so we're splitting bricks from brains in that respect.

BFS: What are your areas of focus as a hotel group?

HF: It's a mixture and it varies from site to site. Obviously, for hotels on the coast in Devon you're going to have a strong leisure market. 

2007 was the busiest year for transactions in the hotel market so I would say nearly every hotel group in the UK was underwater in terms of the value of their buildings and debt

Haydn Fentum, Bespoke Hotels CEO

You want any provincial hotel to have a good blend and be as big a fish in as many ponds as you can.  So you'd like to have a commercial market, wedding market, international banks, leisure, corporate, international - that's your perfect mix, if you can get it.  

Again, each hotel is specific and you need to play to your strengths. So we encourage the managers to push hard in areas where they know they'll get success. 

BFS: To what extent has the downturn and subsequent turmoil affected your business?

HF: I would probably say that the hotel sector is in recession and has been for about the last three years. 

There are predominantly two markets. London, which is a bubble unto itself and is supported by international money, overseas visitors and the fact that London is I think the fifth largest economy in Europe, is unique. The London market continues to trade comparatively well and rates of occupancy are sound.  

Outside of London it's a very different picture. Valuations are back a long way from where they were at their 2007 peak. Also, money was much easier to borrow in 2007; I think a lot of people had mortgages for 75%, 80%, 85% against their business. 

And of course they're worth 60% of the value. 2007 was the busiest year for transactions in the hotel market so I would say nearly every hotel group in the UK was underwater in terms of the value of their buildings and debt.  

Coupled with difficult trading, most of them are maintaining their position through the grace and favour of the banks not foreclosing on their loans - which is sensible I think for the funders. 

The impact has been pretty far reaching. As I said, London has a lot of capital going in, but it's an oddity. Provincially, most hotels are underinvested and I don't think it's going to get much better in the next couple of years.  

We've had some green shoots with the leisure market thanks to the 'staycation' effect, and the hotels that we operate with a strong leisure profile have done better through this summer than last summer.  But business travel, conferencing, residential conferencing and training are all massively down on three years ago.

BFS: So what is the secret to the success of your hotel group?

HF: Somebody asked me the other day about this when I was mentoring.  I think it's the usual things that most business people would say. 

Perseverance. Either Gary Player or Arnold Palmer said it - the more I practise the luckier I get. I think it's just working hard.  

Probably not overplanning too - there's a great tendency in business to talk about five-year plans. I think it's important to have a strategy, but I'm not entirely sure what our business will be doing in five weeks, because an opportunity might present itself.  

If I had to choose one word to explain our success I would probably choose 'flexibility'. By listening to our clients and the hotel owners, we make sure we apply the right level of service to a particular property.  

We adapt well and that's where we've won out over branded operators, because our properties are all idiosyncratic and quite unique to their location. We take a more bespoke or tailored attitude towards running those businesses.  We're not a one-size-fits-all hotel group.

BFS: Have you ever had to be ruthless and close an underperforming hotel?

HF: Honestly, I think in the first years we probably said yes to most things because we were building a business.  We are more selective now in the properties we work on.  

But there are certain times when you need to go to the owner, administrator or funder and be up front with them and say: "You know what, this shouldn't be a hotel." The market is now being decimated by high quality budget properties.  

Maybe a hotel has been underinvested and undercapitalised for such a long period that making it competitive again is going to require so much money that you'd be better off converting it to residential or sheltered housing. 

Those have tended to be the ones where we've said: "No, we don't think there's a market for this hotel anymore. The reason you're talking to us is because you're losing a lot of money, and the reason you're losing a lot of money is not really because it's being badly run - but actually it's just not viable."  

Regrettably there are quite a few hotels in the UK that really probably shouldn't be hotels anymore.

 

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