Survival of the fittest is the business mantra for 2009 — and hotel and leisure entrepreneur Richard Balfour-Lynn is up for the challenge.
Mr Balfour-Lynn, 55, is one of the most respected figures in the hotel industry, heading two companies that have become significant players in the sector. As co-founder and director of hotel and retail group Marylebone Warwick Balfour, and chairman of the Alternative Hotel Group (AHG), he owns an estimated £500 million worth of hotels and, across the two companies, has controlling interests in around 90; notably leading chains Malmaison, Hotel du Vin, De Vere and luxury London store Liberty. But, in the current climate, even he is changing his business strategy in order to seize market share from his competitors. “The downturn requires a culture change,” says Mr Balfour-Lynn. “You have to be proactive in how you chase business. You can no longer wait for business to come to you. It’s a challenge but there is business out there. You just have to fight for it.” He adds: “We live in a world where the pricing of hotels changes all the time. Businesses that can adapt to change quickly and have strong yield management departments will survive, and those that continue to operate in the old way will have problems.”
Among his companies’ coping strategies are having multiple revenue streams. AHG owns the De Vere Group, the Greens health and fitness club chain, distiller and bottler G&J Greenall, and contract caterer Searcys.
Mr Balfour-Lynn is also pushing ahead with expansion plans for other parts of the business, including the rollout of 16 Village Hotels combined with leisure clubs. He explains: “We think this is a fantastic concept. A third of our income comes from the health club, a third from the restaurants, bars and meeting rooms, and a third comes from the rooms.
“Securing multiple revenue streams and not being solely dependent on room income has always been a big part of the group’s strategy, and this is particularly important in the downturn.”
So far, Mr Balfour-Lynn is staying ahead of the game. “We are out-performing the comparative sector of the hotel industry. For the first few months of the year, the hotel sector has seen revenue per available room (RevPAR) decline by 13 to 16 per cent, and we have declined six to eight per cent. We are keeping ahead.”
But surely the sector in general is suffering in the recession? Mr Balfour-Lynn says that the market has held up reasonably well, with occupancy levels at an average of about 80 per cent. Room rates have come down between five and ten per cent. “Forward bookings over the next three to six months look strong. Even the luxury market is holding up.” He maintains the sector has been “helped enormously by the weakening pound against the euro. Because of this, and the strengthening dollar, the number of visitors to the UK is about 15 per cent up this year. A lot of people have decided to take their holidays in the UK.”
According to a recent report by hospitality consultant PKF, people who are travelling within the UK are spending more than before. Spend from domestic visitors rose by 1.9 per cent from £21.2 billion in 2007 to £21.6 billion in 2008.
According to Mr Balfour-Lynn, those with jobs have higher disposable incomes. “Interest rates on mortgages have come down so people have more available cash. They are continuing to spend on retail, hotel and leisure.” He adds: “We have become a nation of people that shop for leisure. Shopping is a way of life, as are short breaks, holidays and leisure time such as health and fitness. Hotels are very much part of our regular spending.”
Nonetheless, Mr Balfour-Lynn’s company has not escaped unharmed. “Obviously, we have had to cut costs. We have had to make changes to the menu. In these times, people are less interested in nouvelle cuisine and more interested in comfort eating. The wine lists have to be altered.” He says the biggest challenge facing the leisure sector is maintaining service levels while being more competitive. But then, he says, he is driven by challenge and living outside his comfort zone.
He cites former Israeli Prime Minister Golda Meir as an inspiration. “She believed you could do anything.” His other great inspiration was his father. He taught me not to have that fear but to go out there and fight.”
Mr Balfour-Lynn has been in the property game for close to three decades. In 1982, he formed Warwick Balfour Properties and, in 1994, co-founded MBW, now a listed company. He co-founded AHG in 2005. It took over the De Vere Group for £1.1 billion the following year.
But he is perhaps best known for buying Malmaison — a chain of five hotels — for the MBW portfolio in 2005 for £77 million. MWB has been rumoured to be mulling over a sale of the chain. Can he set the record straight? “We were planning to sell Malmaison in 2007 and we didn’t. No, it’s not on the market. We are continuing to grow.” In the past six months, MWB have opened four new Malmaison hotels in the UK and are considering taking it to other parts of the world.
Richard Balfour-Lynn’s interests
MWB Group
● Malmaison: 12 hotels
● Hotel du Vin: 14 hotels
● Liberty: 2 stores
Alternative Hotel Group
● De Vere Collection: 12 four-and five-star hotels
● De Vere Venues: 31 UK venues
● De Vere Collection: 12 hotels
● MWB Business exchange: 50 serviced offices across the UK
● Village Hotels: 21 hotels
● Searcys: 16 bars and restaurants
● Greens : 15 health and fitness clubs
● G&J Greenalls: distiller and bottler
