The chief executive of EasyHotel talks to Katherine Price about the group shifting its UK growth focus to franchise, outperforming the market four years in a row and why he thinks the hospitality industry is undervalued
You joined EasyHotel four years ago. What was the business like when you arrived?
It needed some TLC and a focus. Fundamentally, it was a great brand, it just hadn’t been developed. Everything needed a refresh and I brought in a completely new team. When I arrived, there was only one other person who had worked in a hotel business before.
Now we’re at a phase in our development where we can bring in people who have no hotel experience and they bring very different skills that we can use to make us think in different ways. There’s a really good team of people here and we’ve got really strong foundations now to grow for the future.
When I took this job, a previous chief executive sent me an email that said something to the effect of ‘good luck, you’re one of many that has become CEO of EasyHotel, let’s hope you last longer than the rest of us – so I give you nine months’. And here I am four years later, and the business has more than doubled. I hope most people would say it’s a completely different company from what it was when I took over, and I’m really proud of what the team have done. We’ve got people that want to now put in significant sums of their own money to franchise with us.
We’ve got a 300-bedroom hotel that will open in Dubai just after Christmas; that’s a significant investment in a pretty difficult market- place. Knowing that people want to do that because of what we’ve built here is great.
Is the business still in growth mode?
Yes, absolutely. We’ve got 37 hotels open and we’ve got a really strong pipeline of hotels still being built, both in the UK and in continental Europe, and we’ve got one under construction in the Middle East. The brand is in the strongest position it’s been in, I think, probably since its inception.
Is that still being funded from the share placing last year?
The growth is a combination of both owned and franchised hotels, so from a franchise perspective, it’s not using our own funds. In terms of owned hotel development, yes, that is from the placing last year and we have some bank debt that we can draw down.
We’ve also got some leased hotels, so for example, we’ve under construction a hotel in Oxford in Summertown, and that’s a lease; one in Cambridge that will be a lease; and we’ve got the planning permission through for Paris Charles de Gaulle airport, and that will also be a lease. The rest that we’re constructing at the moment are all freehold. But we’ve still got cash left to keep developing.
Is the focus still on the UK?
From an owned hotel perspective, we are going to start developing hotels in France and Spain. That’s not because we don’t think that the UK market has still got growth opportunities, because we do. There’s a limit to the amount that we can buy and build and we decided to put that expenditure into continental Europe. We’re never going to have as many hotels as the really big players in the UK market; that’s not our aim. Our aim is to have a more European footprint than them, and we’ve already got hotels successfully operating across continental Europe. Owned and franchised, by the time we’ve finished building out, we’ll have 25 hotels in the UK. We’ve said that for owned hotels we will target four locations we’d like: York, Bath, Edinburgh and London.
For owned hotels, we’re then going to focus on Spain and France. We’ve identified cities in both in which we want to develop, and you’ll see over the next three to five years a much stronger development in both of those countries than you’ve seen to date.
In the UK, I think there’s an opportunity to double the size of the network, but we are looking now for franchise partners to come and work alongside us in the UK. We can see an opportunity to get to at least 50 hotels, if not more.
Are the cost pressures affecting business?
The market is and has been tough. Our financial year starts on 1 October and there was a marked difference in the market in which we operate, which is the midscale limited service market, the same market in which Travelodge and Premier Inn operate. And we saw a marked deterioration post-Christmas.
Having said that, we continue to outperform the market – we’re on our fourth year of outperformance with like-for-like revpar growth. But without a doubt, the UK economy isn’t as strong this year as it was last year and that’s filtering down into the hotel market. We continue to believe that we’ll outperform.
It looks as if June has bounced back slightly. Whether that’s trading against last year’s World Cup, where people were sitting in pubs watching the football and not staying away, I don’t know, and it’s too early to call.
In terms of cost inflation, we don’t have F&B in the hotels. It’s a very clear strategic decision for us because we know that our customers come to us because they want to go out and explore the location they’re staying in and that includes going out to eat. So we use that space for bedrooms and that enables us to generate higher returns for our investors.
What about wage increases?
From a payroll perspective, we don’t have as many staff in the hotel as some of our competitors may do. If you take a hotel such as Old Street [with 89 bedrooms] in London, we may have seven or eight members of staff.
People in the industry are claiming that Brexit is causing difficulty – I suspect some of that is where people have got restaurants and have got to find chefs. We don’t have restaurants and we don’t have that issue.
In 2019 we opened in Milton Keynes, we opened in Ipswich, we reopened Old Street – we had more applicants for jobs than we had places, so we were in a fortunate position of being able to pick and choose the staff we wanted that really met the criteria that we’ve got and that mirrored the brand values.
Clearly we’ve been affected by the rate increases. One of the decisions we’ve taken as a business is that we will try and own our real estate, and that means that we’re not as exposed to lease increases as a number of other hoteliers are, and that protects us from the downside. We’ve been able to absorb the price increases and the hotels are performing very strongly.
We’re able to get to mature occupancy of 85% after about 12 weeks of opening a hotel. And that means at the moment, we’re not affected by the inflationary pressures that other people are facing and we haven’t experienced difficulties in terms of finding staff. In the first half of this year, we opened three hotels – one in Germany, one in Lisbon, one in Ipswich – and they’re all performing exactly the same way. The thing about the brand is it travels fantastically well because of the ‘easy’ name.
Do you feel the hospitality sector doesn’t get the recognition it deserves for driving economic growth?
I think that’s potentially still the case. In terms of driving economic growth, it absolutely does – the hospitality sector is still one of the largest employers by sector in the UK. If you look at our own hotels across the group, the hotels will run in excess of 85% occupancy for the year. We don’t have restaurants, so people will be staying in the hotels and going out and spending money in the towns and cities in which we operate, which has got to be good for the economy. We create a lot of jobs across the industry, but I still think there is maybe a stigma.
I don’t think hospitality is viewed as positively in this country as it is in other parts of the world. It’s not treated as seriously as other parts of the economy considering its size and importance.
Do guests ever express surprise about what they have to pay for, such as WiFi or remote controls?
Sometimes. If they do, we’ve made a mistake. One of the things we try to do is to be very transparent on the website. We explain to people what it is they’re going to get and what they’re not going to get. If we’ve done our job centrally properly, I hope the customers are not going to be shocked by something they perceive they don’t have, because of all the things we do provide them with.
You have some interesting marketing strategies – hipster welcome packs [with chest hair mousse and beard volumiser] and zip-up hotels [an orange tent] – what’s your thinking?
One of the core parts of the business is that we don’t take ourselves too seriously. I’m yet to find a customer who says it was an awful idea. We get some press coverage, people talk about the brand – I don’t think we’re hurting anybody. It fits with us. Life would be really boring if it was all straight all the time.
What’s the focus now?
I’d like to get to more than double the size of the business in the medium term; I think that’s very possible. The business has been going since 2004, but to some extent, it still feels like a start-up, in that we’re growing at speed, we don’t employ that many people, we’ve proven that the brand works and we’ve got a real opportunity now to keep growing and to grow across Europe. I hope then to persuade potential franchisees to grow with us in the UK.
2015-present Chief executive, EasyHotel
2013-present Non-executive director, Yorkshire Building Society Group
2013-15 Chairman, Nescot Consortium
2012-15 Non-executive director, Warmup
2013-15 Chairman, Commercial Services
2011-14 Non-executive director, London & Partners
2010-14 Chairman, North East Surrey College of Technology
2010-12 Chief executive, Travelodge
2006-10 Managing director – UK, Travelodge
2004-06 Sales and marketing director, Travelodge
2002-04 Managing director UK, TGI Fridays
2000-02 Sales and marketing director, Whitbread Hotel Company
1997-99 Marketing director, Travel Inn
1992-97 Director of operations, sales and marketing, Novotel UK
1990-92 Marketing manager, Accor Business Services
Owned hotels 11 in the UK and one in Spain (1,340 rooms)
Franchised hotels Eight in the UK, one in Dubai and 17 in Europe (2,139 rooms)
Development pipeline Six owned hotels in the UK and two in Europe; three franchised in Europe and one internationally
2018 financial results
Adjusted earnings before interest, tax, depreciation and amortisation £2.96m
Pre-tax profits £870,000
EasyHotel is one of the spin-off brands from Stelios Haji-Ioannou’s EasyGroup, best known for its budget airline EasyJet. The brand was launched in 2005 with its first property, a 34-bedroom hotel offering a stripped-down proposition decorated in the group’s distinctive orange, opening in London’s Kensington.
Guy Parsons on…
…the radio selection in the EasyHotel office
We have a radio in the office and whoever gets in first gets to choose the station. We may have Kisstory one day, then Virgin, Absolute Radio or Radio Two, so we hear a lot of music in the office. I’m into my music in a big way. If I had a choice of band to go and see at the moment, I’d go and see Foals.
…playing the piano
I started playing 20 years ago. I’ve got a Boudoir Grand – a hand-me-down. From memory I think one of the kids wanted to learn the piano and you’re sitting next to a seven-year-old watching them do the scales and I got hooked, so I had lessons.
…what he’s most proud of
I am very proud of the work that was done when I was at what was Travel Inn and is now Premier Inn. I won a Catey for that. That was quite a proud moment, and that was when we did the original redesign of Travel Inn. In recent times, I’m proud of the turnaround of this business.