Inside track: the Pig is becoming a whole different animal, says Robin Hutson

The Pig has outgrown its origins and we are looking forward to a different future, says Robin Hutson

I have been thinking a little about the various ownership models for our hospitality businesses in these past months. As the pandemic illustrated only too graphically, most pubs, restaurants, clubs and hotels rely on substantial and often expensive ‘bricks and mortar’ in order to operate at all. Very sadly, over the past two years, many UK businesses that struggled even in normal times, found the weight of rent or debt on their premises just too heavy, and collapsed as a result.

There have been plenty of column inches devoted to the landlord/operator Covid tug of war, as to exactly where the ultimate responsibility lies for servicing either rent or debt. But the fact of the matter is, that property in the UK is expensive and, whether owned or rented, property costs place a huge burden on the profitability of any business, even before the intricacies of balancing all other factors begins.

While not an option for many hospitality businesses, most of the hotels I have been involved with over the years have been based on freehold ownership: raising capital in the form of equity or debt to purchase a building outright in which to operate. A somewhat traditional model perhaps, but a model I feel offers me greater control over more of the risks to the business.

Clearly it takes substantial effort to raise large sums of capital in the first place. It’s not always easy, but by placing that principle property asset on the balance sheet compared to a term rent liability has served us well.

Over the years I have been involved in raising capital in various forms for these freehold projects. Back in 1994 when I founded Hotel du Vin with a nonexistent entrepreneurial track record, that capital consisted of bank debt with a 12.5% interest rate, a raft of 14 individual family and friends as small shareholders, room sponsorship from wine companies, and our house as the guarantee for the business!

Since then, we have primarily raised capital from a handful of high-net-worth individuals. These relationships have in our case been happy and successful arrangements with good understanding and levels of support.

At Home Grown Hotels (the Pig hotels) we have just recently entered a partnership with a new investor. Now with eight hotels, 1,000 employees, a turnover approaching £50m, plus aspirations to grow further, we have grown to a size that demands a new kind of investor. My new partners in the business are KSL, a specialist private equity firm based out of Denver Colorado.

As we have been negotiating the deal over the past six months it has been fascinating looking at our business through a completely different lens. I think the professional analysis KSL have employed has been a real eye-opener for us, and we are excited to be entering this new phase for our business. It certainly feels a long way from scratching around for those first investors in 1994.