ELSTREE, England—Michels & Taylor, the consultancy and hotel management company founded in 2010, already boasts a glowing pedigree: a knighthood for chairman Sir David Michels and an Order of the British Empire for CEO Hugh Taylor.
Now the duo is striving for hotel-management success, albeit in an usual manner.
“We have 23 staff but no asset managers on the payroll, which might be odd for an asset-management company. I have always seen asset managers as generalists, which is not what we wanted. We want hotel specialists,” Taylor said.
“So we have a team looking just at the top line, at pricing and yield management, a finance team looking at the cost base and conversion rates and another looking at capital projects,” he said.
Although M&T has brand exposure in the United States, it is essentially a European operation, overseeing, managing and/or advising on more than 100 hotels, including 81 in the United Kingdom, from independent hotels to portfolios and from unencumbered assets to internationally branded ones.
Taylor hopes the non-traditional approach increasingly will bear fruit, especially in M&T’s core markets: the United Kingdom and the Republic of Ireland, especially right now the latter.
In Ireland, M&T’s recent growth has included the October announcement that it started managing at the beginning of 2014 the country’s largest hotel, the 774-room Citywest Hotel Dublin, saved from administration (Chapter 11 in the United States) in a deal orchestrated by Swiss private equity fund BSQ Investments.
And at December’s Hotel Property Conference 2013 held in Dublin, Taylor confirmed M&T, in a joint venture with the Royal Bank of Scotland’s Ulster Bank subsidiary, would launch a brand targeted at Irish provinces.
No details as to a brand name have been announced, but Taylor said it would include approximately 25 predominantly independent hotels that have lending arrangements with RBS.
“We’re aiming to announce details of the brand in the first half of next year, but we are being careful and are not in a rush,” Taylor said.
M&T executives are in discussions with other regional Ireland properties that have no connection with Ulster Bank or RBS.
Putting the ‘I’ in Irish
The regional Ireland brand represents an untapped, if obvious, strategy, Taylor said.
“The idea is to take a group of independent hotels and allow them to perform better and be as strong as possible. The brand will cover the country in an appropriate way and cover the full range of sectors—for example, a 3-star property above a pub to major hotels in major locations. We have spent a considerable amount of time narrowing down properties on Ulster Bank’s book in order to get the correct mix,” Taylor said.
Possible properties need to satisfy three criteria, he said:
- Are they big enough to add value?
- Are their management set-ups robust?
- Are the hotels in the right location?
While international brands have tried to add value outside Dublin, success has been checkered, Taylor said.
“We want a domestic brand, not an international one that happens to be in one country. It is the smile and hospitality of Ireland that we are after. The hotels we have in mind supply that but are not known as sufficiently as they should be,” he said.
Michels in a press release added that “Ireland has been without a major domestic hotel brand for many years, and we believe there’s a real opportunity for a group of hotels to get together and offer the customers something tangible and inherently Irish.”
Taylor also is positive regarding Ireland’s economy.
“I believe the market has bottomed up. Dublin has recovered and is going so at pace, but the regions, not so much. There’s a lot of stock that has yet to play out, but analyzed from a low base, there’s real opportunity for assets to grow and grow back to levels they enjoyed in the past,” he said.
No Dublin properties are being considered for the brand at present, but properties in northern Ireland are included, he added.
Brand adventure
Taylor hinted that M&T dismissed very quickly many of the properties in Ulster Bank's portfolio.
“On the other side of the equation, there are gaps in the bank’s portfolio, so we’re engaging additional hotels. There’s so much excitement around, and early next year, we’ll be able to better see the brand’s proper positioning,” he said.
M&T will not be involved in day-to-day property management of the new brand, nor will it contribute equity to acquire new properties.
“M&T’s role is to manage brand economics, procurement, staffing, websites and distribution channels in order to deliver income over and above current levels and to make the hotels over time become more valuable for all stakeholders,” Taylor said.
The assets in the new brand are not distressed despite a sizable supply of such assets in Ireland, he said.
“(Capital expenditure) is generally not a problem with Irish properties. For some, it has affected debt, but (the new brand will be) working with successfully operating hotels,” Taylor said.
Experience matters
Taylor together with his partner Michels have sufficient experience to be “very comfortable” moving into managing properties under a brand umbrella.
Taylor’s resume includes such roles as marketing director at Radisson Edwardian and Ramada Jarvis; VP of marketing at Hilton UK & Ireland; and regional VP at Hilton, before going into the private sector and at one time owning more than 100 hotel properties. He also has been chairman of The Hotel Marketing Association and VisitEngland as well as a director of VisitBritain.
In addition to his role at M&T, Michels is also chairman of London & Capital; president of The Tourism Alliance and The Institute of Hospitality; and a board member of Strategic Hotels & Resorts, Jumeirah Group, The Savoy and Miroma. He also has been deputy chairman of department store Marks & Spencer and airline easyJet; a former board member of British Land, RAB Capital, Arcadia and Paramount Restaurants; and past president of the British Hospitality Association.
Perhaps more notably, Michels also was CEO of Hilton Group, during which he sold Hilton International to Hilton Hotels Corporation for £4 billion ($6.5 billion).