Scottish hotelier Norman Springford is retiring from Apex Hotels, the small four star chain he started in 1996. Springford’s son Ian will be taking over the business, as it plans a major growth spurt.
Springford announced his retirement as the company revealed a 37% increase in underlying profits in what he called “a very good year”. The group saw occupancy up to 87.2% from 81.4% the previous year, while average room rates increased from GBP 115.44 to GBP120.24.
He also revealed Apex had agreed a deal to buy an existing, as yet unnamed, hotel in the centre of Glasgow. The approximately 100 room hotel will close in early 2015 for refurbishment, ahead of opening under the Apex brand in June 2015.
Currently, Apex runs eight four star hotels, of which four are in Edinburgh and three in London. It has bought sites adjacent to its Dundee hotel and to its City of London property, with the latter already planned to deliver an extra 30 rooms.
In Bath, the company is planning to open a new 177 room hotel in late 2016 on a site in the city centre. During the summer of 2014, it bought a vacant office building in the city with planning permission to redevelop as a hotel. “This is a rare and exciting growth opportunity for Apex to add to our portfolio and have presence in a popular UNESCO World Heritage Site,” said Springford when the deal was announced. The hope is that the GBP35m project will start construction in May 2015. In line with the permission previously granted by the city council, the hotel will have extensive conferencing facilities.
Apex marketing director Lorna Lee said sporting events including the Commonwealth Games and Ryder Cup had helped the 2014 occupancy. The company says its business vs leisure mix varies from location to location, and over time: “I think we’ve benefitted in London from increased leisure demand,” she noted.
In a tough market, Apex uses its vertical integration to set its offering apart. “We continue to invest in our hotels, and we have good locations so they’re very central,” said Lee. “We get a lot of feedback that we do offer good value for money,” and the company continues to invest in training, tweaked around customer feedback.
To help fund the expansion of the portfolio, Apex has recently agreed two sale and leaseback deals. Two Scottish properties, the European in Edinburgh and City Quay in Dundee, were sold to an institutional investor to release GBP6.8m in a deal that gave Apex 150 year operating rights. A City of London property was also sold in a similar transaction, realising GBP5m. “The latest financing arrangements have strengthened our position, and we remain focused upon a programme of ongoing investment in the current portfolio, together with the pursuit of additional growth opportunities,” said Springford.
Without the benefits of loyalty programmes and other large chain marketing methods, Apex has to act smart. “We have to value our relationships with the OTAs,” said Lee, “but we do try to look at a range of lower acquisition rate channels.” These include personalised direct marketing to guests, and incentives for booking direct. “We’ve been running an affiliate programme for five years. It gives us another route to market, it drives traffic to our website at a lower cost than the OTAs.”
HA Perspective [by Chris Bown]: There are plenty of four star hotel chains in the UK – and many of them have changed hands in the last year. Few are actively expanding, while some are relieved to have the increased takings of the last few months to spend replacing tatty carpets and tired decorations. So it is a tonic to see a group that, in less than 20 years, has grown, weathered the storms, and been able to continue investing in growth.
Apex has a mix of owned and leased properties, and has been able to secure medium term debt to support its growth; it has also been canny in agreeing sale and leaseback deals with index linked rents.
The use of an affiliate programme is a neat addition to the marketing mix, costing Apex less in commission than a typical OTA charge. Perhaps other hotel groups ought to be considering the option.