‘STREETFIGHTER HOTELIERS!’

Our company policy at Balbirnie over many recent years, has been to always work with a very significant retained current account cash surplus. The pace of our ongoing reinvestment at double the rate of industry averages, is then dictated by the cash amount over and above the current account surplus, both existing and envisaged. This also provides security and underpins bulletproof credit ratings.

This is the only way to continue to approach the future.

Writing this blog in January 2016, there are obviously extraordinary challenges facing Hospitality.

-       National Minimum Wage accelerating at a 38.5% increase over a 260 week span, instigated by Westminster Tories without even consulting anybody in UK Hospitality.

-       Tourism VAT at vastly inflated percentages, when compared to all other EU countries, apart from Denmark. If VAT was a matter reserved to the Scottish government, we would now be at 5%, instead of the current 20%, and that would allow tourism and hospitality to begin to reinvent, further increasing eventual tax receipts.

I recall highlighting these two points in April 2016 with David Welch, one of the judges for the 2016 Scottish Hotel Awards, who said in reply, ‘don’t worry, you are a streetfighter hotelier, you’ll find the way to get by!’

Well, all I can say is that Hospitality character best reveals, when tested!

To these two main challenges above, we then add, The Dog’s Brexit. Mass uncertainty, and costs for food and beverage increasing, as things stand in a band somewhere between 10% and 20%.

The competitive threat from Airbnb to the hotel sector has also been dramatically underestimated, according to new research from Morgan Stanley Research.

“Airbnb usage has increased more than we thought it would and cannibalisation of traditional hotels has been higher,” it said.

Penetration rates among leisure travellers increased from 12% in 2015 to 19% last year and are forecast to reach 25% in 2017. Business travellers’ usage has also grown from 12% in 2015 to 18% in 2016 and is predicted to reach 23% this year.

Then comes the additional cherry on the challenging cake, with rises in rates now to be enforced in % terms which are leaving many hoteliers totally perplexed at the calculative methodology.

Those properties which have had minimal or non-existent investment back into the fabric of assets over recent years? Good luck one and all. And as all above combined circumstances converge into reality, many properties simply won’t be able to afford to continue to reinvest.

And regrettably, one of the further casualties of these circumstances, will be the scale of donations provided by Hospitality, for charities and great causes.

So, things are as they are. Those who don’t recognise the challenges, and act upon them, will struggle to survive.

Here are a few thoughts across the span of Hospitality, on how our management team at Balbirnie are going to endeavour to remain ahead of the curve, maintaining ability to reinvest, and continuing to assist so many charities and great causes.

Owner operators, remunerate yourselves in as humble a way as you can, don’t waste time on anything other than saving costs or creating revenue. Future forecast! Helpfully acknowledge that future client purchasing, will be more and more based upon what they can expect to experience. 
And of course, take the time to enjoy your own journey! 

Accountants, run your figures every Monday, know your exact cash positions, supplier accruals, and sales ledgers. Summarise monthly – management accounts, balance sheet, cashflow, debtor and creditor, VAT, PAYE and future core trade analytics.

Chefs and drinks purchasers, use purchasing and procurement mechanisms, get creative, use Scottish produce, screw down deals, pass on great value to customers. Your direct competition isn’t only the other restaurant down the street, it is very much the success of the formulated M &S two dinner meals for a tenner, including wine!

Managers, streamline, automate, digitalise, and now more than ever, get everything into providing our truly amazing warmth of welcome of Scottish Hospitality. The training standards you set, are certainly what you will get.

Marketeers, if you haven’t yet grasped the phenomenal power of digital, the necessity of in-house retained Data, and capability of online, the bus has already left! But don’t get stuck on computer keyboards and internet devices, fabulous hospitality is always at the very point of personal service.

For all us who dedicate our lives to working in the incredible world of Hospitality, never ever lose sight of one very special thing. The entire adventure on the hospitality rollercoaster, must maintain as being about ensuring that memories are always made of this. All the best from Balbirnie House.

Nicholas Russell / MD and owner Balbirnie House

Former #SHA Hotelier of the Year