Economy Class. Grant Hearn tells Mel Flaherty why he loves budget hotels and about Travelodge’s recovery course.
Eating your way round motorway service stations may not be most people’s idea of fun and 45-plus years ago, it would certainly not have been a gastronomic experience to savour. For the young Grant Hearn, however, it was his idea of heaven. To be fair, what child would not enjoy eating burgers and sausages at restaurants ‘run’ by their dad?
Hearn’s father, Dennis, worked for the restaurant division of Forte and it was from tagging along to site visits that Grant got his first taste of the hospitality industry. Despite his early exposure to this world, the now Chief Executive of Travelodge actually wanted to be a doctor, up until the age of about 13 when he discovered he could not stand the sight of blood.
So the business that was in his blood beckoned after all and now, he laughs, at nearly 55 he is a hotel industry veteran. His CV takes in 14 years at Forte, five at Whitbread (where he had stints running Marriott and Travel Inn) and three at Hilton. He has been at Travelodge since 2003, where he started as CEO, then became Executive Chair in 2010 before taking back the reins as CEO last year to implement a complex financial restructuring of the firm.
Without doubt, Hearn says, the most difficult time in his whole career was 2012 when he was instrumental in the process that saw the company’s ownership transferred to New York hedge funds Goldentree Asset Management, Avenue Capital and Goldman Sachs under a deal to make debt payments more manageable and to enable the company to progress.
An unforeseen five years of recession necessitated the changes and Hearn is glad he now gets to talk to employees and customers more than to lawyers and bankers again.
Steering the company through that process has been challenging, but he has found the commitment and energy of the teams managing it “jaw dropping.” “The strength of feeling within this business from the people, particularly management at all levels, is incredible – they really believe in the company and brand,” he adds. “I love the business to bits for that reason.” The key to keeping them motivated through this tricky part of the company’s history has been communication, he says. “We always tried to get to our people before something was in the newspapers, whether good or bad, to let them know to expect it and to tell them if it was true or not. It more or less played out the way we told them it would and they understood that their part in it all was to keep the business going.”
Hearn says Travelodge’s staff retention rates are “higher than people would think” and certainly comparable to others in the market. He is aware that the firm’s private equity ownership, and its core brand values as a true budget economy operator with low prices achieved by tight cost controls, gives outsiders the impression that Travelodge must be a tough company to work for. But there are plenty of employees who have been with Travelodge from the start and, Hearn says by way of example, the retention rate after a year for previously long-term unemployed people who joined as staff under the Local Employment Partnership scheme, is an impressive 80%.
Hearn himself says he would find it “very difficult” to work for a plc ever again: “Throughout my career company politics got pretty frenzied at times, particularly at Forte, but when you’re working for private equity, you are totally focussed on improving the business.”
Now the rocky road of restructuring is behind him, Hearn is focussing on a totally consumer-led strategy that aims to change perception of Travelodge from cheap to budget economy.
This started with the now well-underway £55 million refurbishment of much of the room stock, using a new room design that responds directly to customer feedback with luxurious, comfortable beds and a larger desk area. In another year, when 50% of the rooms earmarked for investment will be refurbished, the company will start advertising the revamped brand in earnest on TV.
“We didn’t have the money to invest in our product for a while so the product became not so good. We now have to re-establish the consistent quality that customers expect,” Hearn says.
Growing corporate business is another plank of the refreshed Travelodge strategy, an important move when leisure business continues to be squeezed by the general economic situation. The company is also back on the expansion trail, having recently announced plans to build a further 145 hotels in London and 10 in Hertfordshire. These will be followed by further pockets of development as and when each area is assessed from the ground up. Hearn says Travelodge will likely get to 75,000 rooms, as Whitbread has recently announced is its aim for rival Premier Inn, but he is not bothered about such numbers.
“Before [the restructuring] we said we would have 10% of the UK supply [of hotel rooms]. That was because we see ourselves as comparable to supermarkets, in a retail sense, and we didn’t think it was improbable that ourselves or Premier Inn should do so given that 60% of the UK hotel market is still independent,” he explains. “Now we are looking from the bottom up – what are the locations we want to be in and how many rooms could we have there.”
Smaller formats or different versions of the Travelodge model have been ruled out for now but franchising will, for the first time in earnest outside of Ireland, be used as a method of expansion, particularly for potential out of town and roadside locations. Further down the line, once the UK Travelodges are up to scratch, further expansion in mainland Europe (except France which is so dominated by Accor), particularly the largely unbranded German hotel market, will become a focus.
Travelodge’s customer-led approach is far removed from the ‘old days’ when Hearn started out in the hotel business. He recalls that back then those responsible for running hotels seemed to make it “as mysterious as possible” and to assume that they knew what people needed rather than asking them what they wanted. He says hotel management was often a dictatorship, carried out by those promoted because they knew how to do all of the different jobs “not because they had the intelligence and empathy with people to get them to want to do things well for them.” The brave new world of the budget brands, of which Hearn is one of the original pioneers in the UK, not only brought innovation to the business of running and booking hotels, it opened up accessibility to hotels for the public, something he is particularly proud to have been part of, quoting his favourite statistic – before budget hotels one in five people in the UK had stayed in a hotel, now it is one in three.
Despite working in the sector for so long, Hearn does not find it hard to keep his thinking fresh. Last year did not leave him much time for the life bit of the work-life balance that he thinks is essential for anyone who wants to keep a more objective perspective on their work. Now, however, he is back to enjoying an active social life including wine trips, regular theatre and restaurant visits and supporting Harlequins Rugby Club.
He also ensures he employs staff from other sectors, particularly retail, and enjoys constantly learning from other businesses. He particularly admires Nick Varney, the Chief Executive of Merlin Entertainments, the international theme park operator (“he is an evangelist for his business”) and his former Hilton boss Sir David Michels who, like him, has always actively promoted the industry as a significant driver of employment and growth. The thing that irks him more than anything at the moment is the Government’s backward approach to visas for Chinese visitors. He finds it absolutely astonishing that as a result, Germany gets six times more Chinese visitors that the UK does, and he is worried that if something is not done as a matter of urgency, the UK will miss its chance to get these high spending tourists to put London top of their itinerary as the gateway to a visit to Europe.
What with a brand to get back on track and grow and politicians to lobby, Hearn has his plate exactly how he likes it. Full.