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AGO Hotels: Founding a competitive lease provider during Covid

Lionel Benjamin, the co-founder of AGO Hotels, discusses the launch of AGO Hotels, the company’s hybrid profit lease business model and the challenges of launching a new venture in the midst of a pandemic.

In the throes of a global pandemic, launching a new hospitality venture might seem perilous, but for Lionel Benjamin, the co-founder of AGO Hotels, the decision was not just about seizing opportunity—it was about reimagining a business model for the modern age.

Reflecting on his journey, Benjamin’s voice carries the weight of decades spent in hospitality, first as an operator and now as an entrepreneur. His story is one of resilience, transformation, and a deep understanding of the business of hotels.

A Career Built on Passion and Perseverance

Benjamin’s foray into hospitality began in 1983 with an unlikely encounter at a dinner party. “I bumped into somebody who happened to be the front-of-house manager at Claridge’s,” he recalls. Intrigued by the compelling picture painted of the industry, Benjamin dove headfirst into the world of hotels. “I heard all the hard stuff and said, when are you going to tell me the hard stuff? Because that sounded like the good stuff to me.”

His early career was a study in diligence, starting with housekeeping at Hendon Hall Hotel, followed by a stint as a waiter at Wembley Hilton. After earning a degree in hospitality and travel management, Benjamin joined Hilton’s management program, eventually rising to Operations Director at London’s iconic Savoy Hotel.

The Savoy became a turning point, where Benjamin shifted his focus from running hotels to selling them. “That’s when I really learned about the business of hotels,” he says, contrasting it with the operational side. From negotiating sales to understanding the nuanced language of investors, Benjamin’s expertise grew, setting the stage for his entrepreneurial ventures.

The Birth of AGO Hotels

Fast-forward to 2020, and Benjamin found himself at a crossroads. Having left his role at Topland in late 2019, he faced the unthinkable—the arrival of Covid-19. Yet, where others saw calamity, Benjamin spotted opportunity. Collaborating with Viv Watts, a real estate entrepreneur, Benjamin launched AGO Hotels in June 2020, focusing on hybrid profit leases.

The innovative business model combines fixed rental payments below market rates with profit-sharing for landlords. “This was the first time in hospitality in the UK, and possibly in Europe, where we aligned the interests of the landlord, tenant, and operator,” Benjamin explains. “Everyone comes together for the same goal: profitability.”

The model also incorporates a CapEx budget into the operational framework, ensuring regular investments in property maintenance. “We follow the uniform system of accounting,” Benjamin notes. “Below the EBITDA, we add in a CapEx budget, which helps protect the landlord’s asset and keeps brand standards high.”

The Pandemic’s Harsh Realities

Launching during a pandemic brought unique challenges. AGO Hotels took over its first properties on December 17, 2020, only to face another lockdown in January 2021. “We had planned to open in January,” Benjamin says. “Good old Boris decided lockdown.”

The financial strain was immense. With no income from trading, AGO still had to pay rents and other fixed costs. “We didn’t qualify for bounce-back loans or government aid,” Benjamin points out. “We were pushing water uphill.”

Yet, by July 2021, when restrictions lifted, AGO Hotels experienced a rapid recovery. The surge of “revenge travel” saw guests eager to escape their homes, driving occupancy rates. Despite this, the legacy of costs incurred during the shutdowns lingered, making profitability elusive. “We did manage to pay some profit rents in 2021,” Benjamin says, a testament to the resilience of the model.

Weathering Economic Turbulence

The challenges didn’t end with the pandemic. In 2022, the industry grappled with rising inflation, utility costs, and supply chain disruptions exacerbated by the Ukraine conflict. “Our laundry costs skyrocketed because of higher fuel prices,” Benjamin explains. “It’s not just our utilities; third-party providers’ costs also go up.”

Despite these hurdles, Benjamin believes in adaptability. “We have to be creative,” he asserts. From leveraging technology to targeting leisure travellers over corporate ones, AGO is reevaluating its strategies to meet shifting market demands.

Sustainability at the Forefront

For Benjamin, sustainability is both a moral imperative and a business necessity. “Let’s be commercial,” he says. “Sustainability is about being efficient with resources. If we do all of that, we save money and protect the world we live in.”

AGO Hotels has embraced ESG (Environmental, Social, and Governance) principles, integrating them into CapEx budgets and operational practices. Benjamin credits Accor’s leadership in sustainability as an inspiration. “Sebastian Bazin, their CEO, even brought in a former French government sustainability expert onto their executive committee. You have to take your hat off to that.”

However, Benjamin warns against “greenwashing.” He advocates for clear benchmarks and gold standards to guide the industry. “We need to move beyond marketing claims and make real, measurable progress.”

The Road Ahead

Looking forward, Benjamin is cautiously optimistic. The hospitality sector faces headwinds—from rising interest rates to changing travel patterns—but Benjamin sees potential. “We’ve said no to three times as many hotels as we’ve said yes to,” he says, emphasising strategic growth. “We can’t take on a hotel that’s going to drain CapEx. The landlord must provide a compliant property.”

AGO’s focus is on consolidation and selective expansion. The company has also ventured into asset management, creating a balanced portfolio of lease and managed properties. “It’s important to evolve,” Benjamin says.

As for the future of the industry, Benjamin highlights the rise of leisure travel and the enduring importance of people. “Hotels are about people,” he says. “From the team you work with to the guests you serve, it’s always about people.”

A Vision for Hospitality

Lionel Benjamin’s journey—from a housekeeping job to launching a pioneering hotel company—is a testament to adaptability and innovation. Through AGO Hotels, he has not only weathered one of the most challenging periods in modern history but also reshaped the way landlords, operators, and brands collaborate.

“You’re either dinner or dining,” Benjamin quips, summing up the competitive nature of the industry. For now, AGO Hotels appears to be firmly at the table, poised to navigate the complexities of a post-pandemic world while driving sustainability, profitability, and growth.

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