RBH: A push into the luxury market

What has trading been like for RBH’s hotels so far this year?

The last year has proven to be beyond any expectations we had at the start of the year as we were still in the shadow of the pandemic. Revenues have recovered beyond pre-Covid levels (in some cases substantially beyond).

The London market has come back more strongly than anyone anticipated, while some hotels in the more staycation-driven regions have struggled to get back to the unique levels achieved last year during the summer – but even then, they have still done well.

Have any of the hotels under RBH been hit by the cost-of-living crisis and energy costs? 

Almost all of our hotels are still on fixed price energy contracts, which were put in place prior to the dramatic increases we saw earlier this year, which has meant they have been protected for now. Many of these are due to end this time next year.

We have recently made a change to our procurement strategy around utilities by moving to a new broker and putting a focus on limiting how much fixed price contracting we put in place, and instead managing a more flexible hedging process.

Ultimately, we see the cost-of-living crisis as an impact on the P&L through numerous costs inflating – be that food, beverage, linen etc., which are all experiencing material growth. Payroll costs have also increased significantly, driven by the shortage of labour (with housekeeping being a particular issue) and increasing wage demands arising off the back of the inflation and energy issues everyone is experiencing. 

What inspired RBH to manage three new high-end UK hotels?  

We were presented with the opportunity to manage the hotels as part of an operator selection search. We have been publicly vocal in the last few years about our push to move into the luxury and upper-upscale space, and these properties support that messaging. While they are all high-end hotels, they are each different in their own right, so we were incredibly focussed on delivering a strong pitch to the owners.

How does RBH plan to maximise the performance and value of these properties?  

When we’ve taken over hotels in the past, we have always seen an immediate uplift in performance. A large part of this is centred on revenue performance through our three commercial teams – Revenue Management, Sales, and Marketing. Around a third of the extensive central RBH team falls within these three functions.

Along with our bespoke business intelligence and analysis software which enables in-depth analysis of all commercial performance, we are certain this will lead to significantly improved revenue performance. We also have dedicated resources within our commercial teams to drive the strong meetings and events focus these hotels have.

In terms of costs, we will implement our Business Intelligence software to ensure detailed analysis can be carried out and this will include benchmarking both to our other managed properties, as well as third-party performance via third-party benchmarking companies. As well as increasing the size of our central team, we have also added additional resources into the hotels to improve financial performance.

Finally, RBH’s in-house capital projects team has experience managing historic and listed properties. We will ensure that all ongoing FF&E and Capital works are in keeping with the nature of the buildings and to carry out appropriate ongoing maintenance and facilities management throughout.

How do the three Covivio-owned properties mark a significant change in the third-party management sphere?  

Few luxury and high-end properties are currently managed by third-party operators. Many of these types of high-end hotels continue to be owner-operated, meaning third-party operators are not given the opportunity to show the positive impact they could have, coming at it from a different perspective.

Historically, the financial metrics involved in luxury properties tends to mean they are able to withstand a far larger cost base on-property and have not needed to drive the cost synergies that can come from employing a third-party operator. However, as time is moving on, owners of such properties are starting to see the benefits of bringing in a third-party operator that is aligned with them and it removes the need for them to oversee detailed daily operational requirements of their investments.

Does RBH have plans to expand the partnership?

This is an important partnership for us, given Covivio’s unparalleled reputation, both in the UK and across Europe, but also due to our mutual values. The owner of these three hotels is a significant hotel investor with over 300 hotels owned currently, and it is our hope that we can expand our partnership. But first, we must demonstrate strong performance, which is what we are focused on now that they have onboarded. 

What does RBH’s plan to disrupt the luxury market entail, and how will this be carried out?

We are focused on demonstrating that the expertise we bring as operators can be applied to the luxury market as well as upscale and mid-tier markets. By showcasing our successes with our existing luxury hotels, it will enable us to demonstrate what we can achieve and disprove the misperception that the specialist skills required to make a luxury hotel successful doesn’t exist in third-party operators.

What is next for RBH?

We continue to work on our RBH25 strategy which is aligned to our vision of being the partner of choice for hospitality investors. Our focus continues to be on growing in the UK, particularly in the luxury and upper-upscale markets, but this fundamentally doesn’t mean we’re moving away from our roots. We have always been a multi-brand and flexible operator and we simply see luxury as being a widening of our experience and skillset.

More widely, we will continue to look at opportunities to expand out with the UK, but this is dependent on other markets engaging with the concept of third-party management which still has some way to go as we move further East.