Renaissance Man With A Dream
One-time accidental hotelier Andrew Davis now wants to take uncommon von Essen portfolio to the next level of investment across Europe.
By Jeff Weinstein, Editor in Chief -- Hotels, 2/28/2009 11:00:00 PM
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Cliveden is owned by Andrew Davis through von Essen hotel Ltd., a private holding company incorporated in 2002. |
Dealing expensive works of art; trading in silver and diamonds; owning and operating London’s only heliport; buying and selling investment properties for both himself and exclusive clientele: These are some of the exciting and, some would say, curious business activities of one of the hotel industry’s most intriguing entrepreneurs and gregarious characters, Andrew Davis. Originally an hotelier by default in 1996 when he took the UK’s Taunton Mount Somerset off a friend’s hands, the founder and chairman of von Essen hotels now has assets that include helicopters, private jets, a fleet of luxury cars, spas, retail products and the most coveted set of UK country houses to provide complete luxury concierge service for titans of industry, the rich and famous and ladies who lunch.
Davis, apparently always switched on and whose personal passions include architecture, art, period furniture, food and drink, as well as gardening, seems to have a great eye for property not trading at its full potential. He knows how to market with eye-catching advertising campaigns and, even with high costs that impact net operating income, to date manages exceptional bottom line profits with a lean management structure and limited overhead.
However, under current economic conditions and as a result of the now infamous “AIG effect” on luxury hotels, one might assume high-end hotelkeeping that can include Davis’ PremiAir helicopter service from London to some of the region’s most elegant senior level business meeting retreats and luxury family hotels could translate into a business model under severe distress. One might also assume today that what has to be the declining value of the von Essen real estate portfolio acquired over the past 10-plus years—currently with about 60% leverage only on the hotel portion of the assets, according to Davis—could put even greater stress on the fledgling company. But the 45-year-old lawyer by trade with a very loyal clientele and an even more loyal management team is anything but nonplused by such insinuations, and quick to point out that the company has not so much even breached one bank covenant.
At a time when the luxury hotel segment is reporting dramatic RevPAR declines, Davis says that while he is watching lodging trends with a cautious eye, not replacing staff and has a newly stated goal of saving 10% to 15% on purchases, he remains very optimistic about his hotel prospects going forward. In fact, for 2008, he says business was down only 2% and even termed January 2009 relatively successful. “We are a very asset-rich company and better placed than a lot of people,” Davis said during an early February telephone interview. “Because each of our hotels is an icon, we have a huge regional presence and following. They are the best hotels in their markets and, while that might sound arrogant, it is not meant to be. When I buy hotels, I target the best hotels and aspirational hotels with a loyal client base.”
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Andrew Davis (top) and Andrew Onraet are the creative leaders at von Essen hotels. |
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While Davis admits some of the banking conference business has dried up, he is confident it will be replaced with leisure business. “More people are staying in the UK right now, worried about the economy and terrorism,” he says. “We are a home market collection of trusted hotels that have been in place for decades, and I hope they will be there for many more.”
In fact, Davis, who says hotels account for only 20% of his balance sheet yet pleasantly 90% of his time, is quite confident about his plans to eventually grow the portfolio from its current level of 28 hotels (with less than 1,000 rooms) to 75—soon, he says and hopes, with the help of one additional, very big investor currently being courted. It appears the potential investor (sometimes rumored in the press to be his friend, Paul McCartney) could help Davis more quickly acquire assets he wants in regional UK cities such as Oxford, Cambridge, Brighton and Leeds, as well as Europe gateway cities in Spain, France, Switzerland, Austria and Italy. He says he also covets a hotel in Monaco. In fact, his dream to grow on the continent already has legs, having acquired the Chateau de Bagnols in southeastern France from close friend Lady Hamlyn in early 2007.
Or perhaps he is thinking bigger. Davis makes no secret that he has interest in (but cannot comment on) acquiring the Orient-Express Hotels portfolio and MWB’s Hotel du Vin collection in the UK. Industry sources who know him say that if anyone could pull this off in such a stifling environment it could be the very well connected Davis, who has Lloyds TSB Bank as a supportive principal banker plus a great network of wealthy von Essen clients, many of whom come through his London heliport and with whom Davis has outstanding relationships.
Industry sources say the charismatic Davis has been talking to MWB about Hotel du Vin for quite some time and that he would also like to hold Orient-Express’ continental Europe assets to create pan-European business. He is reported to have debt lined up and has actively been looking for joint venture equity partners, with other rumors swirling around Middle Eastern investors or the Tata group out of Mumbai.
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A rendering of Hotel Verta at the London Heliport, scheduled to open later this year. |
The company currently has a £500 million line of credit and is currently using about £200 million, according to Davis. “Obviously any acquisition must comply with the group’s loan-to-value or EBITDA covenants imposed by the bankers,” Davis says. “The company continues to trade well within those constraints.”
On the other hand, for years there has been mystery surrounding Davis and the reported sources of his funding. First, there is the fabled, rarely seen Austrian aunt, Countess von Essen, who lent Davis a few million pounds to buy his first hotel property. Then the Sunday Times Rich List initially refused to feature Davis years ago because the editors were unsure about his sources of wealth. He was added to the list in 2005 with an estimated worth of £120 million and in 2008 at £210 million. Even today, while researching this story, industry sources continue to wonder about where “the illusionist” finds the money to buy hotels and make a profit and expand.
The effusive Davis responds to the conjecture with both amusement and a very matter-of-fact response: “We publish an annual report, We couldn’t be more transparent.” He says 2008 turnover was £71 million with £19 million of EBITDA and budgets £77 million turnover for 2009 with £24 million in EBITDA. The 2009 growth projections include two hotels acquired last October and takes into account about £20 million spent on capital expenditures in 2008, which added rooms to the system and higher projected room rates.
Rule Breaker
Davis believes there might be a degree of jealousy and skepticism about his business, because the rulebook says country houses fail and lose their character when gobbled up by a group operator. “But we work on the principal that if it’s not broke, don’t fix it. We invest in the property and get great people to run the assets with the help of our central team to maintain integrity. Our customer base trusts us. If they are dissatisfied, I want to know, and we will give them our views.”
Davis’ formula also includes finding great iconic, architecturally significant buildings in great locations and working closely with his two top advisors, CEO Nick Romano and Creative Director and Development Architect Andrew Onraet to recreate the spaces and then fill them with brilliant hotelkeepers.
Today, most of the von Essen hotels have extensive grounds on which Davis farms, as he likes the concept of guests being able to walk through the organic gardens or watch wild game grazing in the fields to see what might be on their dinner plate later in the day. Each hotel generally has two restaurants—one formal and one bistro-style—a flavor of conference business that does not interfere with the leisure trade, and a flavor of leisure business. Some hotels have bigger conference facilities than others, while some have larger spas. In addition to business meetings, the hotels do a lot of private parties, weddings and anniversaries—a piece of the business that to date has not been overly impacted by the economic crisis, Davis says.
Once Davis acquires a hotel, his business model breaks the traditional hotel operating mold even further, as each property operates as its own limited company and controls its own finances. As a result, the parent company is not liable for an individual hotel’s debt and the entire group does not suffer at the hands of one or two failing properties. Each hotel pays rent to von Essen hotels, which acts as the landlord and polices the quality of the effort—not unlike the Relais & Château model that Davis seems to admire. Each hotel’s general manager and head chef is handpicked by Romano, who charges the duo to run their property with as much verve and entrepreneurial spirit as possible. The head chef is an integral player at each von Essen hotel, as food and beverage is a big emphasis and accounts for about 50% of all revenue.
“We choose the GM and head chef with personalities that match and reflect the individual hotel and client base,” Davis says. “Many of these are grown organically by Nick Romano from our current staff. He has developed two GMs who started 10 years ago as junior staff. We have the same policy with chefs—again grown organically by our Executive Head Chef James Parkinson who, like Nick Romano, has been with the company over 10 years.”
The Pipeline
The next hotel coming online provides further proof of Davis’ desire to separate his business model from the typical hotel pack. This fall, in a very challenging environment, the boutique-style Hotel Verta is expected to open as the world’s first heliport-hotel in the industrial south of London. Davis hopes the hotel and heliport lead the regeneration of the neighborhood, while this hotel will also serve as the founding member of von Essen’s Metropolitan Set of hotels (there are five “sets” in total). Some call the London location in the transitional Bridges Wharf neighborhood challenging. Of course, Davis sees the hotel as being ahead of the curve.
“Right from the start we wanted the hotel to be different,” Davis says. “Not just different but better. Being situated adjacent to London’s 'vertical gateway’ makes us really unique, and that is why everything we do has to go above and beyond.”
Under the direction of Onraet, the 70-room hotel will have views overlooking the Battersea Reach of the Thames, a renowned chef manning the rooftop dining room, a destination bar and a subterranean spa. Davis says Hotel Verta would not look out of place in the Jazz Age or in the golden age of air travel. “We’ve chosen cutting-edge facilities with elegant, well-crafted materials to create an ambiance and atmosphere which will appear timeless—a mini-grand dame hotel fit for the 21st century,” he says.
In addition to Hotel Verta, Davis says von Essen has the firepower and surplus borrowing power for acquisition and additional capital expenditure. Furthermore, the £10 million spent on refurbishment over the past two years is now paying off at a very opportune time. “Those who haven’t made the necessary investment are really going to suffer now,” Davis says. “We have been very brave in our approach to refurbishment. It has been a fundamentally important part of our story and has people coming back.”
When von Essen hotels purchases any distressed property, it repositions that hotel within the marketplace. But Davis says his team is always careful not to be too fashionable and prefers to create a timeless elegance that is relevant to today’s lifestyle.
Onraet points to the recently completed full renovation of The Elms in Worcestershire, with its new spa and family facilities. “It has received great reviews, great uptake and repeat business in the luxury family market,” Onraet says. “It has become a destination in its own right and opened tourism to the entire destination.”
Onraet adds that continued capital expenditures remain very solidly on the books. One of the more exciting ongoing projects is the Bishopstrow House in Warminster, where demolition work is being done to take the hotel back to its original house and will be followed by a complete refurbishment, as well as an expansion of the spa facilities.
Another part of the business that is just being tapped is the von Essen umbrella brand, which is only about 10 years old and modeled somewhat after Orient-Express. “People know we are synonymous with quality and there is a level of expectation,” says Onraet. That said, all hotel beds are custom made, and von Essen plans to sell “the bed” as part of a homewares collection. There is further potential for brand development with Von Essen Organics and a line of food products created at the Sharrow Bay property that is now sold at high-end retailers, including Harvey Nichols.
To manage the growth, the corporate team has relocated to a central office park south of Bath, where additional talent will be housed to manage the expansion push. “The last few years have seen us invest in senior management, ranging from finance to sales,” Davis says. “We are managing the growth and training a central team to help further grow the business. We have identified this need and are now together—keeping it personal and all about the quality of our hotels.”
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Food and beverage accounts for 50% of von Essen’s revenue, according to Onraet. |
While Davis continues to keep a rather low public profile, he says the new head office team is getting more involved in supporting the industry and related charities.
At the end of the day, Davis says the next few months are expected to be “very interesting” and that the group remains in an acquisitive mode, yet with a slightly more cautious approach to continental Europe due to economic problems linked to the euro.
Davis confidently affirms that the group is not looking to sell any individual hotels or the company as a whole. “We have been approached by many to invest in our business, as we have a portfolio no one will be able to put together again.”
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