‘I’ve great time for people who work in the hotel business’

Insurance costs are the biggest bugbear for David Kelly of FBD Hotels and Resorts

David Kelly: “You probably have a more sustainable type of investor [now] in the hotel space in Ireland.” Photograph: Dara Mac Dónaill

David Kelly: “You probably have a more sustainable type of investor [now] in the hotel space in Ireland.” Photograph: Dara Mac Dónaill

 

David Kelly is a difficult man to pin down, Between managing his group’s four hotels, spending time with his remarkably large family and frequenting the races, one gets the impression he’s rarely in the same place for long.

“There’s big mileage on my car outside and air miles as well,” he explains over coffee in the recently refurbished restaurant wing of Castleknock Hotel in Dublin.

Aside from Castleknock, Kelly controls the Faithlegg House Hotel in Waterford and two hotels in SpainSunset Beach and La Cala resort – in his role as chief executive of FBD Hotels and Resorts. But he’s no lifelong hotelier, he’s keen to point out, but a “finance guy”, who has fallen into the business of hospitality.

“I’ve been exposed to it for 25 years now but I’ve great time for people who work in the hotel business, it’s a hard gig.”

At its height, FBD Hotels and Resorts controlled seven hotels and was part of the wider insurance group, FBD. That association has since ended and the hotel operator is now simply owned by Farmers Business Development.

“It was seen as a negative. Property assets, hotel assets, were not the sexiest assets in the world back then because the way the business was and so, when analysts would look at FBD Holdings plc, they’d see an insurance story and they’d see this other thing...it wasn’t a pure play,” said Kelly.

When the split happened, Kelly, who first joined the group in 1992, took on the title of chief executive of the hotels business having managed that segment of the group for some time.

Now, in the seventh year of independence from the insurer, is it time to consider a move away from the name of its former parent?

“It’s something we’re looking at,” Kelly says, pointing out the name is most relevant to Irish customers. Perhaps he would consider licensing the Trump International name for the group in his control?

“I won’t comment on that,” Kelly says jokingly before telling me he’s stayed in both Trump Doonbeg and Trump Chicago.

Well travelled, unsurprisingly he does enjoy spending time in hotels. His favourite is Ashford Castle Hotel, in Cong, Co Mayo, which he calls “the finest hotel in the country”. Always trying to stay in new places, Kelly also cites Powerscourt, in Co Wicklow, and the Westbury, just off Dublin’s Grafton Street, as exemplars of Irish hospitality.

Guest experience

Whatever about Irish hospitality, however, he is enamoured by how the Americans look after their guests.

“I think we can learn a lot from it,” Kelly suggests as he details an upcoming trip to New York. Dubai, too, is a location that does the “whole guest experience thing” well, he says.

Of course, Kelly’s hotel group knows its fair share about guest experience. The Castleknock Hotel holds the contract with the Football Association of Ireland (FAI) for Ireland’s home soccer matches. Kelly, a Manchester United fan, talks about the finer details required when they stay, such as Martin O’Neill’s special bowl for porridge when match day rolls around.

And whatever about institutional knowledge of guest experience, Kelly himself, a former chartered accountant with Deloitte, is acutely aware of the costs associated with making this business work. He impressively breaks down the sums at one point to explain that the insurance cost for a room in Castleknock is €20 per week.

Insurance is undoubtedly Kelly’s bugbear.

“Insurance cost is frightening in Ireland. Before we open the door of this hotel, it’s €220,000 of an insurance premium. Public liability cover in Ireland is about €1,000 per hotel room, in Spain it’s about €200.”

He blames the significant difference on Irish culture. From the evidence he’s seen at least, A Spanish person won’t take insurance actions against people and businesses.

Notwithstanding insurance concerns, and the risk to his company from Brexit – particularly considering that the group’s hotels are located in the two markets most exposed to the UK – Kelly has a “positive outlook” on where the business is going. He points out the company has started awarding wage increases to staff again.

“We want to do that, they’re our key stakeholders,” he says.

In Ireland, at least, those “key stakeholders” are becoming increasingly hard to find, however. On the topic of recruitment, Kelly notes “we don’t pay minimum wage”. I glance at the suddenly nervous looking PR woman before clarifying whether he means they pay more? He confirms that they do, such are the difficulties hiring certain staff, including chefs. The PR woman relaxes.

“It’s more prevalent in Dublin,” Kelly says. “Down in Waterford, there’s more availability of staff, the competition wouldn’t be as high. In Spain, because of where we are in the south of Spain, staff are plentiful.”

Key metric

One might have little sympathy for a man forced to spend such a considerable amount of time in the south of Spain, but Kelly makes clear it’s not as glamorous as it may seem.

“I wish I was on the beach with my laptop but that’s not the case,” he explains. FBD Hotels and Resorts has assets worth €200 million: of this, , €150 million are Spanish assets, which made a €6 million profit in 2017.

Additionally, the growth focus is the Spanish La Cala resort, where they have a joint venture with British housebuilder Taylor Wimpy. On the morning we met in north Dublin, Kelly has just received an e-mail telling him that a unit there had just been sold to a British customer for €355,000.

He reports that British travellers haven’t pulled back their spend in that regard, but says that discretionary spending associated with the traditional two adults, two children holidays has pulled back ever so slightly.

While cautious in both Ireland and Spain, Kelly expects revenue per available room, a key metric in the hotel business calculated by dividing a hotel’s total guestroom revenue by the room count, to increase by around 5 per cent in Dublin, for example.

“Dublin will be okay; if there are any little wobbles, it will affect outside of Dublin,” he says.

Of course, it wasn’t always that way and Kelly is conscious of supply dynamics in the Dublin market. He recalls the latter years of the Celtic Tiger when Ireland was building more hotel rooms than the rest of the world, with the exception of Dubai and Las Vegas.

“It was complete and utter madness,” he says of one particular gimmick by Sean Dunne, who sold hotel rooms for €25 a night.

The “madness” appears to have calmed.

“A lot of people got involved that were not hoteliers per se,” he says. “You probably have a more sustainable type of investor [now] in the hotel space in Ireland. Hopefully that will set it in good stead.”

Hopefully indeed, and if they’re anything like Kelly, one would imagine they’ll keep an eagle eye on costs. A regular on the 7am Aer Lingus flight from Dublin to Malaga, by his own admission, Kelly is rarely totally removed from the business.

“I suppose I’d be lying to say that, when I’m off for two weeks, I stay removed from it. I don’t.” Nevertheless, he has interests that take him out of the business from time to time.

Flat racing

“I developed, for whatever reason, an interest in bloodstock and flat racing and the mammies and daddies of horses – real anorak stuff – but it’s been a massive interest of mine,” he says.

Kelly, from Athy, Co Kildare, lived near a horse trainer from a young age and, while he admits his interest, or at least success, isn’t anywhere near the level of John Magnier, he has had some success including the recent sale of his horse Elusive Beauty.

“If you make money out of it, it’s great, but don’t put the mortgage [on it]. But it’s a great switch off.”

Another switch off from the business for Kelly is spending time with his family of 13 and his mother, who still lives in Athy. One quickly learns that Kelly is very appreciative of his mother and her work behind the scenes at the family home.

“She was the hero,” he says. “It sounds like a bit of a cliché but we were brought up to try and do the right thing and to be respectful and have manners and to treat people well but also to stand up for yourself.

“When I was showing promise academically as a young fella, my parents just supported me 100 per cent and they helped me in a practical way to get to where I got to.”

Despite living in such a big household, where one would have imagined time dedicated to each individual child was limited, Kelly says he and his siblings were “probably spoiled”.

What was it like living in a household of that size?

“You wouldn’t want to be a shrinking violet, you’d want to speak up for yourself anyway.”

Kelly seems close with his siblings and they have one particular outing that ties up his family interests and his working world.

“We’ve an annual golf outing with the brothers in memory of my father. We’ve a trophy in memory of him,” Kelly says of his dad who worked in Tegral in Athy when he was a child.

Of course, they sometimes go to Spain. “We’ve a few contacts down there,” Kelly quips.

For how long those contacts will remain is unclear, but Kelly is young for a chief executive and doesn’t confess any desire to move on. So what does the future hold? Will he eventually leave the group and open a boutique hotel in a remote Irish location?

“There’s a lot of attraction to that. Even though I’m not a hotelier, I would love to have my own hotel but it’s a costly exercise. Maybe if I get a better horse the next time, that might allow it all to happen.”

CV

Name: David Kelly
Position: Chief executive of FBD Hotels and Resorts
Age: 50
From: Athy, Co Kildare.
Lives: Athy, Co Kildare.
Family: Separated with two children, Jack and Caoimhe. Partner Lorraine.
Something you might expect: As well documented in this interview, Kelly is a firm believer in the guest experience. “If the customer leaves with a positive experience, then it’s a job well done for us.”
Something you might not expect: Outside of work, Kelly is passionate about bloodstock breeding and horse racing. “I was lucky recently to have a good filly with trainer Ken Condon at the Curragh called Elusive Beauty. She ran 26 times, won three races and claimed prize money in 18. Last June, she won the listed Eternal Stakes at Carlisle in the UK, which was a huge achievement. I now have a new two-year-old with Ken called Patriots Day – watch this space.”