If you were in the vicinity of Jurys Inn's hotels in the London districts of Chelsea or Islington early last Thursday week, you might have seen the company's chief executive John Brennan on a so-called Boris bike taking part in a staff relay to raise €40,000 for charities in Ireland and the UK.
Brennan has been on quite a journey of late, both professionally and personally. In one hectic week in mid-April, he became a father for the first time when his daughter Libby was born while also concluding a major financial restructuring of Jurys Inn that saw its debt reduced by 60 per cent to £240 million.
All in the space of three days.
“I know which one was quicker,” Brennan joked when we met recently at the Christchurch property, where it all began for Jurys Inn in 1993. The restructuring took 14 long months to conclude with its lenders and shareholders.
The Government's decision to put key lender Irish Bank Resolution Corporation into liquidation in February potentially threw a spanner into the works but the deal pressed ahead.
IBRC was one of three lenders – AIB and Ulster Bank being the others – that Brennan and his team were negotiating with over its loans. They agreed to write off £290 million of the debt. Ulster Bank took equity in the business in return for debt write off while the £120 million in new equity invested in the business was paid to the banks.
It now remains to be seen where the IBRC loan will end up. The special liquidators at KPMG have until the end of this year to sell IBRC's assets or else they will be transferred to the National Asset Management Agency to be worked through over time.
Brennan is sanguine about the liquidation although he would prefer if Jurys Inn did not have the stigma of being in Nama: "Somebody else will own a performing loan that will ultimately be repaid in due course," he says.
On the right track
The business appears to be on the right track financially. Vesway Ltd and Subsidiaries, which operates Jurys Inn, made a loss of £6.5 million in 2012 compared with £31.7 million a year earlier. Revenue rose by 3.8 per cent to £153 million, the third year running that its turnover has increased. The chain also saw its operating profit rise to £25 million last year from £3.1 million in 2011.
Jurys Inn is a good example of the madness that gripped the property and development market here in the Celtic Tiger years. The company was sold in 2007 by the then Jurys Doyle hotel group (now trading as the Doyle Collection) for €1.166 billion to a group of investors put together by financier Derek Quinlan.
Quinlan subsequently sold half the equity to Oman Investment Fund. The sale price and £650 million debt placed on the company were based around ambitious assumptions on economic growth and the availability of cheap finance that went up in smoke when Lehman Brothers collapsed in 2008 and markets globally went into a spin. Brennan wasn't with the company when all of this took place, joining only in December 2008. But he was left to pick up the mess.
“It seemed like a very high price for the business but there were lots of other transactions that were very high prices [IN 2007],” he says. Brennan argues that a key difference between Jurys Inn and other frothy deals done in the boom is that the hotel chain has an “underlying business that is successful, profitable, and employs nearly 2,000 people.” The debt level was simply too high but that has now has been addressed.
“We haven’t got anything here now other than a debt level that is sustainable,” he says. “It’s been a process that has involved pain for everybody, equity shareholders and lenders. Hopefully, as a result of this restructuring, the business now has a sustainable future, that the debt that is there will be paid back with interest, and that the business will continue to trade and be successful.”
It’s not just been about debt restructuring for Jurys Inn. There’s a growth story at play, too, albeit a more modest iteration than was originally envisaged by Quinlan and his backers. In Christchurch, the lobby area has had a €300,000 makeover to give it a modern look with Costa Coffee added to the service mix.
“This is the start of a process that will see us spend in this particularly property something in the region of €2 million,” Brennan explains. It’s part of a wider £30 million investment across its network of 32 hotels over the next three years to keep them fresh and relevant.
It has already spent €2 million on its Customs House property in Dublin's docklands while the Galway Inn is close to finishing its €1 million refurbishment. "We'll renovate the Cork hotel between Q4 of this year and Q1 of next year," Brennan adds.
This is a “good deal more than” merely keeping the properties ticking over. It’s part of a broader strategy to reposition the hotels away from the its historical label as a three-star budget chain to being “mid-market hotels”.
Is it a move from the backpacker to the briefcase? “I’m not sure we were ever in the backpacker [market] but we are very much orientated towards the briefcase,” Brennan says dead pan.
A greater push is now being made into the corporate market. Brennan reports that the Christchurch Inn has benefited from Ireland’s hosting this year of the EU presidency, which has brought plenty of officials to town for various meetings.
“We’re probably up 30 per cent year over year in our corporate business at the moment,” he says. “It really reflects the fact that we’ve got great city centre locations, a great physical product and we’re invested heavily in service and standards. We’re seen as good value for corporate travellers.”
Going mid-market has also allowed Jurys to increase its room tariffs. "Absolutely, there is an opportunity to raise rate," he admits although he's coy about the quantum citing various factors such as location and time of year.
Significantly better value
"The corporate market pays a premium in comparison to some of the other market segments we may have had previously. But at the same time these customers are getting significantly better value than if they were going to the more normal full-service, four-star hotels." A night in the Christchurch Inn will typically cost you about €100 on a bed and breakfast basis. However, you will have to pay for wifi access.
It’s not just about refurbishment either. the Islington Inn in London is getting 143 additional rooms as part of a £13.5 million development. Planning permission has been secured and funding is in place with the builders slated to go on site within the next six weeks.
"That will open in the summer of next year," Brennan says. "The hotel is incredibly successful and the Islington area is in a period of resurgence. The hotel is full most of the time and we're looking forward to having that extra capacity." Brennan says Islington is one of the Inn's most profitable hotels. A night there will cost £140 on average. Jurys Inn is also in "negotiations" to expand its Edinburgh hotel. "It's probably our third best performing market in the UK. London is probably number one and Aberdeen number two. We want to see another 130 bedrooms added to that particular hotel."
Planning permission has been secured and it’s now a matter of finalising a deal with the landlord. “We’ll also renovate the existing hotel [190 bedrooms] as part of that process,” Brennan says. That would involve a spend of £3 million by Jurys Inn and up to £20 million by the landlord on the extension.
With its debts restructured and its shareholder base reconfigured, Brennan says Jurys Inn can also start thinking again about adding new properties to the chain or taking on management contracts.
"We believe there will be opportunities to acquire properties as they become available in the UK specifically. We could also see ourselves entering into long-term management agreements for owners who currently have properties that they want to rebrand."
City centre hotels
Brennan doesn't see Jurys Inn adding much to its portfolio here. "We're open minded to projects in Dublin or other core urban areas. But we won't manage resort hotels in rural Ireland. That's not our core business or speciality. They need to be city centre hotels, [rooms with] 20sq m (215sq ft) or above, 150 bedrooms or more, and they need to be contemporary and well invested.
“We’re not interested in one or two-year deals. We want 10-year deals where we can invest the time and energy to get the businesses up to the level required. We’re looking for targeted growth in specific locations where we believe there will be strong businesses. We’re in no rush.”
Jurys Inn once had ambitious plans to grow the chain in central and eastern Europe. The global economic downturn and financial constraints have resulted in it only planting its flag in Prague with a 219-bedroom hotel via management contract with the property's owners, Dublin-based Avestus Capital Partners.
Avestus is a shareholder in Jurys Inn, with many of its executives having previously been involved in Quinlan Private at the time of the transaction in 2007.
Has Brennan given up on continental Europe? “Prague is actually performing extremely well. It delivers a very high occupancy rate and delivers good profitability. The focus [for growth] is the UK. There are no plans to develop in continental Europe.”
Jurys Inn has a site in Budapest, next to the city’s opera house. “If market conditions in Budapest improve obviously that’s something we’ll look at. The site is there and available to us and it’s probably one of the best sites for a three-star/four star hotel in that market.”
The hospitality industry is in Brennan’s blood. His late father, Michael, opened the Burlington, Berkeley Court and Westbury in Dublin for the old Doyle group, and his brother Michael is general manager at the five-star Europe hotel in Killarney. John and his family are “staycationing” their this summer.
Brennan spent his spare time odd jobbing around the hotels his father ran before taking a four-year hotel and management degree college course at Cathal Brugha Street in Dublin.
In 1984, he became a management trainee with the Canadian Four Seasons hotel group. He spent 23 years with Four Seasons, climbing through the ranks and working in eight countries. He returned home to oversee the launch of its Dublin property in Ballsbridge in 2001 before joining Quinlan Private as director of hospitality and leisure six years later. In December 2008 he was parachuted into Jurys Inn by Quinlan to run the business.
I check out of the interview by asking Brennan to gaze into his crystal ball and predict the future for Jurys Inn.
“I’m very positive about the future. Thus far, 2013 in the UK has seen an improvement. The Irish market has been quite positive. We’re seeing RevPar [revenue per available room] growth in the UK that’s in the five per cent mark. It’s been a long time coming.
“The corporate market is strong and we see that continuing. We’re looking forward to another year of record revenue and profit growth in 2013.
"We now have a capital structure that is appropriate and we can look forward to growing and developing the business in the years ahead to build on what we've done already with new initiatives to build the financial performance and to build the reputation of the company as an operator of mid-market hotels."
CV John Brennan
Name: John Brennan
Job: Chief executive, Jurys Inn hotel chain
Married to Doris with a new-born daughter Libby
Hobbies:“I play tennis. I don’t have time for much else these days.”
Something we might expect:With a new born child in the family, he’s
had a number of sleepless nights lately.
Something that might surprise: “I am very keen on aviation and I like go
to the flight simulator in Heathrow airport from time to time
[to fly Boeing 737s] . It's a quirky love affair with aviation."