INTERVIEW: HUGH TAYLOR OBE, FOUNDER & CHIEF EXECUTIVE OFFICER, MICHELS & TAYLOR
Hugh Taylor has dedicated his professional life to the hospitality industry for more than 30 years. He has been an advisor and non-executive director for several associations, alongside holding senior positions at some of the world’s biggest hotel brands, and was awarded an OBE for services to tourism and hospitality in 2008. Here he tells Sophie Harper about building his own successful business and gives his insight on what lies ahead for the hospitality industry.
A marketeer by profession, Hugh Taylor tells me about the beginnings of his career following his studies in Business & Marketing both in the UK and America. “I had four marketing roles to begin with at four different hotel companies,” he says. Over a 15-year period, Hugh managed and directed marketing for Norfolk Capital, Radisson Edwardian, Jarvis, and Hilton before moving to the operations side of the hotel business. “I guess when I got the Hilton role in marketing it was, I felt, sort of the end game for me in marketing as it was the biggest brand in the world and I’d done all I needed to do.” Hugh then became one of three vice presidents at Hilton Hotels who together ran the operation of the brand’s UK & Ireland properties, of which he was responsible for 31 hotels in the southern half of England. “It was a 250-million-pound business, so it was a big size division. I learned about the costs as well as the revenue, which isn’t always the case for the marketer who just likes to spend the money! And so I really understood hotels from that.”
Hugh has certainly immersed himself in the industry, having taken on non-executive roles including being Director of Visit Britain and Chairman for Visit England as well as holding a number of advisory roles for different industry associations and hotel companies. “I thought I’d like to run a company, which is what I’d always wanted to do, and if you have different angles, different visions, from different perspectives, you’re going to become a much better manager.” Hugh made the move to the investment side of the industry in 2008 with his business partner David Michels – famed for his roles at Hilton, Jumeirah, The Savoy, Stakis, and the British Hospitality Association as well as Marks & Spencer and easyJet.
The formidable duo set up what was essentially an asset management company under the name of Hilmar Asset Management, to run the hotel interests of investors Igal Ahouvi and his partners, which included 42 Marriott hotels and 16 Hilton hotels in the UK. “The largest hotel companies when I joined the industry were all owners of hotels and they owned and ran everything. Over the years they have divided their assets through sale and leaseback deals, and as a result you have a very important investor community of non-hoteliers, very often who own hotels because they like the asset, but don’t actually know too much about the business itself. So we set up materials and labour to look after them.”
There were some curve balls in the beginning though. “Within three months of starting the whole thing collapsed! Not my team, but the 58 hotels we were overseeing. It was 2008 and suddenly we were presented with 23 banks who were exposed to a one-and-a-half-billion-pound investment.” For the first five years of the business Hugh and David found themselves tackling a much bigger task than anticipated, advising hotel owners on one side and managing banking groups and lenders on the other, to the point that more investors were coming forward to ask for their help. “They asked if we could help them with other assets post 2008, but we couldn’t at the time because we were under single ownership,” Hugh explains. “It was then that we went to the owners and asked if we could look after other clients. The owners gave us 30% of the company initially to go out and find new clients. Within six months it was very clear, we were going to do really well. But we were giving 30 pence per pound to investors who really had nothing to do with the company, so we bought them out at that point and became 100% owners, and the rest, as they say, is history!” In 2011 the business became Michels & Taylor. An independent business, it now serves a wide variety of clients, including high profile owners, administrators and financial institutions, and employs over 50 people directly whilst managing a team of more than 2,000 in the hotels themselves. “From big brands we’ve pretty much jumped ship to the other side of the industry in order to help people who have the assets, but don’t necessarily have the experience.”
Telling me more about the team structure Hugh says, “We’ve been able to put together a really unique senior team of high-end hoteliers with similar backgrounds to us, but in specialist areas, so we don’t have any generalists at all. The specialists structure is important because if I’m going to work on behalf of my investor with Hilton or Marriott on the other side of the table, I need the best people – and we’ve got the best people because they’ve [previously] hired them all.” He tells me that it’s this acute understanding of the daily operations of a hotel that makes Michels & Taylor one of a kind.
“We have a group of finance experts. We have eight people in revenue who just do top line, that’s all they know, distribution, commercial strategy, branding and so on. Then there’s management who are a team of top line experts. We have a property team who deal with design, reinvestment, repositioning, extensions and we all have a strategic view together. Every project we work on has at least three experts on the team,” he pauses, “It’s a very expensive model. If you hire an asset manager normally it’s a guy called Jim, who’ll go and talk to Hilton about revenue and finance and capital investments and so on. Whereas I have the Projects Director of Marriott, the Operations Director of InterContinental, and the ex-Finance Director of Hilton all on my side so that when they go into a meeting they can add real value – and the brands love it.”
Hugh tells me that asset management is just one side of the business. “We look at strategic challenges and look at ways to get clients’ top line up and manage base costs,” he says. “Hotels have a huge number of moving parts and opportunities to make more money and for that we have an advisory business, which takes care of around 60 projects a year.” The advisory side of the company carries out independent business reviews, feasibility studies, and strategic analysis to help their clients maximise profits from their hotels.
Hugh is clearly proud of the company he and David have built and, starting with just six people in 2008, they’ve come a long way. In the last decade Michels & Taylor has formed strong relationships with its clients and become a trusted brand. “First we listen to what their challenges are, they will always have a situation they need to talk to somebody about, and whether it’s a management solution or a strategic issue, or property related, or a development itself, we have a conversation and that’s how it starts. We then translate that into the approach that we’ll take with these clients to show them the journey from where we start to where we end, and as a result, how they can get a return. We are there, both in the good times and in the bad times to help owners along.”
As has been proven for Michels & Taylor in the past, bad times are often when hotel owners and investors look to them for advice, so with the current crisis I ask Hugh for his thoughts on what’s going to happen in the short term with the industry. “We are in a uniquely awful period of the industry’s history. I haven’t seen anything like it in my career. And in these circumstances, clients are really looking at survival mode. How do I protect my money? When am I going to reopen the hotel and what are the services? How can I even possibly make money when I have to social distance people in my restaurant? An entirely new operating model has to be created to allow hotels to be commercially viable, because the danger at the moment is that hotels will lose more money when they reopen initially, and that’s a real problem. So we have been working for some time putting together re-opening plans, which we’re offering free of charge to the industry.”
Hugh tells me more about the Michels & Taylor Hotel Re-opening Plan, which outlines the operational and commercial checklist of issues a hotel needs to consider prior to opening their doors to the public again. But why offer it out freely when they could quite easily charge for use of their expertise? “The industry has been very good to me and David over the years and our team,” Hugh tells me. “It’s a really lovely industry, in my experience. In 30 years I’ve made friends and colleagues and everyone we work with have all had the same attitude, ironically, given social distancing, of being together. But that’s hospitality, it’s what we do. We’re a very people-based industry. So we don’t forget that in these times.”
The Michels & Taylor team put the plan together over the course of five weeks, developing it as they learnt more. “As a result, we’ve got this quite substantial and well thought through plan that can be adapted. We were already doing it for our hotels and we just came up with the idea that it would be a nice gesture, and it was something that we thought would be really useful, particularly for those that didn’t have the depth of expertise within their businesses and could just take something off the shelf, use it as the basis upon which they could then adapt it to their property, play around with it. We just thought it was the right thing to do.”
With plans of action starting to form and other countries taking the lead on tentatively returning to some sort of normality, the hope is that the hospitality market will recover sooner rather than later. Hugh says, “I think in due course, it will all come back to normal. In the early stages, there will be rollouts of flexibility around staffing levels and operating models. It’s not enough, in my judgement, for the hotels to be ready to open when the government tells them it’s okay to open. There is another dynamic, which is getting the customers to be willing to come. Guests today are wary about coming out. So there’s going to be a significant effort and I think it has to be a coordinated one. When I was at Visit England we used to do this a lot, where you coordinate industry stakeholders to get them to work together to get the message across. We’ll need to reassure customers that it’s okay to come into hotels, that they can enjoy their experience still and that it’s safe to do so.”
Hugh predicts that in the short-term this will be a difficult time for the industry, but that with the right planning hotels will recover. “We will change the operating model of our hotels. It will come from the bedrooms first and then be developed over time. I think the meetings and events business is going to be the last to come back. There will be a number of hotels and portfolios that will have challenges and will be distressed and may find it difficult to survive in the way they are. Businesses that were good six weeks ago will likely remain good although have cash issues that will need to be dealt with, but they will come back again and they will remain relevant. So they’ll need to adapt their strategy, their products, their service provision, in order to reassure the customers that things will be okay. And then in due course, as we get more relaxed and things move on, we will learn to live in a new environment. I think things will go back to pre 2019 levels, but I would say that that’s going to take somewhere between three and five years.”
Looking ahead at what the new normal might bring to the industry, Hugh talks about the contributing factors that help draw people to a particular hotel and of course the conversation turns to design. “Genuinely, I think design is massively important. I remember with the early days of the lifestyle hotels, you would have this extraordinarily brilliant design winning every award possible but the customer doesn’t want to be there because it’s cold and it’s sparse. It’s the equivalent of nouvelle cuisine, it looks beautiful, but it’s not a meal. There was a risk, certainly in the early days of lifestyle, where designers designed for themselves. Great design is design that the customer loves.” He adds “A lot of hotels today are benefiting from really wonderful design. And that brings customers in. Ultimately it’s a people business, so whatever the design is, if the service is crap, customers won’t come – that’s just the way it is. Equally, certainly more today, given the demands of the customers, if the hotel is boring, if the hotel is dull and not well designed, they are not going to stay there. I’m talking about budget all the way up to five star and everything in between, in every sector. Now the brands in particular are driving these new design concepts. And the design work today I think is absolutely a driver to customer satisfaction.”
So what is the winning concoction that makes a hotel truly successful? “Great management,” says Hugh, “a product that the customer wants to buy. It doesn’t need to be all things to all people, it has to be absolutely right for the target market and a quality of service and product that is clearly at the top of its game and against its competition. A price strategy that optimises for the owner the rate, and the pricing across the product, but allows the customer to believe they’re getting real value for their money. And,” he adds, “you’ll hate this: location, location, location. I’ve tried to reinvent the wheel a number of times in my career, and I keep coming back to the fact that it doesn’t matter what you do if the hotel’s in the wrong place.”