Scottish roots, diversification fuel Apex
 
Scottish roots, diversification fuel Apex
22 FEBRUARY 2016 8:40 AM

Scotland’s Apex Hotels is spending cash on CapEx, pushing into new cities and diversifying into hotel-related services, all with the aim of capitalizing on pent-up travel demand in the U.K.

EDINBURGH, Scotland—Family-owned hotel chain Apex Hotels will not soon forget its company’s roots in Scotland, CEO Angela Vickers told Hotel News Now.

 
“Our Scottish roots are so many and engrained in what we do,” Vickers said. “We hold on to that culture but regard ourselves as ‘contemporary Scotland.’ We’re a friendly company. We are pretty frugal and have a flat hierarchy and high engagement.”
 
Vickers described Apex as “100% family owned” and said the company intends to stay that way.
 
“Most of the family are involved in running the company,” she said.
 
Founded in 1996, Apex currently has nine urban-center hotels all located in the United Kingdom. Six are in Scotland—with four in Apex’s home base of Edinburgh and one each in Dundee and Glasgow—while the other three are in London. All nine are branded Apex, and the company has a leaseback model on two of the properties.
 
In 2017, Apex will open a 177-room hotel in Bath, England with a spa and conference facilities. The company has finished the demolition of an existing building and will spend £35 million ($49.3 million) to develop the property.
 
Apex’s City of London Hotel added 30 keys in November to increase its room count to 209, making it the largest single hotel in the portfolio. The 104-room Apex City of Glasgow Hotel opened in October and is the most recent addition to the Apex portfolio. 
 
“Our focus is definitely on the U.K. at the moment,” Vickers said. “I cannot see us expanding overseas, as we have a model that works well in the U.K. in high-rate and occupancy cities and both for corporate and leisure markets. The (return on investment) works well. We tend to focus on city-center locations and office conversions, although Bath and Dundee are new buildings.”
 
Apex also will concentrate on capital expenditure and expansion on its existing properties. An example is its purchase of a site next to its hotel in Dundee, which will be the home of the first branded outpost of London’s Victoria & Albert Museum, due to open in 2017.
 
While Bath might appear to be a shift from Apex’s focus on having city-center locations in larger British cities, but Vickers said what interested her about Bath was that transportation initiatives could result in it being less than an hour away from the British capital.
 
“Of course that could work against (Bath), as people could stay in London,” she said. “Bath, we think, is closer to Edinburgh in mentality, though, and it is probably undersupplied in terms of big brands.
 
“Our London hotels, too, are contemporary, and they all have their own micro-markets, each with a particular customer, and we found surprisingly that they did not cannibalize one another.”
 
Another push is to diversify into hotel-related services.
 
“We have a laundry service in Livingston (Scotland), and we see great opportunity to offering that to the industry,” Vickers said. “Apex will be involved in some diversification.”
 
Designs on the duopoly
Vickers said smaller firms such as Apex have taken advantage of the space that has existed in the U.K. for new and different brands. The country is dominated by two mega-brands, Travelodge (U.K.) and Whitbread’s Premier Inn.
 
“We have to be clever at what we do (and) continually push our team to think dynamically,” Vickers said. “We are small enough to be flexible but large enough to create value, and as we have no machine to have millions of loyalty members or be instantly recognized, we need to work three times as hard as everyone else.” 
 
Travelodge and Premier Inn helped create space for new product, Vickers said. She said those companies opened up a large demographic that might not have contemplated hotel stays and now might consider the opportunity to book at properties with higher price points for special occasions.
 
“We believe we can satisfy this pent-up demand to travel with realistic rates,” Vickers said.
 
According to Vickers, Apex Hotels’ rooms sold in 2015—in comparison to those sold in 2014—fell by less than 1% to 360,334 roomnights. Occupancy fell from 0.8% to 86.5% over the same period, average daily rate increased 4.9% to £126.17 ($177.59) and revenue per available room by 4.1% to £109.17 ($153.66).
 
In a 2 February release of a full-year earnings statement for the year ending 30 April 2015, Apex saw turnover grow by 2% on a like-to-like basis to £57.2 million ($80.5 million). Profit before exceptional items increased by 11% to £10.6 million ($14.9 million), which reflected “reduced interest costs following refinancing in the previous financial year.”
 
There was further good news in terms of Apex’s real estate, as the earnings report stated that the “strong underlying performance of the hotels is reflected in the hotel valuations, which increased by £18.9 million ($26.6 million) to £299 million ($420.9 million).”
 
“The main driver for us is just to make sure we compete in the sea with the big fish, and we do well within our competitive set, always at the top of our game,” Vickers said, “but because the industry is very dynamic and with so many challenges such as (online travel agencies), in-room tech, staffing, the (upcoming) National Living Wage, we constantly have to keep on top of it all to make sure all the balls are where need them to be.”
 
Other Apex initiatives include an apprenticeship program that allows Scottish talent to view hospitality as a career option. So far 15 graduates have completed the program, studying, working and learning at such entities as Buckingham Palace, Disney and the Gleneagles Hotel.
 
“The events industry also is crucial, events such as the Ryder Cup,” Vickers said.
 
“Our work is to build the brand name, raise awareness, push hard to increase revenue and to target innovative streams of revenue,” Vickers added.
 

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