27 Jun 2012

Paul Kerr: CEO of Small Luxury Hotels of the World

Keep it simple. Confuse and lose. Have a goal. Paul Kerr, CEO of Small Luxury Hotels of the World, shares his favourite slogans for success with Penelope Rance

Paul Kerr has always had a plan. And if things don’t work out, he makes a new one. The original strategy was to be a doctor, but when he didn’t get the required A-levels, he regrouped. “I looked around the family, and my godfather was pretty well off and he was a chartered accountant,” recalls Kerr. “Nobody told me that he actually inherited the money.”

Nonetheless, once on his new path, he threw himself into the ACA. “I enjoyed it, because there’s no lying in figures – if you do they catch up with you,” he says. “It is hard, probably harder then. If you failed a subject you had to take the lot again. But you have to have goals and the ACA was one.”

His approach to exams typifies his approach to business. Needing to retake Elementary Financial Decisions (EFD), he went for belt, braces and extra string. “Before the exam, I took a weekend, a residential and an evening course,” he recalls. “I ended up doing the exam in two hours rather than three, and knew I’d got it all right.”

During his training contract with Harmood Banner, later part of Deloitte Haskins & Sells, he was the youngest in the company, but not the most inexperienced. “It was interesting to see how people who’d been to university and never failed anything met failure, and how they coped with it. There were a lot of dropouts. They told us anyone who stayed the course would end up a partner.”

Kerr credits Sir Michael Pickard, a chartered accountant and founder chairman of Happy Eater restaurants, where Kerr flipped burgers to pay for his courses, with keeping him focused. “Sir Michael said, ‘There’s only one failure rate – your own, 100% or 0%.’ It doesn’t matter how anyone else does.”

Following Pickard’s example, Kerr left Deloitte to go into industry. “I was hospital director (finance) for the Princess Grace Hospital. But life was a little too easy, so I decided to go abroad,” he says. He opted to emigrate to Toronto in 1981.

“The country was in financial crisis. So I moved into receivership, because I thought I’d be busy and it was all chargeable hours,” he says. “Once I was dealing with a receivership of Charolais cattle, and woke up one morning to see a photo in the Toronto Star of the dead cattle on the Royal Bank of Canada’s doorstep and the CEO walking over it. It was like the Wild West.”

It was during this time he cemented his belief that, no matter how good your product, success is about business management – you need a plan.

Returning to England, that plan was the hotel business. “I wanted to do something I enjoyed,” he says. He worked at Trusthouse Forte, overqualified for a role at the coalface as a hotel financial controller, then for a tour operator, and in venture capital, picking up the skills he needed. “I ended up being headhunted for Cunard Hotels & Resorts as finance director for the Ritz, Stafford and Dukes hotels,” he says. “Then came the 1989 property crash. The owner of the hotels was a property company called Trafalgar House. My job was to break up the group and sell them individually.”

Kerr had to ensure the hotels were running at a profit, reorganising balance sheets. They were part of Small Luxury Hotels of the World (SLH), a recently formed, non-profit organisation, limited by guarantee. “I was paying cheques to this company and I didn’t know what it was all about,” says Kerr. “So I asked the general manager of the Ritz how it was going and he said ‘not very well’. So I said I’d look into it with my financial hat on. I took two weeks holiday to do so, and decided it was going bust.”

He founded Hill Goodridge & Associates (HGA) with Brian Mills to act as the outsourced management company for SLH. “We purchased the rights to manage the brand. We had our assets on our balance sheet, and they had the cash to pay us our fee. So in effect we tipped the balance sheet into the P&L and paid ourselves via SLH,” he says. “The boring bits in the hotel business produce results. If you get the database right in the electronic systems, then you release a lot of the reservations. A lot of the hotels’ databases were incorrect. So when travel agents searched the systems, the hotels wouldn’t come up, or had the wrong prices. By unlocking the channels, reservations started flowing.”

HGA sorted out the databases and ensured the travel agents had access to the hotels through GDS, a bespoke system that was a forerunner of internet booking. “Keeping it simple helps people make decisions,” says Kerr. “It is the same on the internet. We have a saying: if you confuse, you lose.

“We track weekly figures for reservations, have a strategy meeting every year, produce a 280-page bible of figures and goals.” On the whiteboard in the SLH conference room, these goals are listed in a neat hand, waiting to be ticked off.

The number crunching has led to huge success. Even in a time of alleged austerity, the luxury brand is booming. “The model is working because there are people who spend money,” he says. “You can’t keep a luxury man down for long, and he will not give up his holidays. Money goes around, it doesn’t disappear.

“I’m a surfer. GDS was a huge wave where there were millions of pounds of marketing money spent trying to get the people to book electronically. In comes the internet in 1997 and we’re riding that tsunami now. As a global brand, you need that geographic penetration the internet allows. And now we have this new wave that’s social media. You have to keep reinventing a brand. If you don’t change, you die.”

Whether it’s a social network or the loyalty club, the hotels’ contracts mean they must subscribe to the brand ideal. “We market the brand and the hotels have to connect to the brand, or they don’t get the business,” says Kerr. “A key strength of SLH is that there’s only one contract, one set of fees.” SLH now generates annual reservations revenue of £65m for member hotels.

Over the last 20 years, Kerr has overseen the growth of SLH from 70 hotels in 12 countries to over 520 in 70, transforming it from a “club of hotels” into a “club of customers” through the slh.com website, which hosts a loyalty club with over 150,000 members. “There’s no one to look up to, there have only been three other competitors in the business in 20 years,” says Kerr. “I did read a book about branding in the late 1980s and I thought about the hotel business, do they have anything? They do, but they don’t use it business-wise.

“SLH wasn’t doing well because it was run by hoteliers. They had conflicts of interest. They wanted cheap reservations for their hotels, but the brand has to make a profit. It was a good idea, and I thought if you brought a business focus to it, it would work.

“Qualifying as an accountant was the best thing I did,” he says. “It gives a complete base for the business world, as long as you have the imagination. If you have goals you can achieve anything. And I’m a great believer in keeping it all simple.”

Kerr cites his greatest satisfaction as the proof that his plan worked. “I enjoy the graphs that go upwards,” he says, “and the fact that the business plan I wrote 20 years ago hasn’t really changed.


Penelope Rance