The Chestnut Group has had quite the year, with two new acquisitions proving that in a difficult climate, this is a company not afraid to invest. The group, which refuses to be pigeonholed as a hotel, restaurant or pub, is helping to drive trading momentum in East Anglia, with founder Philip Turner conducting a careful expansion process across the region. We sat down with Turner to discover how the business intends to grow in 2019 and why he says honesty is always the best policy.
“I think growing a business is all about making mistakes, if you don’t make mistakes then you can’t learn your lessons,” Philip Turner explains when I meet him for breakfast one morning at The Zetter, fresh on the back of two shiny new hotel purchases.
It’s been six years since Turner left his high-flying bank job in the capital to set up The Chestnut Group, building a hospitality brand in East Anglia pinned on good food and service, refusing to be defined as a hotel, restaurant or pub. And within five minutes of meeting him, it’s clear that he is fuelled with just as much passion as he had from day dot.
“Right at the start when someone asked when I wanted to do, I said, I want to do food that is better than you expect in a pub, rooms that are better than you’d expect in a pub and I’m trying to deliver a level of service that is better than you would find in a pub,” Turner says.
The first, the Packhorse Inn in Newmarket, was an underperforming pub in the village where London commuter Turner lived, and so when it came up for sale, he took the plunge and decided to have a stab at hospitality.
In his own words, he admits it was a ‘case of complete and utter naivety’, but with a clear vision and armed with bags of enthusiasm, he was determined to make it a success.
“You go into it with this huge enthusiasm,” Turner tells BH, “then you’ve got all the operational constraints, chefs and managers to hire, a business plan, marketing, websites, booking platforms – it was all very new. But we did it, and it opened very strong, we filled a gap that needed to be filled.”
That was 2013, and since then the Group has grown to encompass five country inns and the two newest additions, The Ship at Dunwich and The Westleton Crown on the Suffolk coast. Each one individually boutique, boasting between eight and 34 bedrooms, and focused on providing a genuine, fun, quality hospitality experience.
“We thought, ok we’ve done this now, what would happen if we did it again?”
After the success of the Packhorse Inn, Turner found himself in a position to consider expansion. “We thought, ok we’ve done this now, what would happen if we did it again?” He says that there wasn’t a grand masterplan in place, but in the back of his mind he always knew the model had potential.
The business started off being equity funded – Turner didn’t want to have to answer to a bank from day one – then after the first surge of acquisitions and growth he was in a stronger position to approach the banks.
Turner now owns all of the properties they operate, with a bunch of shareholders with whom he is in regular contact. Admitting it’s a ‘capital intensive business’ this way, he knew that if he was to continue buying freeholds after the purchase of The Packhorse Inn, he would quickly run out of money, so looked to drum up support from people he knew. These people have travelled The Chestnut journey ever since.
“I have a bunch of people who have supported the business and hugely grateful to them,” he adds. “I also send out shareholder updates; it’s a very important thing for me, I make people feel very involved in the business because I want them to know what’s going on.
“Sometimes our shareholder updates are not 100% positive because this isn’t always a 100% positive business. Things go wrong and I think it’s very important to tell people when things go wrong because then they believe you.
“We are now an operating business that is of a magnitude that is financeable from a bank’s point of view, and went to them for the second phase of funding when we acquired the two coastal inns in Suffolk.”
The only way is East Anglia
Having grown up in the area, initially Turner was driven by the ‘distinct lack of hospitality venues in East Anglia’, saying the resource and beauty of the region wasn’t being exploited in the way it should.
He says that as the epi-centre London moves further east, the customer base exposed to The Chestnut Group gets bigger, which is a ‘good position to be in’. “The exit point on a Friday night is East Anglia, so we see now a huge number of people coming to the area for the weekend.”
Business is also being bolstered by the fact that Cambridge has become a key economic driver in the region, with the ripple deriving from that helping to play into the lap of The Chestnut Group properties. Plus Turner says that because 60% of imports come through the port at Felixstowe, the Government have huge reasons to ensure that the infrastructure in East Anglia remains robust.
The 16-bedroom The Ship at Dunwich and Suffolk coaching inn, The Westleton Crown, which comprises 34 rooms and a popular restaurant were acquired by The Chestnut Group in August this year, further cementing the East Anglian-rooted ethos of the brand.
Turner tells BH that the sellers, Agellus Hotels, approached him with the opportunity, knowing they were champions of hospitality in the region and what they were trying to achieve as a business. After considering how the two properties would operate within the Group and ensuring both the product, location and offering work on the ground.
Turner explains: “The Suffolk coast is such an important part of the region – it’s more than 50% of the land – so it was obviously an area that I’ve been thinking about for a long time. We’ve looked at a number of places and as we’ve developed and grown, I’ve got to understand more about who we are as a business and what we need to do in terms of taking the brand to the next level and I’m much more aware of what I’m looking for now.”
Both businesses were operating well, albeit fairly seasonal being situated on the coast, and Turner said that they ‘dovetail’ quite nicely with the rest of the portfolio. The acquisitions also marked the first time that Turner had taken over an established business, rather than an old building that needed a total refurbishment. Naturally this had huge implications on the time scale of the acquisition.
“The process took longer than any of us could have wanted, but it gave us the time to really think about what we wanted to do,” Turner says. “It throws up loads of challenges, in terms of people and integration and we knew we were going to be taking over these properties during their busiest period, so it was really important to ensure that we minimise disruption from a personnel perspective.”
Clear communication from Turner to staff across both the existing hotels in the portfolio the new additions was crucial in securing a smooth takeover. He explains that it was vital that employees coming on board knew who they were as a business, their values and aspirations, whilst also ensuring current staff were kept in the loop to feel part of the process.
“I was aware that we started the business less than five years ago and we’ve travelled a journey with a bunch of people and I was worried that they would feel disenfranchise because we were making this big acquisition for us as a business and they would think they’d been left behind and it was all about the new places.”
Turner spent a good two weeks during the transition training with staff – from general managers to pot washers, housekeepers and kitchen porters – making sure they understood the company’s vision and ambitions.
Changes to be made
In November Boutique Hotelier revealed that a refurbishment was to take place across The Ship and The Westleton Crown, to bring them both in line with the ‘brand standards’ of The Chestnut Group.
Turner said that the plans have been put in place with the primary aim to ensure that ‘sold rates are brought back into line with rack rates’, whilst trying to improve the offering and price accordingly. He also said that another top priority was ‘keeping in mind the existing loyal customer base’.
While the properties will be renovated with new soft furnishings, coffee machines, plus locally-sourced toiletries and other room accessories brought in to enhance the offering, Turner says that the challenge is to refresh the building without making it look like a dramatic new look has been rolled out.
“There is investment to be made around the properties,” Turner says, “but it has to be done with an extreme amount of empathy to what people expectations are. You can’t take a business that’s working really well and suddenly chintz it all up and double the price.
“When we started off, we were small and wanted to look big and now we’ve got a bit bigger, we want to look small.
“A lot of the people there are asking, what are you going to do?” he explains, “and the challenge is, to make it look like you haven’t done anything, so it has to be really subtle, even down to changing curtain rails, the detail, which says something about who we are, but not changing the authenticity of what those properties are.
“People have a certain expectation level before they go there.”
So no big brand standards set to be introduced?
“You might recognise certain types of colours we’re using, or drinks we are supplying, or paper for the menus, but it’s subtle; there aren’t big signs emblazed everywhere.
“When we started off, we were small and wanted to look big and now we’ve got a bit bigger, we want to look small. Each property needs to have its own identity and that is driven through the food products you’re using and the feeling and characters of the staff, to make people feel they can relate to the property,” he adds.
Food inflation has been challenging this year for most hospitality businesses, but Turner says it goes hand in hand with the rise in people wanting to pay for artisan and Provence. He isn’t afraid to make decisions on where money can be best spent at various time throughout the year, to ensure targets are met.
“We are a business with metrics that we’ve got to hit, I set those metrics and I know I can make a decision that if I decide not to hit those metrics I have a reason for doing it, but if I have employed a chef on a bonus structure who is supposed to hit those metrics, he doesn’t know that.
“I will almost give them money back so they can hit their margins and continue doing what they are doing and I’ll take it out of the marketing budget or something like that.”
The future looks rosy
Having built up a portfolio of seven properties – including The Blackbirds Inn which is undergoing an extensive refurbishment following a fire in 2018 and is due to open later next year – over just six years, should the industry prepare for a mass Chestnut Group expansion programme?
“East Anglia is a big place and there is a lot we can do,” says Turner, “but if a business doesn’t fit with us, then I won’t go for it, however attractive it might be.
“I have a much better understanding of what I want to do and how I want to do it, so consequently when the guys from Christie’s or Fleurets call up, which they do on a regular basis, saying they have this really interesting property, my first thing is does it fit? How does it resonate with who we are?
“Equally if I see something that fits, I will now be a bit more on the front foot, seek it out and ask if people are interested in selling.”
The two new acquisitions for the group take the company to a nearly £10m turnover business; not bad for a hospitality first-timer who created a hotel company influenced by his experiences as a consumer after spotting a niche in the market.
Turner knows the importance of investing in the business to ensure its longevity, from the physical buildings to the staff and facilities. “We have to invest, in every single aspect of the business if we are expecting growth, that growth doesn’t happen without a committed programme of investing in many different facets.”