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The Credit Crunch: The Perfect Time for a Fresh Eye and a Third Arm
The dramatic adjustments currently taking place in the UK's financial and property markets could be seen as the latest case of periodic correction to the substantial growth enjoyed by these sectors over recent years. While there is no doubt that the credit crunch is having a direct bearing on many of Scotland's hospitality operators, the newly coined term threatens to become a convenient catch-all excuse for under-performing businesses to justify their own intrinsic shortcomings. With many operators revising their short-term plans for business- growth and development in the face of lending decisions being delayed or redrawn, it is invariably the well-established hospitality sector operators who are best-placed to survive the short-term economic constraints and prosper in the years ahead.
Michael Dunn prescribes some fresh ideas and a proactive attitude for making the most of these turbulent times…
It is generally accepted that no hospitality operation, however popular it may have been at a particular period in time, can ever afford to take its customers for granted. In a notoriously fickle marketplace where the customer can turn around and walk into a competitor's establishment simply because they weren't happy with an establishment's décor, it pays to plan ahead.
Licensees and hoteliers must continually invest in their offering to ensure they satisfy the ever-changing demands of discerning clientele. Perhaps surprisingly, the credit crunch can actually represent a window of opportunity for seasoned practitioners with adequate reserves to re-invent and re-invest in their properties.
Rather than embark on ambitious expansion plans or acquisitions, astute operators are instead seeking to raise the returns by re-branding and repositioning existing units. The obvious attraction of such a strategy is that it avoids the heightened risk and greater costs associated with acquiring and launching new locations, while simultaneously reinvigorating existing outlets, attracting increased business and generating new revenue streams. Shrewd operators can reduce the cost of any such investment by appointing established design-and-build specialists who can consolidate the various elements of traditional refurbishments by coordinating and controlling all aspects of the process to deliver projects on time and within budget. Despite the relatively bleak outlook, in time the economy will recover. When the upturn duly arrives, the operators who will find themselves in the strongest trading position are those who realised the benefits of investing in and improving their businesses now, and using the credit crunch to their advantage.
Tackling the credit crunch head-on
As managing director of Dunn Interiors, Michael Dunn has built his company into Scotland's leading design and build specialist to the hospitality sector.
With 18 years' experience, an annual turnover of more than £9 million and over 600 contracts under their belt, the firm is a one-stop shop for refurbishments and new build developments in restaurants, hotels, style bars and pubs. With clients ranging from independent establishments to multiple-outlet firms such as Hilton Hotels, Maclay Inns and Scottish & Newcastle, Dunn Interiors offers an all-encompassing consultation, design and build package.
Michael himself knows the signs of a business that must evolve in order to survive: 'Hospitality operators know that they need every possible edge over their competitors to help attract and retain customers,' he says. 'A well-designed space that appeals to a diverse clientele can provide a sound and crucial starting block in advance of the service levels the customers expect. If you impress them as they walk through the door they will be more amenable to you from the start.
'My company will go into a hotel or restaurant and we will talk to the owners about all aspects of their operation. We take an aerial view approach, from product offering and target clientele, to annual turnover and any renovation plans they might already have in place.
'The problem is that, often, people consider their pub or bar to be their pension, and having built it up gradually over a number of years they plan to sit on it and hope for the best when the time comes to retire. However, while they are sitting tight pondering their options, bigger and better operators come along and raise the bar, walking away with their customers in the process. The alternative is to try to move with the times. Procrastination is a natural human trait but in order to counter it, people have to be proactive about growing and changing.'
It is at this point that Dunn Interiors can really provide a design platform and strategy to help turn a business around. By offering advice and ideas – backed by years of experience in the field - it can assist proprietors of all types of establishments to concentrate on their strengths rather than trying to conquer their weak spots.
However, once a client has realised and acknowledged that it is time for change, further obstacles can jeopardise the effectiveness of the proposed refit or refurbishment:
'Often, what the client wants is not necessarily what their business needs,' continues Michael. 'There is a fine line between objectively appraising a person's lifetime effort and openly criticising it. We want to identify ways of improving and building on the foundations of a business or establishment, and that can mean stripping away the less profitable aspects and concentrating on introducing revenue-enhancing changes, as well as suggesting operational improvements to maximise their income. Our aim is to improve the bottom line of their business by getting a better idea of what the establishment needs and, ultimately, by adding value. We'll help take the business to the next level.
'We provide a fresh eye and a third arm at a time when operators need someone to turn to for advice; someone who knows their trade inside out and who can show them a way to get their business back on track. Part of our job is to get people to work on their business rather than in it. This encourages them to ask themselves the tough questions about their business.'
As the credit crunch begins to bite and operators are faced with the dilemma of riding the storm or stagnating and hoping for the best, there has never been a better time to rethink your strategy. As Michael says: 'The good guys are getting better and will be investing in their businesses. If you are not prepared to take the bull by the horns and tackle the credit crunch head-on, you could end up regretting it in the long term.'
This article has been edited from its original version. For the complete feature, please see Catering in Scotland magazine November/December 2008.
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