The company snapped up this building as an unfinished relic of the recession and turned it into a tastefully reappointed all-suite hotel. Business in Dublin’s hotel sector, says Murphy, is booming.
But while developers have flocked into hotel investment, Murphy and his team were quick to react to market changes. This time last year, they struck a €17.5m deal with Aviva, selling the Ballsbridge property but retaining the operating lease.
Dublin, he says, despite the hordes of tourists that roam its streets, is not a market in which Prem is currently interested in further expansion.
“The market is changing and getting very hot so the likelihood is that we won’t do anything else in Dublin for a while. We are growing our business through leasehold and we can’t justify the levels of rent that developers or whoever are expecting for hotels in Dublin. We might be wrong. But we’re relatively conservative. We don’t want to blow what we’ve achieved.”
There is, he says, still plenty of opportunity in the city for the right kind of investor: “People have different investment criteria and different returns that they need. Money is cheap at the moment.
“You get nothing on deposit so if you get a 2pc or 3pc return on a hotel investment, it’s more than you get in a bank. But that’s not good enough for our shareholders.”
About 50pc of the group’s business is now outside of Ireland – in the UK and Benelux region – and, Brexit notwithstanding, that is where Murphy is looking to expand. “We’re going to do a turnover of €70m this year and we’re aiming to go to about €100m in the next 18 months, according to our strategic plan. We’re profitable; we’ve cash in the bank and we pretty much have no net debt.”
The Ballsbridge sale, as well as the sale earlier this year of a hotel-industry-focused international procurement offshoot, have provided funds to back this ambition. The pipeline of new business that will deliver the growth is mainly in Europe.
“Last year, we opened Premier Suites in Antwerp. We’re opening in Amsterdam, 114 suites in the commercial district near Schiphol Airport next May. We’re opening a Holiday Inn Express in Antwerp and in Brussels Airport, both in 2021. We are currently looking at an opportunity in Berlin in Germany.”
Prem is also looking at other opportunities in the Haag, Utrecht, and Maastricht in Belgium.
And neither is Murphy overly concerned about a Brexit-related slowdown in the UK. If anything, Brexit could open up acquisition opportunities for the cash-rich company, he says.
Nevertheless, Murphy does have serious concerns about the way Britain is changing.
He says: “My biggest concern is not necessarily around business, which is going well for us. But I am concerned about the perception of Ireland in the UK. The Anglo-Irish relationship has been so good but I worked in Scotland in the 80s and it was tough being Irish, and now on the streets, there’s a lot of negativity I see creeping in about Ireland and that would worry me.
“You’d wonder, should we be making every effort to help the UK get out of this situation somehow? The current government is not going to be there forever but Irish-UK relationships are so important for our future, long-term. It worries me that we go backwards because of this situation.”
If Murphy does have a contrarian streak – or at the very least a tendency to plough his own furrow – it was evident from a young age. He grew up on the market square in Enniscorthy, part of a family of true hurling royalty. His mother was a Rackard, the eldest sister of the great Wexford hurlers Nicky, Billy and Bobby, and his father’s family were also renowned Wexford hurlers.
Nicky’s statue, one of the greatest hurlers of all time, now stands in Wexford and it is a connection of which Murphy is very proud. Nevertheless, the young Murphy played rugby, not hurling.
“I didn’t play hurling because I was sent to a boarding school, Cistercian College, Roscrea, which is a big rugby school, and I loved the rugby.”
Later, when working as a young hotel manager in Kerry, the local hurling club was disappointed to learn that although they had a nephew of the great Nicky Rackard among them, he was much more adept with an oval ball than he was with a sliotar.
But family connections had given him his first step into what would ultimately become his life: the hotel business.
“I worked with my aunt and uncle in Murphy Floods hotel in Enniscorthy when I was a kid during school holidays, waiting tables, pulling pints or sorting out bottles in the bar. It was a great local hotel,” he recalls.
For Murphy, who was struggling with the academic side of school, the hotel industry provided an opportunity that he could not see in other areas.
“I was good at sport in Roscrea but I was brutal academically, which I later found out was down to dyslexia. But when you were going to school in the 70s, you were just seen as thick. But I was lucky to get out of the Christian Brothers school and go to Roscrea because there was a certain level of compassion, and if you were good at sport it kind of covered up a lot of other stuff.”
These days, dyslexia does not bother Murphy, now that he understands how it works. He says: “You can have the frustration at times of trying to remember Pins and passwords that change every three months, but writing and grammar are no problem any more. The computer has spell-check and I actually quite like writing now.
“But at the time, you don’t know any different, so you learn coping skills. For example, I’m very structured and organised in my personal life. I have to know where everything is. That was a coping mechanism I developed when I was young.”
The great thing about the hotel business, he says, is that if a person shows a little bit of flair and energy, they can do very well.
“Working in hotels, it didn’t matter if you were academically smart, once you were personable and you were able to engage with people. It’s a consumer-facing business and if you have the ability to communicate and you’re natural, and comfortable around people, you can survive. I didn’t know anything else. Did I want to be an architect or accountant, or solicitor, or something? No. Academically, that didn’t appeal to me. But I knew the hotel business.”
After school, Murphy was accepted on to a block-release hotel management course in Galway. It allowed for long periods of work experience, which suited him perfectly and he thrived. He got the chance to work in one of the world’s great five-star hotels, Gleneagles in Scotland, before moving on to work at an Intercontinental in Germany.
After graduating, Murphy returned to Wexford to take up a management position in Marlfield House, a boutique luxury hotel. From there, he moved to the Park Hotel in Kenmare to become Francis Brennan’s deputy general manager. The young Brennan was trying to buy the property from its then owner.
Murphy recalls: “He was spending a lot of time in lawyers’ offices in Cork trying to do the deal. Our job in the hotel was to keep the business ticking over. You could see the stress of it for him.
“But what he did was incredible to get control of that business at such a young age. He was in the right place at the right time, but a lot of people would have run away from something like that.”
Murphy learned another lesson from Brennan: “I’ve worked in places where management ran things by fear. But there was a phenomenal amount of respect in the Park, and Francis was leading from the front, leading by example, and he treated people with respect.”
Despite loving his time working at the Park, he moved on after two years. While in Kerry, he had met his wife to be and she had moved to Meath for a teaching post. Murphy followed her, taking a job as group operations manager in Dublin’s Gresham, then one of the highest-profile hotels in the country, and seen in the business as a plum position for a young hotel manager.
But six months later, in November 1989, Murphy’s knack of doing the unexpected kicked in once again and he quit the job. A group of about 40 Aer Lingus pilots – led by Peter Redden and Gerry McNulty – were putting together a Business Expansion Scheme to develop an aparthotel in Dublin.
He had just got married the month before and friends were not enthused by his plan to quit his job at the Gresham after just six months.
“People told me I was crazy to take the job, that it was a backwards step, that it was a very small hotel, only about 40 suites. I don’t know what it was about it that appealed to me, but I loved the idea of opening something new.”
Within a year of taking up his new position, the Gulf War had helped push interest rates to over 18pc: “It was a tough, tough time to be in business.” Because the business was based around tax incentives, it needed to stay afloat for seven years to allow the pilots to get their return. The aparthotel model allowed Murphy to keep costs very tight and the company traded through the tough times. Concert promoters, for example, loved the competitive rates and so a whole host of international stars would stay in the suite at the Leeson Street property when passing through Dublin, much to music-loving Murphy’s delight.
“You could argue this was a precursor to the Airbnb phenomena. It was very American and it was targeted at the corporate market and visiting executives coming into town for a few months. One US telecoms company in particular kept us going for a while because they took the whole place.”
When the tax incentive scheme came to an end in 1996, the two main pilots in the group, along with Murphy, acquired the company from the other investors. The Prem Group was then set up to manage the operation of the property under Murphy’s guidance. His business partners gave him a clear message: grow the business by finding more properties to manage.
That was not a difficult task. At the time, there was a hotel-building boom in Ireland and developers needed expertise to help them operate the new properties. For the next number of years, Prem jumped from contract to contract, and project to project; some good, some not so good.
“We were doing things without giving them a whole lot of thought,” he says. One of the lessons he had learned from dealing with dyslexia was that he could not be an expert at everything and needed to surround himself with good people. By the early 2000s, he had built a team of people around him that he could trust, including financial controller and commercial director Stephen Loftus.
“It was only then that we put a bit of structure on a business that was very entrepreneurial but was all over the place,” he says.
But some of the projects that had been started in the early years worked out very well. The branded hotel management business, particularly contracts it held at the time with Days Inn in Ireland, allowed Prem to look further afield.
“We were a small company but we were networking well with the big brands, particularly the American brands that were looking to grow in Europe, and that led to an opportunity in Belgium to get the management contract for three hotels.”
The branded hotel market in Ireland was one Prem would exit within a few years but not so in Europe. Two years after winning its first three Belgian hotel contracts, the company had nine more. Today, the Prem Group office in Belgium employs 35 people, managing 12 properties.
“When we set up Prem as a management company, the principle was that it wouldn’t own properties; that we would just manage and we would sell our services for a fee. We were very fortunate that we never took on any debt. We were managing other people’s hotels and they were putting in all the debt and we were getting a fee to manage. So we succeeded or failed based on our management skill.”
But the rush to grow came with risks too. In 2000, Prem Group took its first step into the UK market with serviced apartments. “Some of those locations we still have to this day. They were good decisions. But we signed some onerous leases at the time that we had to deal with when the crash came. We did them for the wrong reasons and they probably weren’t very well thought out,” he says.
The mix of the good and bad in terms of leases had been sustainable while the Celtic Tiger economy boomed, but as the wheels came off the economy, Prem Group faced a reckoning.
“I will never forget the September 2009 board meeting,” says Murphy. Prem Group chairman Paddy Murphy, a former Bank of Ireland executive and no relation, had a stark message. “We need to knuckle down and we need to restructure to survive,” he told the meeting.
“We needed a wake-up call,” Murphy now recalls. “At the time, we were turning over about €11m and we were probably breaking even, at best. The board knew that if we didn’t put some structure on the business that we wouldn’t survive.”
Murphy began the process of meeting each of the company’s partners to tell them where things were.
“It was stressful meeting the owner of a hotel to say, ‘I can’t pay the rent next month, we’re going to have to restructure it or we won’t survive’.
“First there’s the anger and a ‘it’s not my problem’ reaction, but then people realise it is actually their problem too, and they calm down and they work with you. We were upfront and spoke to people early. They knew we were good operators in terms of the hotel business and it was a case of ‘well, if we get rid of these guys, the next crowd will be the same, or worse’.”
When the good times returned, the Prem Group business had been streamlined. Irish banks may not have been interested in trying to understand its lease-oriented operating model but others were.
Swedish lender Proventus extended the company a €30m lending facility, which allowed it to expand at a time when receivers and others were looking for competent operators to manage distressed hotel assets that had landed on their books.
The Proventus loan also allowed Prem to purchase a number of Irish hotels, including Cahernane House in Killarney, the Osprey Hotel in Naas and the Tulfarris hotel in Wicklow. For now, much of its Irish capital spending is concentrated on improving these hotels.
Murphy says: “The €30m credit line from Proventus is still intact but up for refinance next year. We haven’t made a decision on what we are going to do with that yet.”
Ambition is unlikely to be in short supply when Murphy faces into that decision, but the varied experiences of the past will no doubt serve as his guide.
Sunday Indo Business
- Florida Federal Judge Clears Way For Challenges To Elections Law
- Drivers could be fined £1,000 for wearing a face covering behind the wheel due to this law
- Liverpool Boss Juergen Klopp Compares Anti-vax Movement to Drink Driving
- India Gears up for Rollout of World's Biggest Covid-19 Vaccination Drive, Health Workers to Receive First Shots
- Phil Murphy, Jack Ciattarelli Clash In New Jersey Governor Race’s First Debate
- Oisin Murphy apologises as failed breath test sees him stood down at Newmarket
- Uber crash was the fault of a human driver NOT the self-driving car, police report confirms
- New Jersey Law Scraps Ability Not To Hire, Promote Workers Over 70
- Amid Britney Spears conservatorship battle, states tightening laws on guardian oversight
- How a US group with links to the far-right may have influenced a crackdown on Ghana's LGBTQ community
- 'Work fell off a cliff': Caravan and trailer towing law change slammed over training fears
- Liverpool boss Klopp compares anti-vax movement to drink driving
- Some Texas Clinics Resume Abortions After Federal Judge Halts Law
- How White nationalists evade the law and continue profiting off hate
- Jerry Brown signs 11 gun-related laws, vetoes seven
- New York State Law Imposes Restrictions on Airbnb | Digital Trends
- Cuomo Helps Groups Mobilize for Gay Marriage Bill
- FRSC boss, NSCDC counterpart hailed as group holds thank-you rally for Buhari
Murphy's law drives Prem Group on have 2808 words, post on www.independent.ie at August 24, 2019. This is cached page on Auto News. If you want remove this page, please contact us.