Sir Rocco Forte is pretty much royalty when it comes to hospitality. A lifetime’s involvement, including 14 years at the helm of a $5.9bn hotel and restaurant empire helps, but that was almost two decades ago, and yet he still gets noticed when he travels far outside of his UK base.
His own hotel group, Rocco Forte Hotels, has been back in the news lately after it secured a $90m investment to help expand its current portfolio of ten properties over the next five years.
If he was ever in doubt about his worldwide status in the industry, that was definitely reaffirmed during a New Year’s visit to Cape Town. While there, he was asked by fellow guests on a daily basis whether he was about to take over the famous Mount Nelson hotel (or Grand Old Lady as it’s known locally), where he was staying.
The Forte name is still very much to the fore these days, particularly after Fondo Strategico Italiano (FSI) agreed to make a significant investment in the luxury hotel group Sir Rocco, and his sister, Olga Polizzi, established in 1996.
The group was started the same year that media and hospitality group Granada was successful in a hostile takeover of Forte Group plc, which at that stage operated approximately 940 hotels and 600 restaurants across the globe.
The takeover left Forte and his family with $544m and immediately he set about building his own little empire, with Rocco Forte Hotels. In its 19-year history, the company has grown to include a total of ten hotels and resorts, across the UK and the European continent.
This year, Sir Rocco expects to have a turnover of around $299m (£198m), up from last year’s $279m. Last year’s profit came in at $33.2m (£22m), and Forte expects the company will have similar growth in profits when the accounts are filed in April.
Business has been healthy and Sir Rocco describes the outlook for the year ahead as “aggressive” and “proactive”, terms that haven’t been used in association with the Rocco Forte Hotels group for quite some time.
The Lehman Brothers collapse in 2008 put Sir Rocco on the back foot, and thereafter into a period of consolidation that forced him to relinquish some prize assets, like The Lowry in Manchester and Le Richemond in Geneva, in order to reduce the firm’s debt burden, which had been accrued during the company’s expansion years.
“In the immediate two months after Lehman collapsed, our sales dropped 40 percent. It was very scary, actually,” Sir Rocco recalls.
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“Then it settled down about below, but I think people were frightened and didn’t know what was going to happen and thought the world might collapse. So a lot of companies drew their horns in and individual travellers decided not to travel for a while and that’s what created the drop in sales,” he adds.
By June 2009, things had started to pick up again and 2010 “was a very strong growth year”.
“We saw 8 or 9 percent growth in sales and then it settled down to a more moderate level, but growth nonetheless,” Sir Rocco says.
The $90m (£60m) investment will see Italian sovereign wealth fund Fondo Strategico Italiano take a 23 percent stake in the company, valuing it at $392m.
The investment has changed the long-term outlook for the firm and what the next year will look like.
“[It will be used] partly to repay debt, strengthen our balance sheet and put us in a position to start moving forward.
“We will continue to invest in our properties — we never stopped that. It will give us extra money out of our cash flow particularly to invest in special projects in our hotels and to use as key money to get contracts in those cases where it’s necessary,” Sir Rocco says.
It was a deal that the chairman himself brokered, having identified the fund as the ideal investor.
“I approached them, actually, because originally when they were set up I was interested but then I saw they didn’t have a tourism brief. More recently, during the course of last year or toward the end of the year before, they were given a tourism brief,” Sir Rocco says.
The partnership, he says, has been very fruitful, right from the early contact with the fund’s chief executive, Maurizio Tamagnini, a former investment banker at Merrill Lynch.
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“I was fairly open-minded. I wanted to understand what their brief was, what they wanted to do, and where they wanted to go and see if it coincides with what my ideas were, in terms of taking my company forward. And also, any business relationship you create has to be one which is mutually acceptable and where the parties feel comfortable with each other,” Sir Rocco says.
“In the first meeting I immediately liked Tamagnini, because he has almost an Anglo-Saxon mentality, although he’s Italian. He doesn’t beat about the bush, so we had a very frank discussion from day one,” he adds.
The fact that FSI is a state-backed fund means there’ll be a big emphasis on expanding the group’s property portfolio in Italy, but that suits Sir Rocco, who is already at an advanced stage in discussions regarding a development in Venice, and is pursuing projects in Milan, Naples and Sicily.
“Their [the FSI] brief is to help tourism in Italy, but they also understand that customer base for tourism in Italy is outside Italy, so they’re bringing customers from a number of countries into Italy. Therefore, a company that has representation overseas is going to do that much more effectively, and therefore they understand our desire to increase our coverage in major city centres around the world, which creates a window onto our company and those particular countries, which are good sources of business for us,” Sir Rocco says.
“Twenty-odd percent of our business comes from the United States, without us having a hotel in North America. Having one would actually enhance our position and reputation there and help to bring more Americans to our hotels in Europe,” he adds.
While the Italians will be involved in discussions over major financial deals, the decision as to where hotels will be located will be decided by the chairman himself. He does, however, plan to use their vital contacts to explore projects in various locations.
“What they have of course, not only in Italy, but on a worldwide basis, are significant contacts and ways of opening doors. They have separate funds within the fund with the Qataris, the Kuwaitis, as well as with Russia, China, so they have people in these countries in a way that perhaps I wouldn’t do,” he says.
As well as the project in Venice, construction also started on a new hotel in Shanghai which will be completed in 2017. Sir Rocco says he would also like to have hotels in Paris, Madrid and New York, and the possible management contracts are being explored in those locations.
Also under construction, and due to open this summer, is Rocco Forte Hotels’ second foray into the Middle East, the Assila Hotel and Residence in Jeddah.
“It’s under construction and the general manager has been appointed and that’s going to be by far the nicest hotel in Jeddah. Very well located — right on the main shopping street, Al Tahlia Street,” he says.
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The Middle East hasn’t exactly been a happy hunting ground for Rocco Forte Hotels. Forces outside of his control have largely conspired to keep his operations to an Abu Dhabi hotel that, ultimately, didn’t deliver what was promised.
“It was not an ideal location. The location was supposed to have developed significantly by the time the hotel went out. There was also supposed to be an apartment building and a shopping centre,” Sir Rocco says.
“The deal was done before the financial crisis. After the financial crisis, everything was slowed up, so a lot of these things didn’t happen, and so the hotel was isolated a little bit in the middle of nowhere.
“It was also considerably delayed, which didn’t help because about ten new hotels opened at the same time. If it was opened two years earlier than it was supposed to, it would have had time to establish itself before the other hotels came on stream,” he explains.
Other hotels that the chairman had planned to take over in Cairo were stalled by the Arab Spring uprisings, but he’s hopeful that they will eventually become a reality.
“We had a deal to do a hotel in Cairo, which was the conversion of the old Shepheard Hotel into a luxury hotel. It belongs to EGOTH [Egyptian General Company for Tourism and Hotels], which was a government-controlled company. And also, a hotel in Luxor, which they owned,” he says.
“Egypt then all came to a stop — we’re still in touch, and we’re still talking and it may well be that things might start moving forward there,” he adds.
Lebanon was also on the cards, with a management contract agreed for a new hotel in Beirut, but the owner decided to sell the site.
In Syria, too, there was a definite plan, but events outside of his control meant it never happened.
“I was discussing a hotel in Damascus — we were at quite an advanced stage there — and of course that went by the wayside as well,” he says.
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“I was already starting to establish myself in the Middle East, but a combination of the financial crisis and then what happened in North Africa have rather interrupted and spoilt all that. But there is no reason why we shouldn’t begin again. The Egyptian project may well go ahead, and [we can] then look for further opportunities in the Middle East.”
The importance of tourism in the Middle East makes it an obvious choice for any expansion plan, but Dubai has been the only location where any conversation of note has taken place.
“There’s nothing that we could talk about specifically at the moment [in Dubai], but there are a number of projects that we’re looking at,” he says.
The year ahead, however, will see Sir Rocco embark on a tour of potential sites, including Oman.
“That’s [Oman] one of the obvious places to look [at]. I haven’t actually actively done anything there, but that’s something [we will look at],” he says.
“I’ve never been to Doha and I want to go actually and I think on my next trip to the Middle East I’ll make a point of going there so that I [could] understand it a bit more, because there’s so much development going on there, I wonder whether it can take it,” he adds.
On the cusp of his 70th birthday [18 January], there’s little sign that the man knighted for services to the UK tourism industry is slowing down. There’s a five-year plan in place to double the size of Rocco Forte Hotels and that he’s clearly looking forward to what the future holds.
“One thing that the FSI deal has changed is [that] it has enabled us to become proactive again and get aggressive in searching for new opportunities. Previously we were a little bit on the defensive adjusting [to]the difficulties that were part of the financial crisis.
“We’re now in a position, with a strong balance sheet, to start looking forward in an aggressive way. This year will see us very active and hopefully by the end of this year we will have a number of projects on the books, most of which will not happen for a few years.
“We will start to have a pipeline of hotels again,” Sir Rocco says, with a tinge of excitement.
And maybe then, finally, the Middle East will deliver on the promise that it holds for Rocco Forte Hotels.
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