53. Titan of the hotel industry reveals the 3 things you need to know to open a luxury hospitality business | Sir Rocco Forte

33:25They're slightly different. I mean, the thing about Italy is, you know, it's a prime tourist destination. There's nothing like it any else in the world because you've got, you know, you've got amazing cultures. Over 60 % of the world's artifacts are found in Italy. You have a good climate, you have wonderful food, and you have a sense of hospitality which exists in the nature of people in this country, which is very different from any other country. And therefore, and the Americans love it. So a lot of Americans have origins in Italy as well. And so Americans come here in huge numbers. Americans are prepared to pay high prices.

34:15And so if you open a hotel in the right destination, the right product, you'll get the American market and they will pay the prices, which justifies very good returns on investment. Americans like coming to Scotland and England as well. Yeah, Scotland to some degree, but not quite the same degree.

34:41And so Italy is very bureaucratic. you know the labor laws aren't very very favorable to the employer as as is the case in the whole of continental europe um uh so all those things are different but italy is a country you know if you know your way around you can sort of right sort things things out and you know even where you have unions the unions are much more malleable and flexible if you if you're a decent employer they know you're doing the right thing, then they'll, you know, they work with you. And so it's been a fantastic success, my investment in Italy. And we now have established effectively, we're probably the biggest luxury hotel company in Italy and continuing to grow.

35:39So how many hotels do you have in Italy now? I've got to say. they're opening so fast I think I've got actually I've got I think six and I have two two Roccoforte houses right and another five on the way in Italy we're opening Milan next month I saw we're doing Naples in 27 Norto which is a small in the centre Baroque in Sicily where with Palermo Verdura we'll have that be the third hotel start creating a sort of tour of Sicily and another one in Puglia and in Sardinia on the cost of Neralda, which was going to open this coming year and next year, but I'm not sure it'll be quite ready by then.

36:26So, and a lot of other things in the pipeline. We're starting now to try and spread our wings a bit further. I did this deal with PIF, where they bought 49 % of the company. So PIF, what's PIF? PIF is the Saudi Arabian Sovereign Wealth Fund. Sovereign Wealth Fund. And injected some money into the company at the same time. So they're shareholders now. They're shareholders. And I have five sisters, and the only one that worked in the business was Olga from the beginning. The others were sort of rather reluctant shareholders because he inherited shares from my father when he died. He left shares in this company to them.

37:07No, no. He left because I said at the beginning of our discussion that my father had invested money at the beginning. So we all inherited, six of us inherited a share of the shares he'd bought. And so they were rather sort of reluctant shareholders. And I saw an opportunity of getting them the liquidity that they would have preferred to have had. That's good. So that was one of the main reasons I did that deal. And it's also, of course, given us a very strong financial partner. The development world is more interested in us as a result. A lot of publicity as a result of that deal. And so I got a solid partner with a long-term view.

38:07not an in-and-out sort of job. And your family's preparing. The next generation is sort of involved in the business as well. Well, my children are, yes. And they, you know. Are you happy to tell me a bit about them and what they're doing? What are their jobs? Yeah, my son is doing the development side now. Right. And since he's been in charge of that, things have really got moving. So when you say development, do you mean new hotels? Finding new hotels, yes. Certainly has. You've got quite a few in the pipeline. And the eldest daughter, Lydia, does restaurants and bars, so she looks after those.

38:47We have a great chef here in Italy called Fulio Pianjolini, who's a sort of executive chef over the whole of all the Italian restaurants we do. he has a philosophy on food where simplicity is the point of arrival not the point of departure he was a two star Michelin chef he would have been three star but he always told the inspectors to have off they didn't like that and I took him to this little restaurant they get a bit pompous don't they some of those Michelin star places and you know it's completely opposite sort of cuisine I like. So he is about, you know, we source locally as much as we do a lot of research on sourcing food locally, wherever we open a hotel.

39:39And his approach to cuisine is sort of, the food is much more natural, not messed about. I don't, you know, Mishnestai, I call it messed about food, inventing things for the sake of inventing them. And he brings out the natural flavors of the food and are very well. He's very inventive, but in a sort of... What's his name again? Fulvio Pier Angelini. Fulvio Pier Angelini. And so he works closely with my... Name to remember, yeah. With my daughter. And then my second daughter, Irene, was responsible for the spas, the spa philosophy, the treatments that we put into our spas. And she started developing some organic skin creams as a result of this and found a scientist in the north of Italy, started working with and developed her own skin cream business called Irani 40.

40:39L. Catterton, which is the investment bomber of B &H, invested$5 million when it was still losing money for 25%. So she's got another business. So she's got another business and she consults on the spouse. And she supplies the hotel. She supplies the hotel as well as being generally available in the market. So this is another entrepreneur emerging from the Forte family. I think that's very interesting. I think it's interesting. I was talking to my wife, Nicola, about this, that you sort of, they have their own areas of focus. But they chose that, you said earlier. They were interested in what was happening in the company and said, I want to get involved.

41:26And, I mean, Lydia, for example, worked with Hicks, the chef in one of his restaurants, and then as a waitress and then sort of promoted to a supervisor. Then she was given a job as deputy manager of a new hotel in Chelsea, a new restaurant in Chelsea Green. the manager had resigned after three weeks and so she became the manager. She ran it for two years and was doing well and she got fed up with closing the till at one o 'clock in the morning every night and so I said, well, why don't you come and work for me? And she then took the... I chose the right moment. Yeah, the timing's important in business.

42:08But there's this impression about family businesses that they're not professional and that there's no reason why family business shouldn't employ the best people and be current in what it does. There is a certain tradition, which I think tradition is important, which gradually is trying to be a politician. some of the politicians are trying to dissipate the idea of tradition today. But it is important that there's a sort of fiber and background which is important, but it doesn't mean you don't innovate, you don't keep in touch with what's going on in the world around you. And I have a great executive team, and my children interface with them as part of the executive team.

43:06It's not as if it's a family and no one else. No. Well, you have to innovate to survive and progress in this environment, I think. You mentioned to me when we were talking earlier that you were headhunted once in your career, which is unusual in a family business. I've never been headhunted, but you said when you were young, you were working in the basement at the Café Royal. Tell us that story. I was in the cellars of the Café Royal, working their holiday job. I think I was 15 at the time. And I was busying myself, you know, moving crates and doing, and one of the suppliers came in and saw me, like the cut of my gym.

43:53Saw you were working hard. And offered me a job. And I think I was being paid six pounds a week then, and I think he offered me ten pounds a week. So good offer. And so I went to my father. I said, look, you know, I've just been offered 10 pounds a week and you're only paying me six. I said, well, if you want to go and work for the other guy, go and work. Good negotiator. So you stayed put. I stayed put. But that's good to be asked. But I think it's interesting. I think family businesses do bring a lot of entrepreneurial families. You learn a lot just being sort of part of the family about business.

44:33You're sitting at the table, hearing the conversations. than listening to the problems, the challenges. It's a journey, isn't it? Yeah, and with my father, you know, any meetings he had at home, you know, I'd sort of sit in and listen. You know, he used to visit, regularly visit parts of the group, and I used to go with him, around with him, you know, tagging along. And then, you know, I saw him in action a lot, And so I absorbed, you know, I think I absorbed much more than I realized. Yes. When listening to you, I'm thinking the same, following my father around when he was sort of starting the business up.

45:19I think I absorbed a lot. and you know I think the the you know as I said earlier my father trusted people you know believed in someone he gave him a lot of string to get on and you know express himself and of course if you're going to grow a business you have to delegate and you have to understand you've got to delegate if you want to control every detail yourself, the business can't grow unless you're a complete genius. And so that's very important. And I think I have a very good relationship with all the top people in the group, not necessarily the executive, all the hotel general managers I know, even people down the line in hotels I'm familiar with and know who they are and their capabilities.

46:23So I think having a team around you at the end of the day is everything, and then you've got to motivate them to drive the business forward in the way you want. You've got to be able to take the key decisions and actually see the wood through the trees, because very often businesses, there are problems, Well, there are always problems in businesses, and people talk around them instead of going to the point which is really the problem and needs to be fixed. Why do you think that is? Well, I think a lot of people are afraid of taking decisions. They don't feel comfortable taking decisions because you can always make a mistake.

47:10And I've made enough mistakes, plenty of mistakes in my life. But at the end of the day, most decisions who take are the right ones, and they help to drive the business forward. I'm not someone, you know, shoot the messenger type at all. If there's a problem, I want to fix it. I don't, let's, how can we learn from it? How can we stop the mistake being made again?

47:36And obviously, if you have employees that are not competent and not capable of the job they're doing, then you can't keep them in the organization. And there's a reluctance always to fire people. And all this modern term of let go is an example of that. And particularly in countries like Italy where it's very expensive, sort of top executives to, senior executives to fire them. Then there's a tendency to move them sideways and so avoid the decision, but they do a lot of damage because they slow everything down, they stop things happening, and they're actually anti the culture of the business. So I'm quite forceful about that aspect of things.

48:36So making decisions around people is a really important thing. Yeah, as well, yeah. And our business is a business by people. Yes. You said the team is everything. I mean, I was very struck by that. What do you look for in your sort of key colleagues? Are there certain qualities or characteristics, skills that you think must have in mind? Also, you know, I'm not very good at all the administrative side, the government side of things. I sort of can't be bothered. So you need people who do that for you. So I have someone who makes up for those failings of mine and keeps the whole thing. So you're looking for people who complement you in ways where you have a…

49:17Yeah, but I mean, you know, I've got a very good marketing director now. She's a woman. Came from Six Senses. Right. Well, she actually came from a holding company after it had bought Six Senses. And that's one area where we're weak. and we're starting to change. They have a very good finance director.

49:47Well, they don't call them finance directors. Chief financial officer. Chief CFOs. I knew what you meant. Yeah, same thing. Who's grown up. That's an Americanism. She's a woman who's been with me now for, I think, 12, 13 years. she's grown up in the country she's terrific um uh you know and you you have people you know you can trust and you know you can rely on and you don't have to worry about every single detail uh and everything and you can do the things that you're good at and and and get on with what so what do you focus on yourself i mean you're obviously i focus on the operational side right and getting the right quality and standards in the business and driving that aspect of things.

50:40Because I think, you know, and how do we drive the top line? How do we get better at getting more people into the business? Because the easy thing to do is say costs. Let's cut costs. But, I mean, you cut costs, you spite your face. You cut your nose, spite your face. interesting it's it's so obviously you've got to keep costs under control but but but if you don't have a top line you don't have a bottom line and uh and if you don't have i want to say that again if you don't have a top line you don't have a bottom line i i like that very much and it's very true and it's very it's easy it's an instinct in running companies when times are tough to try and cut costs and it's important to manage them carefully isn't it yes you're saying people shouldn't just concentrate on that because now in lots of businesses it's pretty tough you're saying look at the top yes yeah but i mean um if you just focus on costs particularly in a luxury hotel business you've got to be generous you'll be generous with the customer if you count every penny you know soaps or this and that then you don't have a luxury product anymore so there and also you need people to deliver service you need people you have to employ more people than you would in a different scale of hotel.

51:55I mean, now you have hotels as an employee. You don't see any staff. I've been to some of those. Clock it on an iPad. That's a different experience coming here, I can tell you. So luxury is about service, about being generous. A customer complains about something. Don't send them a small box of chocolates. You're only a bottle of champagne. What does it cost you at the end of the day? Someone's paying, you know, three or four thousand a night for a suite. Yeah. It's that sort of approach. Keeping perspective on that. Keeping that perspective. And that's something, because I've had two operations directors in a row, and I've sort of done away with that now.

52:40You do that. I do that, and I've got three, I've pointed three, basically my best hotel GMs, and Italy is divided in two, and I have someone doing the rest of the hotels based in the UK and they're terrific they understand the philosophy they understand what I want they know the nitty gritty they don't fool around being political and so on, they just get on with doing the jobs that need to be done and you know, this is this sort of happened a year and a half ago already I can sort of He's off again because I see that. That's good. Well, I have to say the attention to detail is noteworthy, Rocco.

53:29I mean, in our bathroom, there were face towels with my wife's initials on one side and mine on the other. I've never seen that before. And, yeah, we were both impressed. I thought it was very special. And it makes you feel special when you see that. Someone cares that you're there. And I think that's really interesting. I don't know who thought of that, but it's genius. and and i think that the sort of attention that we've had from the people in the business your focus on the people is also evident because they have been very welcoming and but that takes that's a real skill to teach people to be well maybe they're more naturally welcoming in italy you say than some places but i don't know you'll find that you know you have to train in russia in russia what happened there you've got a hotel there what happens there inst petersburg It was a Soviet hotel.

54:17How did you change that then? I started by smiling at people. That's taken by surprise. You smile at people, they smile back at you. And gradually you put in our systems and standards and so on. And they achieve a very good product. Obviously, current period is a difficult one. And, you know, some people say, why didn't you get rid of the hotel? Well, I mean, how do I get rid of it? It's very difficult. You can't sell anything in Russia. If I sold it, I wouldn't get any money back because of the way the sanctions being applied by the Russians. But those people in those hotels are my people. They're just like any other staff I have.

55:08I know a lot of them personally. Why should I abandon them? Yeah. It's not their fault, is it? No. And funny enough, actually, it's had three record years, the hotel, all with Russian business. It used to be 50-50. Right, interesting. A lot of Russians don't go overseas. Because they don't come to Italy so much, maybe, I don't know. And, well, many of the Russians aren't in a position. Some are. Some have moved overseas, and they continue to use our hotels. Some of them have non-Russian passports as well as Russian passports. So I've been back there three times since the war. It's always quite uncomfortable at the airport because they take you aside and, you know, they make you wait about an hour before letting you through.

55:54But to be there, to be there, to give them support, show that they are supported in the hotel. And the sanctions rules have changed lately, which means that we can't give direct services to the hotel. So people in the hotel in Sebizma can't talk to people in our head office. So I'm the only point of contact. Oh, really? And so… So this really is leadership from the front. I mean, I was going to ask you about leadership styles. I mean, you're really sort of the face and persona of your business. there especially but yes you don't talk about smiling and people picking that up that came from you as well i suppose um um there was my father wrote an autobiography you know and um and one of the reviews um there uh of the book said there's a pervading sense of decency comes out of this book.

57:01And I think that's something my father taught me, actually. I think that exists in my company. And people feel it, and they understand it. And when I have a sales, senior vice president sales, as they call themselves nowadays, sales who came from Four Seasons, He's never worked for a company like this before. Best company he's ever worked. So, you know, it's that. It's that aspect. And also that people see me, hear from me directly, are in touch with me. They can ring me up. They can discuss things with me and so on. I think that's a very important fact. I'm not saying frigga the distant white tower.

57:51I'm there. I'm there, present. People see me. And I think in this sort of business, that's very important. And you're on the road, I mean, going to America and Brazil and Russia. You travel a lot, obviously.

58:05So, you know, and I think the other aspect is I'm in this for the long run. I don't have an exit plan. I don't have – I'm not in the business just to make money. I'm in the business to actually create something special, do it well. And out of that, I make money. I've created value in that way. I haven't done a deal, which is suddenly, you know, you're in and out, and it's all about the money. It isn't about the money. It's about actually delivering something that's very special and that can last. And so that's my sort of, you know, someone, I'm not a young man anymore, but I still have that same energy and desire.

58:52I was going to say, forgive me, but you might not be a young man. you've definitely got young man's energy you seem to cover a lot of ground a lot of miles so luckily i've kept fit all my life well you put it you've made an effort to do that though you used to run marathons yeah i remember i didn't i did for 11 years i did triathlon seriously from the age of 54 till i was 65 i did world championship age group stuff you know and i I did Iron Man when I was 60. I came second in my category. I won the over 50s chief executive race. So you're an elite athlete, basically. As well as a hotel owner. When most men have the sales go, I actually got myself super fit.

59:32Yeah. And that stayed with me. So that's important, isn't it, if you're in a leadership role, to have lots of energy, clearly, especially in this business. So, Sirocco, we've got a budget coming up in the UK at the end of November. but there's been a lot of ideas mooted around taxation and taxes rising. Is there anything in particular you'd like to see in the budget that you think would be helpful or desirable for business or for the economy? Yes, they reverse everything they've done so far and go back to seeing what can create growth in the economy. They talk about growth. If we look back at the 70s, because I think we're in a very similar period now, where everybody thinks the UK is finished, there's no future, managing decline, and so on.

1:00:28And this was the case in the 70s. Mrs. Thatcher came along, and what did she do? She created an entrepreneurial spirit in the country. She reduced taxation significantly. You know, we were at 98 % on so-called unearned income and 83 % on earned income as the top rate of tax. This was reduced to 40%. And she did away with all the labor legislation, the power of the unions and so on, and sort of enabled an entrepreneurial culture to develop in the country. This is slowly being ruined over since the first three years of the Blair government. They didn't change anything on the economic front before Brown got going, the socialist approach.

1:01:29At that time, in 2000, the private sector was 66 % of the economy. Today, it's around 50%. So the state has taken over, and this is a problem in continental Europe as well. Labour legislation has got more anti-employer, and now it's going to get even worse with this new workers' rights bill or labour bill, whatever they call it. It's going to put more bureaucracy into businesses, more time wasted on things that are not important for the business. and it's going to help the skivers. It's not going to help good staff. You know, you value good staff. It's the bad staff who take advantage of the law as it is at the moment.

1:02:23It's not as if we're in a market where there's only one type of job available. There are plenty of jobs around. Someone leaves, doesn't like one company, doesn't work for another. So it's completely unnecessary and will be very counterproductive. There's no, you know, we've got 500 ,000 civil servants more than before COVID.

1:02:49The economy has been stagnating basically for a long time. They pin their hope on infrastructure investment by government and housing. There's no evidence that it actually will get the economy moving. They've snuffed out the entrepreneurial spirit because before the first budget, they started talking the economy down, all the things and the speculation about the taxes they would bring in and so on. So no one did anything. until the budget made things worse. The increase in national insurance contributions has affected the job market significantly. And now they've done the same thing again. They've been floating tax ideas and so on.

1:03:39Again, no one does anything until they see what has happened. So they've effectively created a destructive approach to the economy, which won't recover until you have different policies brought into being. So undo everything you've done is the message and start again. Yes, and start looking at cutting your car. They can cut government expenditure. And, you know, every attempt they've made on welfare, for example, you know, we've got 7 million people of working age who are not working. You know, this disability, the whole disability, mental health, So it has doubled since before COVID. COVID was a disaster, actually, from that point of view, because people got used to doing nothing and being paid for it.

1:04:33And that will gradually change, but it won't change with the approach that this government is taking. So it needs a big change of direction, you're saying? Yes, and they're going to make things a lot worse at the end of their term because they have a huge majority in Parliament. They didn't have a huge majority in the county and it said he was 3 % of the vote. One third of the vote and two thirds of the MPs, I think is the statistic. It will change. I think things will be worse then and maybe there's a chance of a revolution. I don't mean in a bloody sense. I mean, a revolution. I feel big changes coming, big disruptions it feels are coming for all sorts of reasons, one of them potentially political.

1:05:26So one other thing I'd like to ask you, you studied at Oxford University languages, I believe. But then after that, you went to learn accounting. You qualified as a chartered accountant. So why did you do that? And has that helped you in your business journey? A lot of business training, in a way, rather than going to business school. It was the most boring three years I've ever spent in my life, I think. You're not encouraging other young people at this point, but it was useful, was it? In fact, I used to go to parties. I had myself some velvet suits made, and I used to go to parties and say, guess what I'd do for a living, you see.

1:06:07No one would ever guess, of course. But no, it's been extremely useful because I become quite numerate, understand balance sheets, and accountants can't tell me what to do. What advice would you give? I feel we're coming to the conclusion of our conversation. I like your last remark. But what advice would you give to someone, a young entrepreneur now, maybe thinking of getting into this business or starting a business from your experience and your family's experience? I mean, I used to know the business. I mean, I think that, you know, many people certainly in my industry think that running because they've stayed in hotels is easy to run a hotel.

1:06:51It's not. I mean, there's a sort of professionalism to it. So if you're going to, you know, you've got to come into it, work in it, and see that you like it, and then you learn about it and understand it before sort of leaping off into the unknown. So I think knowing your business is very important. The other thing I think is, you know, accepting that, you know, do you have one unit or do you expand and create more units? If you expand and create more units, then you've got to understand delegation. You've got to develop a team. My father always tells a story that he had this first milk bar in Regent Street and decided to open another one in Chalice Cross.

1:07:39And he suddenly said, well, how am I going to be in both places at the same time? And so he decided he had one of his best waitresses in Regent Street. it was called Rose Ciccone, decided to appoint her as manager so he could then spend his time at Charing Cross and the opening of that. And he found that she ran it better than he did. So that was the beginning of it. That was a learning of delegation. Finding people who run things better than one does is a good idea. That's fantastic. And I wish you continued success with what feels to me like a multi-generational endeavor in building these businesses and serving customers over many, many years with your family.

1:08:22Yes, well, I think it is. And I think it's somehow in the blood. Seems to be. Yeah. And you're lucky if what you do is something you enjoy and something that absorbs you. And of course, as you get older, you've done most things in life. I've been lucky enough to do most things. The thing that's most exciting and most enjoyable for me is the business. That's my main focus, which annoys my wife sometimes. You're still married? So that's good. Nearly getting up to 40 years. Well, congratulations on that too. That's good.

1:09:05So, Sir Rocco, I ask two questions at the end of every conversation I have with my guests, which I'm going to ask you. The first question is, what gets you up on a Monday morning? Well, I mean, I don't think it's particularly a Monday morning. I don't think about Monday as the first day of the week. I mean, I live with my business all the time. I'm thinking about it all the time. And so I'm anxious to do things. I've thought about things. I want to put them into practice. So it's a sort of continuous process. I don't say it's Monday to Friday. You know, thank God it's Friday. I'm going home. Well, hotels are open 24-7, aren't they?

1:09:46You're always open. I can see that. The irrelevance of Monday mornings might be particular to you. I suppose it's anxious to get going. And then the second question I ask, which is in my interview book, Why You? 101 Questions You'll Never Fear Again, is where do you see yourself in five years' time? I have plans and ideas for business. and I'd like to see us in a position where we're twice the size that we are now. Twice the size. In terms of the number of hotels that we have, either open or due to open. So just to stress, you're not slowing down, you're accelerating into your 80s with this ambition, which is so exciting.

1:10:30To really compete, we need to have a slightly bigger scale than we have now. I don't want to get so big that you lose the ability to touch all the properties. And then, obviously, I have to think about succession, how that will happen, the people who make it happen. I don't think I'll ever, please God, if I keep fit, leave a thing altogether. But, you know, you can't carry on keeping the same pace forever, unfortunately. uh so even you still admit that so i'd have to i'd have to deal with that and i have my ideas and so on and i think there's obviously going to be a transitional period between myself and my children um uh and they're still all developing and um you know and growing as as business people so so so that really is sort of where I'm looking at the moment the

1:11:42you know my wife said to me the other day said well watch how are you going to be when you're 90 I said I'm not going to be any different to what I am now I very much hope that's the case thank you very much for talking to me today and not least for inviting us your wonderful hotel, Roussy. It's been fabulous talking to you and also staying here. Thank you very much, Sir Rocco. Thank you, Sir Rocco, for joining me on All About Business. I'm your host, James Reid, chairman and CEO of Reid, a family-run recruitment and philanthropy company. If you'd like to find out more about Reid or Rocco Forte Hotels or Sir Rocco Forte, all links are in the show notes.

1:12:24See you next time.

1:12:29Hey.