Monthly Archives: January 2021

SMEs in trouble – what can be done?

Clouds over Marbella

Some years ago I was on the board of a company called ‘Superbrands’ which, in short, produces a book of brands that are regarded as ‘truly super’ in their own specific countries. In the Czech Republic, some were the huge multinational brands (Coke, Microsoft and so on) but there were others that were truly ‘Czech’ – the obvious one being Skoda, but others too – Mosers, Pilsner Urquell, Mattoni, etc. It was a fun project, and it would be nice to think that the brands that were chosen then will continue to remain as Superbrands, irrespective of what happens in the world.

A couple of mornings ago, though, I read about one of my suggested ‘Superbrands in the Czech Republic’ from those days, the fashion house Pietro Filippi, which has had to terminate all of its staff with immediate effect by agreement, with no redundancy and no notice period, as it is on its last legs due to the Covid pandemic. Such sad news, but in a country that is giving so little support to employers, particularly owner-run SMEs, not very surprising – I imagine that it is only a matter of time before we hear of many, many others doing the same, whether ‘super” or otherwise.

What is also sad about this particular article is that the majority of the comments at the end of the article were on the ‘side’ of the employees (who, it seems, will get nothing unless they take the company to court – and then, presumably, will still get nothing) and very few on the side of the owners, who have built a really nice company from scratch and are now having to live through the heartbreak of seeing it collapse. The fact is that the Covid pandemic, like most crises, is hurting SMEs in the Czech Republic a huge amount more than the big international companies, many of whom have nearly unlimited reserves, think nothing of terminating people without any compensation (what individual employee is going to take on one of the big guys in court?), and who have the power to push landlords, creditors and others to hold-off or reduce their debt with the promise of future benefits, whilst the smaller guys can do nothing (in fact, in some countries, these big companies are having a huge proportion of their salaries paid by the State, although sadly (for them) not in the Czech Republic).

Right now, I, myself, am going through my own small nightmare of a former employee who left to go on maternity leave, and with whom I have had absolutely no contact for the past seven years (other than a lawyer’s letter on one issue halfway through), who is, according to the Czech Republic’s strict labour laws, entitled to ask me to give her back her job at the beginning of this year, or, if not, pay her a small fortune. Obviously I can’t go into too much detail as to how this is or isn’t being resolved at the moment, but having watched my own former ‘Superbrand’ agency collapse and burn over the last ten months (funnily enough there are not many sport or hospitality companies needing marketing just now!) and having had no income at all myself since the start of the Pandemic (and with no sight of anything changing any time soon), I think you would agree that I could be forgiven for saying that she is being ‘heartless’ in her negotiations (particularly as she and her family are not exactly on the breadline), at the very least!

I am often being asked, and it’s a question that is always out there on ‘start-up sites’ and similar, what it takes to set up and run your own business. And I have always said that it is a lot tougher than anyone gives us ‘entrepreneurs’ credit for – my favourite saying, over the years (and, particularly, to Jan!) is that no-one can know what it is like to sit in my chair unless they do something similar themselves; the endless stress of managing clients and employees, the knowing that if one or other customer doesn’t pay you on time you may not pay your staff/rent/yourself, the fact that you might be very good at whatever it is you are actually selling, but you will spend most of your time being the HR, finance, marketing and every other director rather than doing the actual work. It is never easy, and success never happens without a huge amount of hard work and doing without. And now, well, I am sure that there are very few people that would want to be running their own company in this new and difficult world – and maybe no-one will ever want to again. But the thing is, most country’s economies really do depend on SMEs rather than the big multinationals – those guys will pack up and move on at the slightest sign of trouble. SMEs, well, they are unlikely to go anywhere, and the hope is always that some of them, in time, will turn into the Superbrands of the future.

With most of Europe in some form of lockdown now, and the virus still doing its worst, we have to wonder how many SMEs are going to get through this. I already know mine won’t, but I am in the ‘fortunate’ position of slowing down rather than building up. But I heard today that in the Czech Republic last year, 200,000 small companies/individual entrepreneurs filed for bankruptcy and thought that that can’t possibly be true. But, you know, maybe it is….

So what can we do? First I would suggest that those people that wrote rude comments on the article mentioned above (plus any other ladies out there that are preparing to virtually blackmail their former employers into paying them large chunks of money rather than giving them back a job that doesn’t exist anymore), give themselves a dose of reality – small companies rarely have great big buckets of money that their owners can keep digging into in times of crisis. And unless we all want to live in communist countries, where everyone has a job, no-one cares about what they do, salaries are paid by the state, on time and in the same amount each month, employees need to find a way, if they possibly can, to support employers rather than kill them all off. If they don’t, then most countries are going to be looking at the highest unemployment rates imaginable, with all the other problems that that will bring.

Personally, right now, along with trying to support other SMEs that I have worked with or am friends with (through time, money, just being a friend), I am looking at ways in which I/we can try to persuade the Czech government to make some changes to these antiquated and restrictive labour laws – I have time on my hands and ‘know people’ in the right places. So if you have your own story, then please let me know… something needs to be done, and fast.

PS: I know this is a bit different to my usual ‘lockdown in Spain’ rant, but as we in Marbella head into a new lockdown, I suspect that will soon be back!!!

Hospitality in Crisis (IV) – Jan Adamek, JAN Hospitality

Small Boutique hotels in Prague

Ever since its Velvet Revolution in 1989, the Czech Republic (or Czechoslovakia as it was then), and particularly Prague, has been a ‘must be’ place for most of the biggest hotel brands, and the number of major players has been increasing consistently for the last thirty years.  At the last count, there were nearly 50 ‘five star/five star luxury’ hotels in Prague alone, with more planned to open soon, whilst small hotels can be found on nearly every street of the upmarket residential areas of Prague 2, 3, 5 and 6 (after the Revolution, huge numbers of residential buildings were converted into hotels, partly to fulfil the demand, partly as that was where the money was (and the question now, is, of course, how many of those will soon be converted back!)).

Formerly Kempinski Hotel Hybernska Prague

Even during the years of the financial crisis (2008-2009) luxury hotel brands have continued to enter the Czech market – the Kempinski and Rocco Forte hotels being two that suffered the difficulties of opening around that time and, coincidentally, both of those have since left due to the buildings where they were housed being sold.  What was once the Kempinski is now a stand-alone boutique brand, whilst the Augustine, once Rocco Forte, is now a Sheraton (and Sheraton belongs to the Marriott).

With the hotel industry thriving over the past thirty years, many other companies related to the business have also succeeded; PR agencies specialising in hospitality (such as mine), event and wedding organisers, restaurants and others have all benefited from the continual rush of new hotel openings and expansions, so it is no surprise that the many people involved in the hospitality business are those that are suffering some of the most during the ongoing Covid pandemic in the Czech Republic.

In this, my fourth blog in the ‘hospitality in crisis’ series, I decided to talk to one of my partners in Synergy Hotel Consultants, Jan Adamek, and find out what he thinks the future holds for the hospitality industry in the Czech Republic (and elsewhere) after the last ten months of closing, opening, and closing again.  Jan has been working in the hospitality industry for more than 20 years, having trained and then worked as a General Manager (at the five star Hotel Jalta in central Prague) and then, more recently, starting his own agency, JAN Hospitality, which focuses on a whole range of consultancy services relating to the buying and selling of hotels.   He is, therefore, the ideal person to give an overview of what we can expect.

Hotel Jalta Prague

As a bit of background, I wondered how it was that Jan had given up his very good job as a hotel GM to go into the real estate side of the business and his answer was that he had always wanted to have his own company; somewhere where he can be creative and use the many ideas and experiences that he had garnered during his years as a GM and share them with other hoteliers and restaurant owners.  Since the Jalta itself is owned by an entrepreneur who has always had his eyes on expanding his own hotel business, it is no surprise that even during Jan’s work at the hotel, he was involved in hundreds of feasibility studies of existing hotels, either for potential buyers or for the banks and/or sellers too.  And today, as he says, there are not so many experts on the Czech market that have worked inside the business and are also able to work with projections, banks, and large-scale investors.  So began the idea of JAN Hospitality.

JAN Hospitality was established in 2010 and since then the agency has worked on many large-scale deals, whether for the buyer, seller or, in some cases, both.  What a lot of ‚non-hospitality people‘ don’t realise is that the buildings that house the major brand hotels (95% or so in the Czech Republic) are usually owned by someone other than the actual hotel operator, which makes the buying and selling of them a lot more complicated than when buying or selling regular buildings.  What often happens, therefore, is that JAN Hospitality will end up working for both sides of a deal – initially preparing the valuation for the building owners and then helping them to select the most suitable brand to operate the hotel itself, and then working together with everyone involved to ensure that the final deal works for all parties (whether that is a lease contract, management contract or something in between).   This is, of course, different when it comes to the smaller hotels, where the owner of the building may well be the operator of the hotel, although they, too, have their own issues.  

According to Jan Adamek, at the start of 2020 (ie pre-Covid), there were cca 22 4 or 5 star hotels being built/near to completion in the Czech Republic and 57 existing hotels under refurbishment/reconstruction.   I wondered whether those that were in the process of being built had continued (or will continue) to completion, or whether they may be sold as is, and Jan’s view is that they will probably be completed, but, of course, there may be some delay.  And as far as reconstruction works are concerned, whilst it looks as if some hotels have put the works on hold, others actually started their reconstruction works during the first lock down – in some ways, one could say that lockdown was a ‘good’ time’ to carry out such works, since usually the bigger hotels try to keep open (in order to satisfy their regular clients and keep their market share) during any reconstruction, and try to do it one floor at a time or similar.   The Intercontinental Hotel Prague (which is due to be operated as the Fairmont Golden Prague Hotel by Accor) started its complete reconstruction right at the start of the first lockdown, and so it continues, as did the Marriott, who had started before the pandemic, but continued throughout lockdown and up until completion (see my previous blog).

For smaller, owner-run hotels, the whole situation regarding reconstruction is always complicated, as it is much more difficult to close part of a relatively small building without inconveniencing the guests staying there, and to close-down completely is difficult – especially in a city like Prague, which is a tourist destination pretty much the whole year round (or was!).   However, whilst carrying out reconstruction work makes sense right now, smaller hotels may not have the financial means to do it and/or any bank may not be willing to offer a bank loan.   Plus, of course, the lack of construction workers in the Czech Republic generally, makes it even more complicated when there is a bigger demand for them but a much smaller workforce.  For that reason, just now there are a lot of small, boutique hotels looking very sad and unlikely to survive the next few months.

Cesky Krumlov

Despite a good summer, when the Czech Republic was operating pretty much as normal (except Prague, Český Krumlov and other destinations that rely on international tourists who did not appear), just now the Czech Republic is back in lockdown, so one has to wonder how much longer any of the hotels are going to be able to survive.  Presumably the big brands will eventually bounce back (Prague is always going to be a hugely popular tourist destination), but there are hundreds of small boutique hotels around Prague and outside in the country and I wondered what Jan thinks the future holds for them, and whether they are likely to survive or sell up? 

As far as the big brand operators are concerned, Jan agrees with me that they will definitely survive although some operators may change or move around.  But the owners of the buildings may well be in trouble, with reduced rents necessary and very little government support (plus hotel leases often include special clauses that require them to pay a percentage of their income to the owner – so no income, no percentage).   Jan expects that we will see many hotel buildings changing hands over the next 2-3 years.

So far as the outlook for the smaller hotels are concerned, especially outside Prague, Jan’s answer was quite surprising to me, since he expects that at least two third of them will be OK.  His feeling is that whilst hotels in Prague, Český Krumlov, Brno, Ostrava  may be suffering, there are other areas of the Czech Republic that have had bumper years – mountains and water destinations (e.g. Lipno lake) – since many Czechs have travelled around the Czech Republic a huge amount more than they would normally, taking breaks from the city in the countryside and their holiday this last summer and Christmas in the mountains.

Having said all of that, Jan’s general feeling is that once the Covid situation is under control and we move into the ‘new normal’, the whole hotel market in the Czech Republic will go through huge changes.   Far, though, from crashing and burning, it sounds as if it is going to get very interesting; I told Jan that I had read that one of the big Czech billionaires had put a huge amount of money to one side in readiness for buying hotels once things go back to normal and I asked him what he thought about that and whether it was a positive sign that those ‘in the know’ feel sure that the hotel business will bounce back.  Jan agreed that we should assume that soon there will be a lot of opportunities for those with money to buy a good hotel property in a great location.

I also asked him whether he was ready to take on anything, or whether he will be selective?  He responded that it is always important to understand why an owner wants to sell and then to prepare a market value report and be able to discuss with the owner the market selling price – especially now, when a lot of nice hotels are not having results good enough to be sold for their  best price – for those, he would recommend that they take 12-18 months with good management in place (and his team is able to propose the right managers), and then start the selling process once they are back on their feet, with better financial results.

Key in all of this is, of course, the future potential occupancy of an hotel, its average daily rate, and any other income and profit, as well as its location and the condition of the building.   Plus, in the present situation, it will be key to know which employees are still involved and working as they are a big part of what makes any hotel successful.

Finally, and with my marketing hat on, I asked Jan what he would be doing to survive right now, if he was a hotel manager, and how he would plan his strategy for the future.   Many of his answers, dare I say it, apply to all businesses, not just hotels.  His suggestions:

  • Digitalisation of everything possible
    • Putting a lot of effort into marketing, especially social networks – Facebook, Twitter, Instagram etc.
    • Improving customer service and CRM (customer relationship management)
    • Re-thinking their target audience – for example, in the past, many of the hotels have focused on the US and Asian markets – and for the immediate future, more focus is going to have to be put on Europe
Formerly Rocco Forte Hotels the Augustine

What Jan also mentioned is the importance of hotels making make sure that their offering and target audience match – i.e. how the hotel itself looks (the product), who the hotel is marketing its offer to (does the target audience match with the look of the hotel) and is that target audience actually the clientele that the hotel actually ‘wants’ to attract (there is no point in marketing to, say, the high-end luxury market, if the hotel doesn’t look very nice, or is super-modern and more likely to attract the younger and, in some cases, less affluent groups).    It all sounds obvious, but, as with so many things marketing, many campaigns go astray due to forgetting these three key points.

So that’s it; the coming months are going to be very interesting for the Czech hotel industry, and whilst we can expect that a lot of the smaller operators may sell up, there is obviously a lot of money out there waiting to grab any deals.   And the big guys; well, as I have said, we can expect them to bounce back pretty quickly – all may not be doom and gloom in the hospitality industry.

Happy New Year?

I keep starting to write another blog and then I realise that each time I do, it turns into more of a ‘mad rant’ than anything else. But today I decided that the only way to get over it is to get everything off my chest (for any non-native English speakers reading this, that is not what it sounds like) and then move on – apologies in advance if it is all a bit much!

So, first, Brexit is done and all of us Brits, wherever we are, can revel in our new-found ‘sovereignty’ – something that, it seemed, was the only thing that really mattered to those that still supported it (clearly nothing else did, since no-one that I have read, spoken to or heard from has been able to name one other ‘good thing’ that has come out of Brexit). The terrible scenes of lorry drivers stuck in Dover during Christmas (God, how sad was that) are clearly going to be repeated as and when any European lorry driver can be persuaded to even attempt to drive there again, whilst each day (in between the horrific Covid news) we are hearing more and more examples of things that are not as they were in the UK (satellite UK TV failing in Spain, high levels of customs’ duty on Amazon products bought online and being exported from the UK, supermarkets running low on all products, nothing posted from the UK arriving at its destination, Tesco increasing the cost of everything in their UK stores by at least 10%, etc, etc, etc) – and it’s only January 7th!!! Unlike many on Twitter, I am not yet saying ‘Brexiteers, I hope you are happy with what you have done’ but I am finding it difficult. Sadly, and with no doubt, the next six months will be enough ‘punishment’.

Meantime, the situation in the UK with the virus (more than 50-60,000 new cases per day??? And 500-1,000+ deaths??) is terrifying and awful, and just when we think ‘it can’t get any worse’ it does. How much longer this government stays in power remains to be seen, but despite all of their chaos and corruption, it seems that there are still some people that think that BJ and ‘Hand-on-cock’ are doing ‘as good a job as is possible in the circumstances’. Can I just say here that that is complete and utter bollocks. The circumstances have been no different in other countries – here in Spain (and yes, I’m off again) which was so awful in the Spring, the situation is way different – everyone wears masks, everyone keeps their distance, the lockdowns are reasonable, and the figures, contrary to what the UK media would have us believe, are very low. We ourselves have been enjoying playing tennis and running on the beach, going to restaurants for lunch, shopping in the New Year sales, and generally living a relatively ‘normal life’, even though the virus is still out there, just as it is everywhere else. But it is all so well managed. If only the UK (and some other countries) looked around at how things were done elsewhere and followed them, perhaps things would be different…. but no, they obviously think they know best. Which leads me nicely to the Czech Republic.

Prague in winter time, view on snowy roofs with historical buildings.

It is hard to believe that in a population of just over 10 million, and that had so few cases earlier in the year, something like 8% have the virus, and the way it is going, the amount infected will probably hit a million fairly soon (and that’s just those that have been tested!). How??? Every time we call or email someone, we hear about another bad case (and, sadly, I now know five people that have died), and yet there have been several lockdowns, the one now, in particular, being pretty tough. I still wonder, a bit, about the weather (not so much whether the cold makes the virus worse, but more that here, where it has mostly been pretty warm this winter, everyone still lives a good part of their life outside, which is not so easy in the cold of the CR/UK), and also the pollution (the CR being known for its pretty bad pollution in the winter). But it sounds as if it is also the behaviour of so many people that still don’t believe that the virus is as bad as it clearly is – my old boss, C, told me about his neighbours inviting them for a Christmas drink and then asking if they will mind that the son is joining them and he is Covid positive…. my doctor told me about his son driving with a few friends to the mountains and the girl in the back seat ‘just mentioning’ that she has the virus, is that OK? – oh God… it’s enough to turn anyone to drink!

Except.. not me! Having eaten and drunk everything in sight during the lead-up to Christmas and the New Year (and I am not at all sure why, since we treated both those days pretty much the same as any other day), and managed to put on 3 kilos (no, life is not fair), I am now back to (a) a diet, (b) a full-on exercise regime and (c), most importantly, a dry January – six days done and dusted. Hah. And yes, it is extremely bloody boring and depressing, to the point that I am just accepting that every day is going to be grim, but it is not going to last forever. And generally behaving like a grumpy old bag.

I should just say, here, that I wrote all of the above last night, as I had originally planned to send it then, but just when I was thinking to wrap it up, boom… things got even more incredible with total madness kicking off in Washington.. and I am sure I don’t need to explain what that was! I don’t usually talk about the US as three countries to monitor is enough, plus I don’t know so much about the politics there… but for God’s sake… as someone wrote on FB this morning (yes, I’m still monitoring social media like a fiend), we all said on New Year’s Eve, ‘Thank God 2020 is over’, but now, having had a ‘free seven day trial’ of 2021, I think we would probably like to go back to it!

Here in our little sunny bubble, though, our Groundhog-day life continues in its own strange way. The virus remains relatively under control, although there has been a ‘big breakout’ of 17 cases of the ‘new variant’ in the town next to the border with Gibraltar (due, no doubt, to the many Brits that have been using the Gibraltar airport as a way to sneak into Spain without the relevant papers and tests. – the thing is, though, that here, where the cases are so low, a ‘big breakout’ is 17, and that causes the whole town to be locked down…. take note BJ).

We ourselves dressed up a bit on New Year’s Eve, and since then we have been doing all of our usual things (without the booze (me!), and not too much sun-bathing so far!), plus Jan has been busy with work and I have been doing quite a lot of ‘serious’ writing and looking at a few interesting projects. But, really, on the work front, it is pretty much one step forward, two steps back – but that’s how it is for most of us I guess. And, let’s face it, January is always pretty grim. Things for us now, though, might get a bit interesting, since to continue the crazy 2021 theme, we have just heard from a friend of mine that ‘severe snow storms’ are expected on the Costa del Sol. And since down here in Marbella, everything comes to a standstill if there is a bit of rain, I can’t imagine what will happen if the snow storms hit us – as if we needed any other sign that the whole world has gone completely bonkers…..

I will be back again soon… assuming we don’t get invaded by aliens, disappear under a massive snow drift, or disappear into a swimming pool full of nice red Rioja…. now there’s a thought…