Solberri

Solberri is a group of mainly resort hotels, all in Europe. It was established in the mid-1980s by its founder, Richard Berriman. The first two Solberri hotels were located in two different countries around the coast of the Mediterranean Sea. These two Solberri hotels established a high reputation for quality. By the late 1980s, the two Solberri hotels were regarded by many other international hotel chains as the benchmark for the standard to aspire to.

The success of these first two hotels helped to finance the expansion of the Solberri hotel group. This success financed the expansion of new purpose built resort hotels, which included a wider range of facilities on site, including golf facilities, water sports, spas and beauty treatments. To enable the group to expand further, it needed additional finance, rather than relying solely on loan finance. In 1998 the company became listed on a European stock exchange. By the end of 2000, the Solberri group had 10 resort hotels and the original hotels, which have a smaller range of facilities. These 12 hotels are situated in several European countries, along the Mediterranean coast. The 10 Solberri resort hotels were among some of the most prestigious in Europe at that time. The company continues to invest in new facilities and has a rolling refurbishment programme, which ensures that the high standards which customers expect, are met.

Market overview

The holiday industry is a large, varied industry which is very competitive and tourism generates enormous revenues. Branded chains of hotels differentiate from each other according to the level of quality and facilities they offer. The “package holiday” trend started in the 1960’s and concentrated on specific tourist destinations. Since then the holiday industry has changed and matured enormously. Since the early 2000’s, Internet bookings have made a significant impact on the way customers choose to book their holidays. Increasingly, holiday makers have become much more selective and, through the use of a variety of media, they are able to identify facilities available at their chosen hotel. European holiday makers choose particular destinations depending on weather, facilities, value for money and levels of comfort at the chosen hotel. Significant numbers of holiday makers choose to take their holiday in the Peak season. The Peak season in Europe is defined as the months of May to September inclusive.

There are a large number of international hotel chains that offer levels of comfort based on the internationally recognised “star” rating system. There are also many holiday resort hotels which offer a wide range of sports and other facilities to customers within the hotels’ grounds. These often include golf courses and a wide range of sports and water sports. A resort hotel is defined as a hotel that includes a far wider range of facilities on site than a typical hotel. There are increasing numbers of resort hotels around the world. These resort hotels, which are designed specifically for holiday makers, are situated in prime tourist areas at popular destinations.

The hotel industry relies heavily on its employees and its IT systems to deliver the quality of service expected by its customers. Following a downturn in air travel in 2001, many hotels suffered a decline in bookings and were forced to look hard at ways to differentiate themselves in order to attract customers.The majority of European holiday bookings are still made through established travel companies (whether through travel agent shops or using the travel agents’ websites) although a growing number of bookings are made by the customer with hotels directly.

Routes to the market

Solberri hotels have 3 main routes to the market.

• The main route is that bookings are secured as part of a “holiday package” offered by travel agents, where the customer pays a fixed price, inclusive of flights and accommodation, to the travel agent. The revenue generated from bookings made by travel agents is lower than the revenue generated from bookings made by customers who book directly with Solberri, as the travel agents deduct their agreed discount.

• Bookings are made by new customers directly with Solberri using Solberri’s website. These customers usually book as a result of Solberri’s marketing campaigns and make their own flight arrangements.

• Repeat business. Customers return to Solberri and they book directly with the hotel or by using Solberri’s website to secure a repeat business discount.

In the financial year ended September 2007, around 60% of bookings were made through travel agents. Around 30% were made by new customers directly with Solberri. Around 9% were repeat business. There were a small number of bookings from other sources.

Difficult market conditions for the Solberri group

During 2003 to 2005 it became clear, through falling customer numbers and disappointing customer feedback, that the Solberri hotel group had become complacent. The management team had considered that its successful growth and level of profitability would continue.In 2005, the group made its first ever operating loss and the then Chief Executive resigned in early 2006. The financial year ended September 2006 also resulted in an operating loss. The Solberri Board recruited a new Chief Executive, Johan Alnetti, in September 2006.

Pricing changes effective from May 2007

Solberri’s management had previously resisted any change to the pricing structure, although the Board recognised the need to increase its occupancy level. When Johan Alnetti joined Solberri he worked closely with Richard Berriman to review the pricing structures at Solberri hotels in order to boost occupancy levels.

Over the last decade, many competitors in the Mediterranean region have offered “all inclusive” accommodation arrangements. An “all inclusive” room rate is defined as a fixed price for the room inclusive of all meals, most drinks and use of many of the available leisure facilities. The room rate varies depending on features, the location of the room and assumes 2 people sharing. Therefore, there are no additional charges, unless spa treatments or particular sports activities are booked by customers.

Following extensive market research the Solberri Board decided to change the pricing structure effective from the Peak season which commenced in May 2007. This new “all inclusive” price structure is competitive with other “all inclusive” resort hotels. It has also enabled Solberri to market itself as one of the leading “all inclusive” resort hotel groups in Europe.

Prior to the launch of the “all inclusive” room rate for Solberri in May 2007, Johan Alnetti and Piers Lui agreed on which facilities would be included in the “all inclusive” room rate, and which facilities would be charged as extra charges to customers. For example, all of the Solberri hotels have spa facilities including swimming pools, hot tubs, steam rooms and saunas, as well as a range of spa treatments. The use of these spa facilities are not charged as an additional charge. However, all spa treatments which involve the use of highly trained, skilled employees are charged to customers and generate additional revenues. These spa treatments have proved to be very popular with customers and are in high demand. Solberri also has a number of sports activities which generate extra revenues. These extra revenues generated €21 million in the financial year ended September 2007, which represents an additional 15% of revenue, over and above that which is generated from the “all inclusive” room rate.

Giorgi Kahle launched a major marketing campaign to promote the Solberri brand in early 2007 using a variety of media, including direct marketing, radio and TV advertising and the use of other media. This has proved to be effective as the average occupancy level has shown an increase on the level achieved during the 2006 Peak season, to 74% in the 2007 Peak season (see page 6 in Occupancy levels).