Can Granada grasp Forte’s brand value?

The cornerstone of Granada’s hostile 3.3bn bid for the Forte group is a ruthless reassessment of the company’s brands.

Granada argues that the brands are under-exploited and, by implication, that it could increase their value. But while the criticism has a ring of truth, it is debatable whether Granada’s track record proves it can add that marketing dynamism.

Granada would revamp Forte’s middle and budget-market hotels under the Posthouse and Travelodge names. It would “capitalise decisively” on Forte’s upmarket hotel brand, Meridien, axe Lillywhites, and dispose of its stake in the Savoy Group and the Alpha Airports Group. The restaurant brands, which include Happy Eater and Little Chef, would be “rejuvenated”, according to the bid document.

There is a good chance the bid will succeed. The offer is considered generous, valuing Forte at 3.3bn, although most City analysts believe Granada will have to go higher for an outright victory. Other bidders may emerge, although the Japanese whisky manufacturer, Suntory, is distancing itself from a rumoured 4.1bn bid.

However, Granada is financially strong, having just announced a 30 per cent increase in pre-tax profits to 388.1m in the year to September. But is Granada saying anything that Forte has not already realised and begun work on?

Forte is in the last throes of a thorough brand review, announced in the summer. Much of what Granada is suggesting is already on Forte’s agenda. Last month, after a nine-month search, it appointed Richard Carrick as group marketing director. He is the former marketing director at the number-two UK tour operator Airtours.

The decision to appoint a group marketing director was an explicit recognition of the need to change the emphasis of Forte’s business.

Carrick’s immediate experience is in travel marketing – an area where both tour operators and travel agents are driven by tight margins and are rarely given the chance to develop in-depth branding campaigns. But his most recent role at Airtours was to try to address those broader branding issues.

Marketing, and branding especially, are becoming more important in the hotel and restaurant business. There is increasing competition in hotels and reviews of brand image are commonplace. Hence Inter-Continental’s current rebranding of its international Forum brand of hotels (MW November 24) and Copthorne’s rebranding as part of the new Millennium global chain, announced last week.

In contrast, Granada has no one with responsibility for marketing the whole group. Although a household name, the Granada brand is not systematically promoted. However, some of its brands are – including the Pavilion service stations and London Weekend Television.

Carrick refuses to discuss the brand review but accepts that one weakness lies in the restaurant chains Рa fact pounced upon by Granada. As well as Happy Eater and Little Chef, Forte owns C̫te France, Cafe Royal and Wheelers restaurants.

Forte has already made what it perceives as decisive moves to consolidate its international Meridien chain of luxury hotels. They were acquired a year ago with the intention of using the brand name to consolidate Forte’s other upmarket hotels and give it a much-needed leg-up on to the international hotel scene.

It has also created three umbrella brands – or hotel collections – dubbed Forte Grand, Heritage and Exclusive. The Forte Grand is now heading for a merger with Meridien, which could also be the destiny of Exclusive.

It is all part of an aggressive expansion of the Meridien brand, bringing the Forte Grand hotels under its name and looking to add to its 82 properties. It is also reviewing the brand image and looking to differentiate it from other hotel brands in the four-star sector.

Forte has had a brand marketing approach in place since 1991. The initial success of the Travelodge brand inspired Forte to launch the Posthouse and Crest brands for its mid-market properties. Posthouse was well-received, but Crest has suffered from the perennial hotel chain branding problems of fudging diverse properties and failing to make them fit.

The Savoy group, however, remains the darling of Forte’s chairman Rocco Forte. “It carries enormous weight on a global basis,” says Carrick, who believes that it has been underplayed as an asset in all the discussions about the bid.

The remainder of hotels were hived off under the White Hart brand, which Forte is looking to sell for 120m. Its US Travelodge chain has been on the market for several months and the hostile bid has triggered speculation that it will offload more of its assets – it sold its Harvester chain earlier this year to Bass for 165m – to fight off Granada.

But Granada insists that the rationalisation to date has not gone far enough. Its own plans would be more efficient, more ruthless, more profitable. A spokeswoman for Granada pledges that “every aspect of Granada’s business is about customer service and superb value for money”.

Granada has managed to make impressive profits from all parts of its business, including its TV rental side, which is in a declining market. That strength and its attractive offer on the table may well win out.

But the bid’s rationale is surely flawed by the fact that what it proposes is already being addressed by Forte’s current regime.

To add weight to its bid, Granada will need to fly its marketing flag a lot higher to convince people that it can truly capitalise on the Forte brands.