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Hospitality, Leisure, Sport and Tourism Network, May 2005 - 1 -

Entrepreneurship Case Study

David Levin and The Capital Group

The First Steps: Up to 1969

The initial desire

David Levin was born and grew up in the close

Jewish community of Pollokshields, a leafy suburb

of Glasgow, Scotland, the son of an electrical

wholesaler. Home life was comfortable but

constraining and the young boy longed to escape

its confines. He resented school and admits to

being a difficult student, thinking that it was a

complete waste of time; few of the subjects

taught seemed to have any relevance. Family

holidays in the resort hotels of Britain after the

war provided the young David Levin with his first

glimpse of hotel life and the possibilities that itoffered. He was fascinated by the Hotel Patron;

master of all he surveyed, never accepting

anything less than perfection in order to deliver a

memorable experience for customers.

His father and the friends of his father were in

business and David grew up understanding the

values of working hard to achieve personal goals.

This led to him seeking work, whilst in his mid-

teens and still at school, at the local CentralHotels Malmaison restaurant, which very quickly

reinforced his view that this was not only a

world he wanted to be part of, but also

something at which he could excel. It became his

ambition to not only get into the hotel business,

but also to one day own his own luxury hotel.

In those days, although there were four-year

apprenticeships for chefs, a career in hotel

management could only be initiated by a spell at aHotel School. Therefore, against the wishes of

his family, in particular his father who went mad

at the news, having harboured ideas that his son

would study for a more professional career;

David attended the Glasgow Hotel School (now

the Scottish Hotel School, University of

Strathclyde). The Hotel School proved to be a

reprise of Davids experience of school, boring

and irrelevant. From his brief time working at the

Central Hotel, he was only too aware that

learning how to unblock a vacuum cleaner and

120 ways to prepare potatoes was going to be of

little practical assistance to him in future years!

Hopeful that things would look up when it came

to the study of wine, he was disappointed to

discover that it involved identifying and learning

35 soil temperatures from the wine growingareas around the world.

A career in hotels

The learning really began for David Levin when

he joined British Transport Hotels (BTH). The

company were quick to acknowledge his talent,

enthusiasm and his knack of knowing what

customers wanted and delivering it. As part of a

large hotel group, opportunities to be

entrepreneurial in these early years did notpresent themselves too readily. However,

experiences were reflected on and analysed, and

the lessons implemented wherever possible.

At the age of 27, David rose to be BTHs

youngest general manager - of the humble

Lochalsh Hotel in the north of Scotland. This

promotion had all the indications that it was a

poisoned chalice. Before his arrival, the Lochalsh

Hotel was notorious within the company ashaving the worst food and was indeed the worst

performing hotel in the company. However, it

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was to prove the pinnacle of his career with

them. His turnaround of this location, in a single

season, remains something of which he is still

tremendously proud.

During his time with BTH David learned key

lessons, the benefits of which have stayed with

him throughout his career and which were

distilled into his philosophy of providing high

standards of service with a very personal

management style. It was at Lochalsh that David

Levin developed a passion for food. Since his

early days of part-time employment at the

Malmaison he had always been interested in

foods from around the world, but in Scotland

this interest grew into a passion. In addition, the

confidence gained from his personal success at

the Lochalsh was to prove a strong influence on

the decision to finally realise his ambition to run

his own operation.

In common with many learning opportunities,

lessons included what not to do, as well as what

worked. Davids ideas about what worked

included a realisation that small could be

beautiful. Being able to know the names of thecustomers and the staff made a significant impact

on the quality of service that a hotel was able to

offer. This was at a time when the really

successful hotels were big, often called on to

subsidise the smaller properties within the

Group.

Inevitably, Lochalsh being one hotel among many

in the Group, the priorities of senior

management focused on the collectiveperformance of the properties as a whole, over

and above the success of any one location; there

were also concerns regarding whether Davids

successor at Lochalsh would be able to maintain

the level of performance he had achieved. Such

short-sighted objectives convinced him that he

could not continue to work for anyone else and

that the time had come to go it alone; to put all

that he had learned into practice and prove that

he could make money for himself.

The term entrepreneur at that time had a very

different connotation. Today, it is associated with

such role models as James Dyson, Richard

Branson and Anita Roddick. In the 1960s and

early 1970s, it was a derogatory term with

entrepreneurs such as John Bentley, Jimmy

Goldsmith and Jim Slater having very negative

press in the UK. They were thought of more as

asset strippers, people ready and eager to profit

out of other peoples misfortunes. This misery

was precipitated by the business environment at

the time, which saw inflation levels of 4.7% in

1965, rising to a staggering 19.5% in 1975. With

so many companies going into receivership, there

were rich pickings for businessmen with vision

and courage, but this did nothing to endear them

to the public at large. This notwithstanding, these

were turbulent, risky times and David Levin was

regularly being advised by friends and

professional advisers, not to take such risks, but

there was a drive to succeed that burned in him.

Start-up: the first business

The long term strategy for David Levins firstbusiness venture was to make money in order to

fund his real ambition, to own a small luxury

hotel in London. He was looking for a suitable

location in, or within striking distance of, London

and so it was that in 1964 he bought a run-down

country pub, The Royal Oak, in Yattendon,

Berkshire and became his own boss for the first

time. He was struck by the village of Yattendon,

although many would not have considered it a

great place to start their first business. David sawreal potential and opportunity. Yattendon was a

pretty, traditional English village, with a cricket

pitch and church. At that time it was still able to

maintain a baker, a butchers shop and traditional

craftsmen. As a result, many people had reasons

to travel to the village. He felt it had all the

ingredients to support a successful country pub

with a restaurant and eight letting rooms above.

In the village community, David set out to formstrong bonds with his neighbours, going out of his

way to minimise the inconvenience to them from

what he was confident would be a successfulbusiness. He knew that success would depend on

looking after the people round about; providing a

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car park for patrons was seen as a priority in

order to keep cars off the narrow village roads. In

return, the village enjoyed a hospitable venue for

coffee or something stronger, and a chat, cashing

cheques, buying milk. This was in addition to a

quality eatery and the added prosperity that

guests to the hotel brought to the village.

It is important at this stage to understand the

business environment in which David set about

developing The Royal Oak into the success story

that it was to become. This was a time when,

generally, the only food sold in pubs was crisps,

pickled eggs and peanuts; long before the advent

of pub grub or gastro pubs that we take for

granted today. Even drinking a cup of freshly

brewed coffee in a pub was unheard of!

David Levins concept of providing good food

available from innovative menus in a pub

environment was totally new. In those days if you

wanted to eat you went to a restaurant and if you

wanted to drink you went to the pub. Far from

consciously going against the prevailing trends,

David saw opportunities where others saw none;

he did his own thing; introduced new ideas; newways of doing things; driven always by the

determination to deliver, continually improving

customers satisfaction.

The economic situation in the UK was unsettled.

Inflation was running at 4% and rising fast and the

new labour government under Harold Wilson

was in power, passing legislation that was

perceived as attacking the business community.

One example was a change in the way thatcorporate client entertaining was taxed. Another

of the governments initiatives that was to have

serious implications for The Royal Oak was the

introduction in the breathalyser in 1967. This

legislation was to change the way that people in

the countryside spent their leisure time. A night

out further away than walking distance, took

more planning now that it involved car sharing or

getting a taxi home. This legislation obviously had

far-reaching effects on country pubs that hadrelied on visiting trade as well as the locals.

Although more of a destination restaurant than

just a country pub, it was at this time that David

Levin was to be grateful that he had taken such

care to woo his neighbours in Yattendon and the

surrounding villages; they were to be his salvation

in the months following the introduction of the

breathalyser.

David put up just over 20% of the investment

required for the pub, with the balance provided

by a loan from Barclays Bank, and everything that

the Levin family owned had to be used as security.

By the end of the first year of trading, there was a

mention in the Good Food Guide and a net profit

of 14,000. He had also repaid all the money he

had borrowed and recouped his personal

investment. Failure never crossed his mind; David

Levin prefers to think of business risk more as

business opportunity.

The success of The Royal Oak was not only

financial. For David, success could also be

measured by the wholehearted acceptance of his

radical ideas and by maintaining his philosophy of

combining the highest standards and attention to

detail, with personal service to an ever increasing

army of loyal customers.

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Moving On: 1969 1995 David was realising his dream of owning a small

luxury hotel, offering a highly personalised service.

True to form, he stuck to his belief in the

traditional concept of hospitality; excellence at

the luxury end of the market with ideas for new

ways of delivering satisfaction for his guests. He

was totally focused on his plans. There is no

doubt that the development of this type of hotel

went against the prevailing trend at the time, of

opening large scale bed factories.

The operating environment

It became obvious towards the end of the 1960s

that hotel capacity in London could not keep up

with demand. Such was the urgency to increase

the number of hotel rooms that a 1,000 per

room non-repayable grant (equivalent to

approximately 10,100 in 2005) was made

available to developers by central government.

Following the Development of Tourism Act;

developers could not build large hotels fast

enough. This urgency was precipitated by the

introduction of the jumbo jet to commercial

service; leading to the arrival in the capital, of

visitors in larger numbers than had ever been

possible before.

David had always intended that there should be a

restaurant within the hotel, although not a hotel

restaurant, rather a destination in its own right.

In fact he has often referred to The Capital as a

restaurant with rooms above. At a time when

French cuisine, with its roots in Escoffiers

Repertoire de Cuisine, was the only food worth

eating in London, David Levin designed the hotel

around a chimney so that a charcoal grill would

become an intrinsic part of the cooking process.

He wanted to provide a limited menu offer to be

based on simple grills using the finest ingredients;

I did not want to serve 15 different versions of

Dover sole I could not bear any of that

(Caterer & Hotelkeeper, 2000).

This goes some way to explain why, during the

twelve-month period that The Capital was being

built, twenty-seven other hotels also opened. The

Capital was by far the smallest; the other 4 and 5

star hotels included the Tara, the Intercontinental,

the Forum and the Inn on the Park. These large

hotels offered minimal levels of service. Ice was

now available from machines on the landings.There were shoe-cleaning machines and coffee

shops replaced hotel restaurants. The building of the Capital Hotel started in 1969,

the Royal Oak was sold in 1970, and the hotel

opened for business in May 1971. Leaving

Yattendon meant not only that he had to buy a

home in London for his growing family, but also

that he had no income for 18 months until the

hotel opened. To purchase the lease and cover

development costs he borrowed 500,000 from

Barclays Bank. Together with the governmentgrant and the proceeds from the sale of the Royal

Oak, The Capital was born. Building costs were in

the region of 1,600 per room and room rates on

opening were 15 for a double room and 10 for

a single room; this when the average income per

household in the UK was in the region of 50 per

week.

The Capital

It was against this backdrop that, in 1969, David

Levin came across a development site on Basil

Street, a small wedge of land on a quiet residential

street in the heart of Londons Knightsbridge. His

business idea was to create a luxury hotel with 60

rooms offering a very personal service with greatattention to detail. It would operate according to

his longstanding philosophy of providing the

highest standards of customer care, second to

none. As well as the obvious target market of

business and leisure high-net-worth travellers, the

solo lady guest was a sector of the market which

he had noticed was not catered for in hotels at

that time. In fact, these guests were looked on

with great suspicion. The location in Basil Street

would be perfect for this market he surmised,being between Harrods and Harvey Nichols.

The hotel was and remains very profitable,

because, David believes, everyone who workswith him cares about the service provided, which

is after all, what hospitality is all about.

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Background and prevailing environmental

factors

In the time since the hotel opened it has traded

through an increasingly turbulent operating

environment. It has coped with rampant inflation

in the mid-seventies; the three-day week and IRA

terrorism in the late seventies; strikes by power

workers and the recessions of the early eighties

and nineties and, more recently, the impact on

international travel and tourism of 9/11 and

subsequent conflicts.

All organisations are affected by the same factors,

but what defines competitive advantage is the way

that organisations respond to these

environmental factors. The response of David

Levin has always been to take the opportunity to

reinvest in the hotel by updating and refurbishing,

maintaining service levels (and prices) so that they

are ready for when the cycle kicks off again, as it

always does. True to form, in the autumn of

2004, The Capital restaurant and bar were

relaunched following an extensive redesign.

In 1981 David had turned his attention next door

in Basil St and bought out the lease of aneighbouring tenant. He opened LHotel, an

original 12 bedroom boutique hotel, followed in

1983 by the Metro wine bar next door. In the

fullness of time, this expansion provided a market

for wine, produced from The Levin Winery in

France, following the purchase of a vineyard in

1990. The first wines were produced in 1992,

using the regions co-operative winery. In time,

David opened his own winery, importing

production equipment from Australia. Since 2003,his range has included his own Le Vin.

Growth realisation

In the mid 1970s, six years after the opening of

The Capital, David Levin was looking for

additional storage for the hotel and came across

some ground floor space in an eight-story block

of flats in Hays Mews, around the corner from an

all night taxi garage. It slowly dawned on him that

the space would actually make a wonderfulrestaurant, although the access to the space was

less than auspicious, squeezed in as it was

between the towering flats in a mews that few

people other than taxi drivers had ever heard of.

He had been looking for another business

opportunity; having made a success of the Royal

Oak and The Capital, but the big question was

whether he could run two establishments. This

was an enormous step; his advisers were warning

him not to put his reputation on the line, believing

that it was destined to fail. He also had a battle

with the local residents, who successfully had his

initial planning and licence applications turned

down. This dispute was only resolved when David

Levin lodged an appeal in the High Court.

David Levin assembled the cash for the

development of the 100-cover Greenhouse

restaurant from personal investment with the

help of an 80,000 loan from Barclays Bank. The

restaurant opened in the heart of Mayfair in 1977,

with a focus on good traditional British fare,

majoring on such British staples as roast beef and

Yorkshire pudding; braised oxtail and bread and

butter pudding - people used to cross London for

the fish-shop chips.

David was also planning something slightlydifferent for the ambience. All of the chairs were

different and he had an upright piano converted

into a dumb waiter. This was all to create a more

comfortable, less starchy atmosphere. The

narrow entrance was developed into a garden;

this helps to keep the eyes down rather than

being drawn up by the towering flats. This has

worked so well that the majority of the diners

never notice the ugly buildings on either side.

The first head chef was PJ Ryan (with assistance

from Brian Turner who was still Head Chef at

The Capital). PJ Ryan remained as head chef, until

he left to open his own restaurant in 1991, to be

succeeded by Gary Rhodes. The Greenhouse was

first of its kind in so many ways: although

relatively common-place now, a 100 cover

restaurant in 1977 was unheard of, as was the

focus on English food and also the out-of-the-way

location with absolutely no passing trade. It wasthe original destination restaurant.

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In the late 1980s the offer was developed further.

The Greenhouse had been a location for business

entertaining, available Monday to Friday, but now

the weekend was emphasised as well. Saturday

dinner opening was extended to Sunday lunch,

and then to Sunday dinner as well. This made the

Greenhouse more attractive to the local

residents, with a menu described by Joe Levin

(son of David Levin and heir apparent) as Gary

Rhodes meets Brasserie, not constrained by the

normal three-course dictates; diners could have

two starters or just a main coursewhatever

worked for them.

He also shares in the reflected glory of the

accolades enjoyed by the members of his team

Michelin stars for The Greenhouse and The

Capital; Le Metro Caf won the Caf Crme

Award for the best caf in Britain (2000) and The

Capital restaurant won the Hotel Restaurant of

the Year (2004). This last award brings particular

pleasure, as it is voted for by the restaurant

industry. Also in 2004 The Capital restaurant was

award by Wine Spectator, the Best Of Award of

Excellence (2004) for its wine list.

Less heralded perhaps is the major part that

David has played as midwife or impresario,

nurturing culinary talent over the years. Richard

Shepherd (now Langans) was brought from The

Dorchester where he was Larder Chef, to open

The Capital Hotel; he was followed by Brian

Turner (ex Turners and TV Chef) who was Head

Chef at The Capital Hotel for 16 years before

moving on to open his own restaurant. His

successor, Philip Britten stayed as Head Chef for

11 years. Therefore, just three chefs have been at

the helm over a 34-year period, during which time

The Capital restaurant has shown sustained

excellence. In 1973 the Michelin Guide waslaunched in the UK and The Capital, together

with the Connaught and the Inter-Continental

were the first to be awarded a Michelin star in

1973, with a second in 2000. Gary Rhodes (City

Rhodes and TV Chef) was Head Chef at The

Greenhouse for 5 years before, with the backing

of Gardner Merchant (now Sodexho), he set up

City Rhodes.

The restaurant enjoyed wide acclaim and the

accolades rolled in, including a Michelin star and

Restaurant of the Year. It was also spectacularly

successful financially; each successive year brought

increased profits and by 1996 it was making

500,000 per year, clear profit.

Letting The Greenhouse go

It may be surprising therefore, that in the wake of

an offer which was too good to refuse, the

Greenhouse was sold in January 2002 to Marlon

Abella, who has totally changed the ambience ofthe space and the menu. But significantly, The

Greenhouse name remains. The key to

understanding this decision comes when hearing

how David measures success.

David Levins response was peace of mind and

success allows me to go on to the next project!

More specifically, a simple rule of thumb he

employs is that in each successive year the Group

should be worth 1million more than it wasworth the previous year. However, like all

entrepreneurs, he has a strong need for

gratification, some recognition of achievement.

His appetite has been sated in that respect with

the many industry accolades with which he has

been feted; Restaurateur of the Year 1991;

Hotelier of the Year 1994. In the citation for both

these awards the judges praised him for his

leadership, inspiration, development and handling

of staff, particularly chefs.

David takes great pride in the fact that he is stillthere. All except one of the 27 hotels which

opened at the same time as The Capital in 1971,

have changed hands since he created the discrete

hotel in a residential back street of Knightsbridge.

Building on what he has achieved, David has

embarked on many business ventures but never

the same concept twice. His fervent belief that

there was more money to be made per room out

of a small efficiently run hotel extends to hisrestaurants where he has never fallen into the

trap of packing in the tables to increase patronage

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Joe Levin: The Heir Apparentat the expense of comfort, service and ambiance.

Better to have fewer tables in a restaurant, even

if that means turning custom away. Early home environment

When Joseph Levin was born, the family were

developing the Royal Oak at Yattendon and the

story is that Joes name was put down for the

Lausanne Hotel School in Switzerland very soon

afterwards. From a very early age, there was a

desire by David Levin that his son should join him

in the business. During Joes formative years, he

spent much of his leisure time working in the

business. At the Royal Oak in Yattendon he

would sort out the bottles, putting them into the

right crates. Later on he was often to be seen

behind reception at The Capital in the school

holidays.

Money, according to David Levin, has never been

his sole motivation. He never set out to be a

millionaire; eighteen months after The Capital

hotel opened, he refused an offer of 2.5m for

the hotel and the idea, and there have been

many offers made since. The Capital is the brand,

its name and its image.

David believes that success has come as a result

of identifying markets and seeing opportunities

that others did not, and going for it with an

unswerving belief in the fact that he would

succeed; never letting any obstacle stand between

him and his vision. Failure was never an option.

Creating something new and staying focused;

feeling, rather than knowing, or entrepreneurial

radar as David describes it.

This exposure at first hand to the entrepreneurial

activity of his father, may have rubbed off on him,

although both are keen to point out that

entrepreneurs, in their opinion, are not born,

they are inspired. Joe would have observed at

first hand the importance of thinking of new ways

of doing things and an attention to detail in the

delivery of a personal service, which has been the

hallmark of his fathers success.

While at school, Joe took great comfort in the

fact that he knew, with some certainty, what he

was going to do when he grew up. While it may

seem to the outsider that Joes progression in the

business was a foregone conclusion, both he and

David are keen to point out that he could have

gone off and done his own thing at any point.

The master planOn leaving school at 18, before gap years were

heard of, Joe went to Australia to work on a

vineyard and learn about wine first hand. Then

followed the only experience Joe has had of

working outside the family business with a spell

back of house in the Ritz in Paris, and the Vier

Jahreszeiten hotel in Hamburg, Germany,

ostensibly to learn French and German before

going on to the Lausanne Hotel School, where

fluency in European languages was essential. Thisextended on-the-job training concluded with a

nine-month stint at The Stamford Court Hotel in

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New Challenges The Peoples

Palace: 1995 - 2005

San Francisco. There was nothing haphazard

about the selection of these properties by David

Levin to develop and inform his son. Indeed, it

was not so much the properties but key people

within them, who were identified as being

examples of excellence in their respective fields.

These were key mentors chosen to inspire Joe in

specific areas of the business.

The challenge

Within the Festival Hall on the South Bank in

London, the Peoples Palace presented a different

challenge. It occupies a wonderful, albeit hard to

find space and has an unrivalled view of the

Thames. It had operated as a restaurant under a

variety of proprietors since the building was built

in 1951 for the Festival of Britain. Surprisingly, it

had never been a commercial success.

In many ways, Lausanne Hotel School was for Joe,

as the Glasgow Hotel School had been for his

father. Such was his experience of the industry

he knew that learning such things as 400 soup

varietals was going to have little real practical

application in his ongoing career. Graduating from

the Hotel School did, however, open other doors

for him, in terms of providing a network of

contacts throughout the world.

The lease on the restaurant in 1995 was primarily

taken up as a commercial decision. It presented a

viable opportunity, because they had the

resources at the Greenhouse in the form of Gary

Rhodes and other members of the management

team ready and waiting for the next step in their

development. It also presented a wonderful

challenge. Could Joe Levin succeed where others

had failed?

Having graduated from Lausanne in 1989, Joe

returned home to be given the job of running

LHotel and Le Metro Brasserie and Wine Bar

next door to The Capital in Basil Street,

Knightsbridge. The diversity of the Capital Group

was such that by the time Joe graduated, every

aspect of the industry that he needed experienceof, was right on his doorstep. His carefully

planned development continued with two years at

the Greenhouse and a similar period of time at

the Peoples Palace, which he conceived and

mobilised from scratch.

The management of the Royal Festival Hall (RFH)

were looking for a stand-alone restaurateur who

had an understanding of the London restaurantscene, as opposed to an understanding of the

RFH. They were looking for the development of a

destination restaurant that would attract patrons

to the venue and provide added value for the

existing regulars at the Hall. At that time, the

South Bank was very underdeveloped both in

terms of commercial infrastructure and draws for

tourists; the London Eye and the Aquarium were

still five years off. The RFH management were

therefore not overly optimistic of the areaspotential and resigned to the poor performance

of the restaurant. So much so, that when David

Levin took over the ten year lease, the first two

years were rent free and thereafter relatively

small for the opportunity presented.

Totally au fait with front of house operations, the

final stage of his on-the-job training was to involve

working closely with his father in the head office

of this increasingly complex organisation. An MBAat Ashridge in 1997/8 was the final piece in the

jigsaw and Joe returned from his sabbatical to

assume the title of Managing Director of the

Capital Group in 1999.

This new enterprise was too good an opportunity

to miss for David Levin. He could see the

opportunity to create something unique, despite

the previous failures of the great and the good inthe restaurant world before him. Funded, as usual,

by a combination of personal investment and a

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loan from Barclays Bank, the move to operate

The Peoples Palace was part of a carefully

conceived plan by David to develop Joe, then aged

29, within the business and to expand the Capital

Group. Having already been responsible for the

running of The Greenhouse, by his late 20s, it was

planned that Joe should be involved in the birth

of a new business. The development of the

restaurant from scratch therefore became his

responsibility. It was Joe who came up with the

name, managed the in-excess-of 750,000

investment by the Capital Group and got the

restaurant up and running, continuing in an

operations role for the two year bedding in

period.

The Peoples Palace opened in 1995. The public

space is large and airy and although capacity is 240

covers, the size of the kitchen is such that it can

only really effectively cope with 200 covers in a

sitting. Where the Greenhouse had been the first

large restaurant of its type in London with 100

covers, by 1995 the Conran Gastroempire had

already started, with the opening of mega

restaurants such as Quaglinos and Mezzo.

The dynamics of running such a high volume

restaurant are totally different from those that

impact on a smaller restaurant. The emphasis at

The Peoples Palace is on volume at a price that is

sensitive to the people who go there. Originally,

there was a need to provide for the needs of an

audience who are not necessarily primarily

coming to eat.

The offerThe menu concept was very simple and low key

with a value offer; The Peoples Palace set out to

exceed expectations in an environment where

expectations were traditionally low; the concert-

going audience were pleasantly surprised from day

one, word spread and a fiercely loyal customer

base has developed as a result. Gary Rhodes,

already a household name, oversaw the opening

of the restaurant while maintaining his

responsibilities at the Greenhouse. He developedthe menu as well as the recruitment and

development of the kitchen team. The menu

concept had its roots in the Greenhouses ethos

of passion and quality, and was loosely based on

the weekend Gary Rhodes meets Brasserie

dishes, which had been introduced so successfully

at the Greenhouse for weekend diners.

It was perfect for the RFH clientele who

represented a real cross section of society; this

menu, available throughout the week, ensured

that there was something in it for everyone. The

detail was driven very much by the operational

constraints of the facilities of the RFH; everything

has to come up three floors in a lift, limited

storage, production space and equipment,

capacity etc. Quick production methods

maximised customer throughput and therefore

capacity, using the best possible ingredients and a

fast service ensured customer satisfaction and

loyalty.

Financial success

The restaurant was an immediate success

returning profits after nine months with

consistently increasing profits year on year

thereafter. While the initial objective of the RFH

may have been to create a destination restaurant,for the first few years 80-90% of the covers in any

given night would have been members of the

audience. This results in the captive audience

being contingent on the programming in the Hall

and inevitably business is affected when the more

obscure events are scheduled. In order to

minimise the negative aspects of this, a strong

marketing initiative was launched to extend

patronage based on their loyal customer base,

beyond the audience. This proved such a successthat currently the audience represents only 60%

of evening diners.

As the clientele generally has become more food-

focused, the menu has developed and even

expanded! There are now quite distinct dining

experiences throughout the day - business

lunches, pre-theatre diners and destination diners

are each offered a different menu style and speed

of service and overall experience, each designedto meet the particular priorities of each market

sector.

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The management team at The Peoples Palace see

their ability to make quick decisions as a key

competitive advantage and the operations

processes are driven from the customers

perspective. They can respond quickly to

feedback from customers, collected by talking to

people, formally and informally. The facilities are

also audited by the RFH with mystery diners and

questionnaires. For example, for the first six years

of trading The Peoples Palace restaurant did not

have tablecloths, but they were introduced after

discussions with patrons. Apart from the

additional cost, the logistics of managing cloths for

a 200 cover restaurant open for lunch and dinner

7 days a week, with limited back of house facilities

and three floors up is not a simple issue, but

because it was important to their customers, it

was important to them.

There is no doubt that, in many ways but

particularly financially, the results have far

outweighed even Davids expectations, and the

modest contribution paid to the RFH is obviously

not going to extend to the new deal. Neither will

the ten year lease arrangement, which will be

replaced with a 5-7 year management contract,

with far more control coming from RFH

management. New spaces are also being put over

to foodservice, targeted as much to the passing

pedestrian on the South Bank, as to audiences and

visitors to the RFH. These will significantly

change the dynamics of the competitive market

and the concept potential for the space currently

taken up by The Peoples Palace; enhanced, lower

priced, wider ranged fare with lower overheads

and a wider potential market not so tied in with

the scheduling of the Hall. The kitchen, installed

by Joe as part of their initial investment has

reached the end of its useful life and therefore, on

all sorts of fronts, the scene is set for major new

opportunities.

Evolution

The contractual arrangements with the RFH have

evolved over the years, with the recent addition

of the bars contract which is operated on a

management contract (as opposed to a lease

arrangement). This has been phenomenally

successful for both parties; financially and in termsof service to the audiences and visitors alike.

Although initially there were economies of scale

for Joe and his team in the operation of these

bars throughout the RFH, they are now operated

independently and as such, can form the basis of a

stand-alone contract and still be financially and

operationally successful. There is also revenue

potential from the two pavilions available for hire

to the general public for events, where they can

be asked to provide a catering service.

One thing is clear however, The Capital Group

will not be basing their bid on preserving the

status quo, believing that The Peoples Palaceformat is due for a change.

The ten-year lease at the RFH has now run its

course, and as you would expect, Joe has many

ideas about how to respond to the challenge.

Proposed Timetable:

January 2005 Tender published June 2005 Building closes for 18

months

2007 Contract awarded

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11/11

Hospitality Leisure Sport and Tourism Network May 2005 - 11 -

What does the future hold? 2003

onwards

Continued growth, diversification and change

For the Capital Group, continued growth does

not necessarily just mean financial growth,

although loss makers are not seen as at all

satisfactory either. Growth realisation within the

Capital Group is thought of more in the context

of ambition. There is a five year plan but it lives in

Joes head as opposed to gathering dust on a shelf.

It is clear that in recent years, Joe has driven

diversification within the Group; moving away

from the core business of hotelier and

restaurateur. The Group now includes semi-

related enterprises including:

The London Bakery: Set up in 2003, inpartnership with a master baker to

provide a quality product not only for the

hotels and restaurants within the Group,

but now operated on a commercial basis

and available to other quality restaurants.

Liquid Assets: Offering the existing in-house sommeliers as a resource to wine-

loving individuals for the appraisal and

management of private cellars. This was

started in 2003.

The Levin Winery: Developed inpartnership with a master winemaker,

located in the Loire valley, France, with

the first harvest in 2003.

Munch: An in-store caf conceptdeveloped exclusively for Habitat. The

Kings Road branch was the first one to

open in September 2004, with two more

to follow in London.

Management Consultancy: started in 2003,making available the skills, experience and

expertise of the key members of the

Capital Groups management team, to

clients. As a spin off from this, an

operating management company has been

set up which offers more long term

resources and support to clients; not justadvising on what can be done, but putting

it into practice on their premises over

the long term. They currently run an

outlet in Kensington Gardens as a joint

venture. Since January 2004, the

management company has had a contract

to provide food, beverage and bar

services for all members and visitors at

the British Academy of Film and Theatre

Arts (BAFTA), including their many

hospitality events. This location has

historically been operated by a succession

of contract caterers at excessive costs

and with poor standards of product and

service. BAFTA now enjoys the benefits

of all the expertise and skills evident

within the Capital Group; they are

provided with hotel-style services in

return for a consideration based on profit

and turnover. This type of service

presents real synergies with the core

business of the Group and there are

many opportunities to poach similar blue

chip clients currently operated by the

big 5 contract caterers.

With all their ventures over the years, the Levins

have never done anything the same twice andthey have always maintained an ability to deliver

and change. They passionately believe that they

are much more efficient because they make

decisions quickly. This deft touch keeps their

concepts contemporary with certainly no shame

perceived in their changing minds in the quest for

continuous improvement.

Joes long-term strategy is based on a real belief in

long-term goals rather than short-term gains;increasing margins is easy. The focus may

therefore be more about continuing to do what

they do, but do it better, as much as about getting

bigger merely for the sake of getting bigger.

See also:

Capital Hotels (Thames) Ltd Profit andLoss Accounts 1995-2003

The Capital Hotel Trading History 1994-2004, and 2005 Budget

ed case

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