Building a business without borders

Beds & Bars is one of the UK leisure sector's most successful firms overseas. Phil Mellows meets its ebullient boss, Keith Knowles.

Eighteen backpacker hostels and hotels scattered across Europe, 11 Belushi's bars, six traditional pubs, a combined turnover of £30m. Plans to open more in Prague, Paris, Barcelona, Rome, Riga, Tallinn and Vilnius.

Where did it all go wrong?

Keith Knowles worries over his pot of peppermint tea at the RAC Club in Pall Mall. "It never goes as you expect," he says.

Because in 1982, when Knowles took over the family pub business — now the international Beds & Bars empire — it was with the aim of building it up and selling it off. Somewhere along the line, though, he realised that could not be.

"I'll never sell up. I know now this is what I want to do. I love this industry. If I wasn't doing this, I don't know what I would do."

And then there are all those beds — 4,500 of them, accounting for half the business. Where did they come from?

That's the other thing, you see. "The pub industry is dysfunctional." It's not the tie he's talking about. "That's irrelevant," he says. "It's about the way the cake is split." For him the roots of the current crisis go back to a lack of investment by brewers in the fabric of their pub estates.

"For 30 years brewers ripped money out of pubs and didn't reinvest it. Every farmer knows you have to give a field a rest. If you don't, the crops fail, and in the pub industry we're right on the cusp of letting that happen.

"Long leases came in because pub estates were run down and brewers didn't have the resources to invest. So they introduced a commercial rent and looked to the lessee to do the investment. There's nothing wrong with that idea, but there's got to be enough money for the tenant to do it — and there isn't. It's just not sustainable."

For Knowles, beds were the solution, a way of adapting the fabric of a building in order to get a return, in this case from a growing backpacker market and the failure of existing hotel and hostel operators to make the most of the opportunity.

What makes it different​

What makes Beds & Bars different is the bars half of the equation, and the fact that Knowles is still a licensee at heart.

"It's the bar that holds people. You can feel the warmth. Other hotel bars are dull, there's no one in them and they go and paint them lime green. It's appalling.

"They just make you want to go and drink somewhere else.

"Our bars are different. They make people go, 'Aah, I must go in there'."

The Mosaic Hotel, a 270-bed hotel-cum-hostel with Belushi's bar, set to open in Prague early this summer, is aimed at upmarket "flashpackers" and promises a heightened "aah" factor. It's being developed as a joint venture with "boutique" hostel operator Bohemian Hostels, and Knowles sees such partnerships, rather than venture capital, as the way to fund expansion.

"Why should be we go to a venture capitalist? Venture capitalists don't get the fact that you don't just need money in this industry, you need the right people. Our sites are getting bigger and bigger. We're now looking for 350 to 500-bed operations. They are medium-sized businesses and you have to have people in there who can run them. Joint venture partners understand that, because they're directly involved."

Knowles has always grasped the importance of people, and the organisation has for a long time developed its own HR programmes, the latest being Consul, an intranet-based system that aims to break through the management "crust" and open up communications through the organisation.

Among other things it enables staff to be instantly rewarded for doing a good job, or — through an iPhone app — get extra training.

"Staff can come direct to me and get my interpretation of things rather than hearing it from other people," explains Knowles. "It's an open-book system that will foster an environment where people learn — and we learn from them.

"There's too much email these days," he adds. "You go email blind."

Specifically to counter that, another initiative, called Golden Eye, requires all key staff to join a conference call at 10am every Monday morning to talk about how they're driving the business.

The telephone seems a quaintly old-fashioned medium for Beds & Bars, a company that's among the best in the industry at using the internet and social media. A few months ago a webcam was installed in a 14-bed dorm at the London Bridge hostel, and in no time four million people were watching a cult live show — mostly of socks drying on a radiator.

(You can see for yourself at www.stchristopherslive.com/webcam if you're so inclined.)

"Two things have driven the business over the past 10 years — the beds and the internet," says Knowles. "Through that we've stuck to our original principles, of creating environments that are safe, feel secure, are good value and great fun. We're not sane. But how can you be in this industry?

"In five years I see us having no more than 22 or 23 sites, but all with at least 250 beds. It doesn't faze me, opening anywhere in the world. It's the people that are important."

It concerns him, though, that the pub industry as a whole may have lost sight of that. "We have to attract a higher calibre of people.

It's the vital ingredient. If you don't support your people you're f*****."

And the old chestnut of trade unity bothers the former Association of Licensed Multiple Retailers (ALMR) activist, too.

"I'd like to see the ALMR get together with the British Beer & Pub Association and others in a combined panel that can put forward a united view to Government," he says, without displaying a lot of confidence that's going to happen.

Charity​

Knowles is, in fact, a founder of Pub Aid, which is bringing the industry together around the specific task of promoting the uncounted and under appreciated work that pubs do for charity.

"I want us to blow our own trumpet. We need a holistic view of what pubs do for society. To make Government see they are part of the solution, not part of the problem."

As you read this, Keith Knowles will be on the ski slopes, enjoying a six-week sabbatical. He's left behind his mobile phone and only the people closest to him will be able to get in touch.

"I'm sure everything will be all right," he says, the merest flicker of doubt crossing his face. You sense it's not so much the well-managed business collapsing without him that he's worried about as how he's going to cope away from the business he loves.

My kind of pub​

For food I would choose the Royal Oak at Paley Street, Michael Parkinson's pub, for a pint of beer any pub by the water will do me, and for a young, vibrant atmosphere it has to be our après ski bars.

My favourite, though, would have to be the St Christopher's in Paris. It's by a canal and it's truly mellow.

Key dates​

1964​ — Knowles' father Ron takes his first tenancy, the Queen of England in Goldhawk Road, west London.

1977​ — Keith Knowles joins the firm and the four-pub RC Knowles & Sons is formed.

1982​ — Ron retires, leaving Keith to run the business.

1994​ — First Belushi's bar opens in Covent Garden.

1995​ — The first St Christopher's hostel opens at the former Grapes in Borough High Street.

1998​ — The growing company is renamed Interpub, and Tim Sykes becomes chairman.

2001​ — First St Christoper's Inn and Belushi's bar outside London opens in Edinburgh.

2003​ — Interpub offers hotel rooms at St Christopher's Inn, Brighton.

2005​ — Company is rebranded Beds & Bars. St Christopher's at the Bauhaus opens in Bruges and a hotel and hostel opens in Amsterdam.

2006​ — Berlin welcomes St Christopher's hostel and apartment complex.

2008​ — Interpub takes over Flying Pig, adding two giant hostels in Amsterdam to the group. Paris gets first new-build, new-model St Christopher's with dorms, private rooms, bar, sauna and nightclub.

2010​ — Work starts on M