When Colin McKinlay was offered the role of CFO of holiday village group Center Parcs he jumped at the chance. He knew the product well, having visited several times with his family, and was aware of how well the group, which delivered revenue of £469m last year from its five UK sites, was run.
“It is a business which is as good on the inside as the impression you get on the outside,” he says, raising the question of what more could he offer to an already successful formula. Why take the risk of moving from Tui, the world’s biggest travel company, where he was well established as CFO for the UK as well as operations in northern Europe?
The answer is that McKinlay had been finessing a skill set heavily focused on digital tools at Tui. After seven years at a company well known for equipping its finance leaders to succeed in a highly disrupted market, he now wanted to take on the challenge of becoming a finance lead.
Moving to Center Parcs gave McKinlay his first standalone CFO role, plus the chance to apply his digital nous to a business that had excelled at customer service, but had not fully developed analytics to model future consumer patterns. “The attraction was the chance to put all this together as a number one CFO, rather than as CFO in a business that was a subsidiary of a group,” he says.
Business of travel
McKinlay arrived at Center Parcs just over a year ago from Tui. His first role in the travel sector was as a junior accountant at listed group Airtours which became Mytravel, after a degree in accounting and financial management at Essex University followed by a number of years at Coopers & Lybrand’s Manchester office.
As someone who travelled a lot when growing up, McKinlay took to “an exciting sector, that everyone talks about” and after rising through the business was posted to Canada and then Germany to iron out issues in local subsidiaries. A natural enthusiasm combined with “a willingness to do what you need to do to get the job done” saw him battle through cultural challenges of working overseas.
From CFO of Thomas Cook UK to running finance at start-up Travelzest, McKinlay developed his career in the travel space as the sector became increasingly impacted by the internet, which fuelled the rise of budget airlines and online travel agents.
The financial crisis, which hit the travel industry hard, was the catalyst for McKinlay joining home emergency repairs business Homeserve. A couple of years of being CFO of its UK business, McKinlay left the cash generative but reputationally tarnished (after his tenure) brand to join Tui.
In his time there, the first five years predominantly UK-focused before northern European companies were added, McKinlay says he focused on developing business partnering once initial restructuring had been undertaken.
“Finance should be a genuine commercial partner to the commercial part of the business. The CFO should be the business partner to the CEO of the business, assessing the strategy, insuring we’ve got the right metrics in place to measure the delivery against that strategy,” he says.
“It’s about making sure we’re making the best possible decisions and its through that commercial relationship, working with teams that are doing pricing, marketing, measuring, challenging, supporting the decision-making process, that finance really adds value in the business,” he says.
The data explosion
To support strategy, finance needs to deliver the right information, says McKinlay, referencing how Tui was able to exploit powerful new tools to mine data, as they became available. “We joined financial data and customer data through analytical work streams for a more cohesive end to end view of the customer.
“That was combined with a really first class yield management system for maximising the number of passengers on an aeroplane and the number of people staying in a hotel, says McKinlay. “Developed in-house with partners from outside, the system ultimately became a proprietary system which was fed with a large amounts of data that could price the product accordingly to ensure that the aircraft and hotel beds were filled,” he says.
But development of powerful technology must still be kept within a budget. “It’s always a balance, but if it’s a business sponsorship and your IT partner is the delivery partner its likely to work. If it’s an IT push to an unwilling business partner, then in my opinion it will generally be less successful, because you have a customer who doesn’t necessarily buy into the functionality of what’s being introduced,” says McKinlay.
But despite all the technology available, the travel industry is still about delivering a first class customer experience, says McKinlay. “You can have all the data in the world to help, but it’s the way you interact with prospective customers and existing customers that is key,” he insists.
Into the woods
When McKinlay joined Center Parcs it had not really changed its formula much in the last couple of decades, offering forest lodges where families can come together for a short break, at the weekend or midweek. It has become a middle class staple in the three decades since the first UK site was opened at Sherwood Forest.
Center Parcs has seen a variety of owners including brewery giant Scottish & Newcastle, which sold the European (Center Parcs Europe) and the UK businesses to separate owners and effectively split it in two. Center Parcs’ operating and property parts were then split with the former being listed on the UK stock market at one stage.
Private equity giant Blackstone reunited the UK group’s operating arm with the property element before selling the group on to Canada’s Brookfield Properties Corporation for £2.4bn in 2015.
Center Parcs performed well through the financial crisis with occupancy rates staying at around 97%, which was a big factor in receiving a £2bn funding round in 2012, some of which was used to develop a fifth site at Woburn Forest.
Center Parcs’ newish owner has demonstrated a similar level of confidence, investing Euro230m into a sixth site in Ireland, that will be completed next year through a separate corporate structure. “It can almost be seen as a hedge against Brexit with a euro-denominated business alongside a sterling one,” informs McKinlay.
There’s plenty of reason for optimism. Center Parcs has performed well over the last decade, says McKinlay, referring to a compound annual growth rate of EBITDA of 7.5% over the last 10 years. “We’ve done a lot of things to grow the business without the benefit of a big focus on the digital agenda so far,” he says.
That’s about to change, says McKinlay. “Coming into the business I am able to use some of my experiences, particularly around the digital agenda,” he says, referencing new ways of capturing and utilising customer data more effectively, using the Adobe suite of analytical tools.
“A lot of the investment we’ve made over the last two years has been focused on creating a far better and more cohesive view of who our guests are and how we can provide the right product and experience for those guests as well as attracting new guests,” says McKinlay.
“We’re looking to segment the data, to ensure we’re getting the right messages to the right customer cohorts with the right product at the right price, at the right time,” says McKinlay. “Those analytic capabilities that haven’t necessarily been optimised in the business previously, we’ve now got in place to do that.”
“We’re getting better insight into the kind of things that customers have done when they’ve come to a Center Parcs resort with the activities they’ve booked, when they’ve gone to dinner, which restaurant they’ve gone to, that enables us to develop a far better picture of a customer, and in doing that, we can tailor our customer content strategy, so that we’re interacting with guests in a far better way,” he insists.
Inhibited by the need to keep the product local, (Center Parcs Europe has 22 sites on mainland Europe) Center Parcs is seeking to continually finesse its offer in terms of accommodation and facilities. “We continue to invest in better facilities in the villages, we have more and more leisure activities, all of which create more demand for the products we have,” says McKinlay.
Addressing the future
When it comes to the challenge of Brexit, McKinlay says Center Parcs has a degree of insulation because 98% of the workforce are UK citizens. “But if we were to see a tightening of the labour pool in the UK as a result of changes in the movement of labour around Europe, that would be a consideration,” he says. Paying the same national living wage rate for under 25s as those over is thought to be one way of addressing this threat.
When it comes to the threat of Brexit to consumer spend, McKinlay says: “We are selling arguably to a demographic that has potentially got a level of disposable income but like anybody the uncertainty that is at large in the broader economic environment is not something we can ignore, though we are not seeing it today,” he says, mentioning forward bookings are still at the 97% level.
When it comes to working with private equity owners Brookfield- which also owns a big chunk of east London business district Canary Wharf, McKinlay says: “They understand the dynamics of real estate but they have also taken time to understand how Center Parcs works, which is both a real estate and leisure product.”
Three years into Brookfield’s ownership, McKinlay says the business has continued to grow significantly. “Our results for the year to April 2018 showed an ebitda of £228.4m. When they bought us in 2015 it was under £190m,” he adds.