Interview: Graham Donoghue, Sykes Cottages
With more and more people opting for a ‘staycation’ in place of an international excursion, business is brisk at the country’s biggest independent operator of UK holiday rental properties, Sykes Cottages. As the firm prepares to move into its new Chester HQ, Move Commercial caught up with CEO Graham Donoghue to talk expansion plans, overseas ambitions and Airbnb competition.
Words by Lawrence Saunders
Boasting a CV that includes managing director and board roles at TUI Group, MoneySuperMarket and TravelSupermarket, Graham Donoghue was a straightforward choice to succeed outgoing CEO Miles Hill at Sykes Cottages in August 2016.
Donoghue’s background in travel, and particularly e-commerce, has proved a central component in Sykes’ success in the overwhelmingly online-driven market of short-term holiday rentals.
In July, Sykes announced record growth in sales and profit, whilst bookings in the financial year to date were up 23% meaning the firm is on track to serve over 1 million holidaymakers in 2017 – an increase from 815,000 in 2016.
A month later the firm signed a 10-year lease for 24,000 sq ft at Chester’s One City Place – more than doubling its current floor space at Richard House in the city.
The new location was hailed a key part of Sykes’ ongoing investment strategy to support its expansion.
Donoghue has previous form in strengthening companies. During his stint at travel firm TUI he managed to significantly grow the group’s online brands, in particular those of Thomson Holidays and Portland Holidays, at a time when the internet was still a bourgeoning tool for holiday booking.
“Despite us being a relatively small company as a whole, we’ve invested a lot in our technology platform – £1.2 million last year”
It’s this commitment to identifying and utilising growing technologies that Donoghue has been keen to continue since joining Sykes.
We’re a technology-led business in terms of how we think and how we operate,” says Donoghue.
“Despite us being a relatively small company as a whole, we’ve invested a lot in our technology platform – £1.2 million last year.
“The technology investment which we’re making is really about allowing the business to scale.”
Following a technology-driven strategy saw Sykes launch its first mobile app in September, which brings the knowledge of its 8,000 holiday home owners direct to customers.
The ‘My Sykes’ app also includes local-specific content offering insider tips on the best places to visit and things to do at different locations across the UK.
Donoghue is happy to extol the virtues of Sykes’ commitment to giving customers the very best online and virtual experience, but he is equally keen to stress the more traditional side of the business – something he thinks Sykes does better than the biggest name in short-term rentals.
“The service that we offer and how we look after our owners is very different [to Airbnb],” he says.
“We’re not just, dare I say it, a digital, faceless booking agent. We’ve got boots on the ground up and down the country. It’s a lot more human.
Although both Sykes and Airbnb appear to offer a very similar product – a short-term rentals across a variety of property types – according to Donoghue, the proposition couldn’t be more different.
“Airbnb has been phenomenal. It has four million listings globally and 100,000 listings in the UK, but if you look at where those properties are, they are very much concentrated in cities like London, Manchester, Birmingham, Glasgow, etc.
“They are not really growing in our heartlands which are mainly rural and coastal locations.
“The service that we offer to our owners is very different also. On a typical day we could be dealing with a dairy farmer who wants to give it all up and put some yurts or shepherd huts on his land.”
Enterprising farmers are just one example of the wide range of owners flocking to Sykes and, as Donoghue explains, they fall into one of three different lead types the company typically gets.
“We classify them as ‘thinking of buying’, ‘new to letting’ or ‘experienced’, says Donoghue.
“The experienced ones are relatively straight forward. What they’re looking for is maximum income or the maximum number of bookings – which is just a proxy for income.
“However, what’s interesting is that not all of our owners want the largest amount of money. Sometimes they just want the property full and they enjoy meeting people – it’s a lifestyle for some of them.
Whilst it maybe a lifestyle choice for some, for others the decision to rent out their property is purely financially motivated.
“We’re seeing a real rise in the number of people who are using their pensions to buy a second home and then using that as a yield and an income,” reveals Donoghue.
“There’s a lot of growth in that particular area because a typical owner will get around £40,000 income per year from the property and the yields are generally between 5-7% depending on the property.”
With just over 10,000 properties on the books and ambitions to double that number in the next couple of years, Donoghue evidently has plenty of confidence in the growth potential of the UK holiday market.
He credits the continuing fallout from the Brexit vote, a weakened British pound and fears over international terrorism as the three major factors which have seen more people, both from the UK and abroad, choosing to holiday in this country.
“The appeal of rural Britain is huge, the number of people going on holiday in the UK is growing significantly.
“We get a lot of customers who are now solely going on UK holidays because they feel nervous about going to an overseas destination.”
Despite this success and Donoghue’s intimate knowledge of the European holiday market, the CEO has no designs on expanding Sykes’ coverage across the English Channel to take on the likes of Airbnb just yet.
“Going overseas? Whilst the headroom is still significant in the UK and there’s plenty of space to grow, we want to remain focused and committed to being the best at what we do in Britain.
“Saying that, there are a lot of overseas visitors who come into the UK so we do spend quite a lot of time marketing in France, Spain and Germany.
“The technology platform which we have been investing in has been built to be multi-currency and multi-language so at some point in the future if we run out of headroom or if we make an acquisition in Europe, our technology will allow us to scale into those markets.
“But at the moment the market drivers are very positive for self-catering holidays in the UK.”