Sleeping giant

From pubs to hostels, and from London to Europe and the US, it has been quite a journey for Beds and Bars and Keith Knowles, its founder and managing director. Theirs has been a success story played out beneath the radar of many, and despite its size and reputation within the community it serves, the company is hardly a household name on the scale of most hotel and bar brands. That has been exactly how Beds and Bars has liked it—but as it stands on the cusp of the next stage of expansion around the world, it is about to get a lot more prominent.

Even in a sector not short on entrepreneurial talent, Knowles’ boundless energy and infectious ambition have stood out over the years. He started out working in his father’s pubs, the last of which was the Hercules Pillars in Holborn—still in the Beds and Bars fold today. Knowles junior was Britain’s youngest licensee and then tenant back in the late 1970s, and Peach Report meets him the day before a doubtless lively celebration of his 35 years in the industry. Those three and a half decades have seen him work tirelessly for the pub and bar sectors and its people as well as his own business, and his contributions to trade bodies like the BII, ALMR and PubAid led to him being voted sector champion at the ALMR’s recent 20th anniversary awards.

Bedding down
After nearly two decades in pubs, his move into accommodation in the mid 1990s came by accident. “We were looking for new pubs and found a terrible one on Borough High Street with a few beds above it,” he recalls. “I didn’t even know what a backpacker hostel was at the time.” He soon found out that London’s hostels were basic, to say the least. “Once we looked around at what was on offer, we felt we had to be able to do it better.”

That pub became Beds and Bars’ first St Christopher’s, named after the patron saint of travel. It benefited from the rise of the internet at the time, with tech-savvy young travellers helping to spread the word about the hostels and even helping to set up its first website. But raising money for what was a new and unproven concept was much harder (see box). “The City understood hostels and it understood bars—but not both of them together.”

Investment from Mark Warner and Scottish & Newcastle eventually funded more openings, first across London and then further afield in backpacking hotspots including Edinburgh, Newquay, Bath and Brighton. A decade after the Borough High Street launch, the company moved overseas for the first time—to Bruges and Amsterdam, then Berlin, Paris and Prague.

By now it had honed its formula of St Christopher’s hostel and attached Belushi’s bar; revenue is fairly evenly split between the two sides of the business. “There’s nothing revolutionary about what we do—China used to have inns along the Great Wall,” says Knowles. But his masterstroke has been to understand precisely what modern-day travellers want: a safe, secure and clean room in which to stay, and a welcoming, lively and late bar in which to drink and socialize. With attention to travellers’ basic needs like decent beds, wi fi and extra plug sockets in rooms, its hostels are light years away from the grotty backpacker joints of the 1970s and 80s. It might seem like a simple proposition, but delivering decent quality at a price that travellers on a shoestring can afford, while simultaneously hanging on to good margins, is harder than it might sound.

Beds and Bars’ hostels now sleep 20,000 people a week in seven countries, with at least 100 different nationalities represented among last year’s guests alone. Knowles is pleased to be encouraging people to broaden their horizons by travelling, and promotes the hostels and bars as inclusive, cosmopolitan places. “If you can get such a cross-section of people all together under one roof and talking, it’s got to be making the world a slightly better place.”

Going global
The next stop for Beds and Bars is Barcelona, where it will open an ambitious 450-bed site seconds from Las Ramblas this summer. Next it will turn its attention to its biggest target yet: the US. It has secured a tentative agreement on funding that will see openings in key American cities, with New York first in its sights and San Francisco, Boston, Washington, Miami and Los Angeles also on the wishlist. Following an introduction via Peach Network, it has also hired Ellie Frost, formerly head of international development at Jamie’s Italian, as special projects director to help steer global growth.

“We’re good to go,” says Knowles of the US. Group operations director Eddy Passey—who like several others at the company has risen up through the ranks, from working in the bar to the board (see box)—adds that Beds and Bars will quickly create its own momentum in the country. “Once we get one open there, more will quickly pop up.” Other eventual targets include the backpacking heartlands of south east Asia, and the vast market of China, to where Knowles’ team has been on an exploratory visit. He has also pondered the idea of ‘pop-up’ hostels at UK festivals and university halls of residences—even on a moored ex-battleship, though the logistics of that one seem likely to be too much to overcome, even for someone of his determination. “It was a pretty cool idea though.”

As Passey points out, Beds and Bars is mature enough now to be attracting the next generation of travellers—the children of those who stayed with St Christopher’s back in the 1990s. And with gap-year and later-life backpacking still increasing in popularity around the world, the future for Beds and Bars looks bright.

From not knowing what a hostel was to leading a £35m-a-year business that is growing at about 50% a year, it has been a startling transformation for Knowles and Beds and Bars, but he is not done yet. “We want to be at least double if not triple the size in five years time,” he says—by which time a sale, flotation or merger might be on the cards. “But it would be hard to finally let it go—to say goodbye.”

Beds and Bars timeline
1994 First Belushi’s opens in Covent Garden
1995 First St Christopher’s hostel opens on Borough High Street
1998 Company first awarded Investors in People accreditation
2001 First non-London St Christopher’s and Belushi’s open in Edinburgh
2002 Named on the Sunday Times British FastTrack 100
2005 First non-UK St Christopher’s open in Bruges and Amsterdam
2008 Franca Knowles awarded MBE for services to skills training in hospitality and charity
2010 Fifth European St Christopher’s and Belushi’s open in Prague. Named on the Sunday Times International FastTrack 100
2012 Keith Knowles named Sector Champion at the ALMR’s 20th anniversary awards

Knowles on… people
What has made Beds and Bars the company it is now? “People, people, people,” says Knowles.

The company employs staff of nearly 90 different nationalities and turnover, by the nature of the hostels and the people passing through them, is high—but Knowles is delighted by the number who have stayed on. “The thing I’m proudest of is seeing people grow with us.” He is a staunch supporter of the Investors in People programme—“It has given us real focus… I implore people to do it”—and an evangelist for training—for services to which his wife and Beds and Bars People Director Franca received an MBE in 2008. Both things have helped him to build a team of experienced, entrepreneurial people, from the bottom up to the board, chaired by Tim Sykes.

Knowles promotes open-door transparency across the business, and is on a mission to promote firms like this as a proper career option—especially for those like himself who left school without high qualifications. “Hospitality is under-sold as a career, and we’ve got to change people’s perceptions of it. People don’t realise that you can earn serious money here, and have a lot of fun doing it. As an industry we need to spread that message better if we are going to attract the best people.”

Knowles on… banks and planners
Knowles is renowned in the industry for his forthright opinions and colourful language—and he reserves some of his more imaginative vernacular for those who are stifling business and expansion.

“If it was down to the bankers we’d all be living in a cave,” is one of his more printable thoughts on a sector whose inflexible approach to funding is stunting the growth of many hospitality businesses at the moment. It is one of the reasons why Beds and Bars’ overseas openings are often on a joint venture basis with local partners, with banks very much a third party when required.

Another factor for is that local associates can help steer a path through local planning laws—which rank just below banks on Knowles’ list of frustrations. Needless procrastination has put the brakes on new openings around Europe, he says, and both local and central government need to better appreciate the value of the hospitality sector. “I wish they would realise that our places help create the energy that starts turning economies. It’s ridiculous how long things can take—you wonder how long they can push a piece of paper around for.”