Over the last two winter seasons, Rank Group has spent £140m improving its three remaining Butlins holiday centres at Minehead, Skegness and Bognor Regis.
Visiting Bognor recently, the major differences I noticed were the Skydome covering the centre, the improvements to the accommodation and a general smartening up of the whole place.
About time too, some would say. The business was gradually dying, and customer satisfaction falling. In 1996, less than half the visitors to Butlins said they would rebook, a reflection of lack of investment.
Early reactions to the new Butlins have been encouraging with two-thirds of customers now likely to rebook.
Certainly the new Skydome, with its undercover bars, restaurants and shops has made a considerable difference to the centres.
Equally important has been the improvement in the accommodation. It had become run down, and just as poorly refurbished accommodation in the hotel sector is difficult to sell, so Butlins was getting harder and harder to fill without heavy discounting.
Now bookings for the main season are 10% ahead in value terms. Updated and relaunched as family holiday resorts, Butlins looks set to have a future again.
However, to justify in financial terms that £140m investment, Rank has got to show an improvement not just this year, but further improvements in subsequent years.
This is dependent on a decent proportion of customers rebooking and, equally important, on word of mouth that Butlins is worth considering again. Warner has been one of Rank’s great success stories. Now aimed at the older, more mature market, it has established a strong niche position by offering a combination of historic houses and specialist resort villages.
By targeting the older market, and concentrating on facilities like bowls rather than discos, it has been a great success both in terms of booking trends and profits.
The Rank Group also looks as though it is turning the corner. Profits have been falling for several years, despite the strong consumer spending levels of the last few years.
In a recent update on its performance, Rank indicated reasonable trading, although consumer demand is still soft.
As for Rank’s share price, it has climbed usefully from its lows, and most investors see little downside now. How much upside there is depends on continued and sustained improvement in its operations.
The jury is still out on that one.
Bruce Jones is first vice-president of Merrill Lynch