BUNHILL

ONCE upon a time, Part II: Trust Houses used to own a chain of hotels, mostly cosy and historic hostelries in county towns. But then it merged with Forte and its chairman, Lord Crowther, lost out to Charlie Forte in one of the classic boardroom cl ashes of the 1960s.

Recently, Forte's son has been shedding some of the smaller Trust Houses, and last week two of them, the Red Lion in Basingstoke and the Goddard Arms in Swindon, were bought by a potential Trust House successor, the much less romantically named Management Services International. This is headed by one Richard Koch, entrepreneur, investment guru, rescuer of Filofax and owner of London's trendy Belgo restaurant.

His first venture into the hotel business was a disaster. In 1989, he ploughed £1.2m into the Saffron, a half-timbered, 20-room family-run hotel in Saffron Walden, Essex, where he made every possible mistake. He put in two inexperienced chums to run it and replaced the snug where locals used to congregate for a comfortable drink with a trendy conservatory. "The old clientele reckoned it had become a fancy, London-style restaurant and didn't take to it at all," Mr K recalls ruefully.

Unable to sell it in the slump, he handed it over to MSI, a newly formed team of specialist hotel managers that ran bankrupt hotels on behalf of the banks or receivers. They turned the business around by wooing the locals, improving financial controls, sacking inept staff, and retraining those who remained.

The grateful Koch promptly bought a quarter of the company and together they turned around the bankrupt, 50-room Westcliff in Southend and the Abbey Lawn in Torquay.

The team sounds confident about its new purchases. Neil Caven, MSI's finance director, points to the formula: a "minimum critical mass" - that is, at least 40 bedrooms - attractive premises, preferably historic, a good name and a location in the centre of a medium-sized town. Caven reckons that business travellers staying for most of a week, prefer not to be stranded in some anonymous new barracks on the bypass.

But the MSI formula does not mean relying on fly-by-nights. "The prime thing is to motivate the staff, provide a better service, and then knock on a few doors. We reckon on getting 90 per cent of trade from the locals - the Red Lion's bar is a local favourite and Swindon people have held their wedding receptions in the Goddard Arms." Clearly, the MSI-Koch combo has some way to go. "There's a mass of badly run, smaller hotels around," says Caven, "and sellers are no longer greedily asking prices related to the number of bedrooms, but looking at hotels as businesses."