Small hotels with grand prospects: Marketing: a new breed of gentlemen innkeepers spreads the discreet charm of a town house stay

Hoteliers Alasdair Hadden-Paton and David Naylor- Leyland are beginning to wonder out loud whether the grand hotel, like the department store, is an idea which has had its day. Of course, as owners of two small but elegant hotels near Harrods - the Egerton House and the soon-to-be- opened Franklin - they have an interest.

They are successful members of a new breed: the 'gentlemen innkeepers' who have made a success of other businesses, often in the City, and who are now owners of 'town house' hotels. These are select, privately owned and beautifully decorated (generally by the owners or their wives) in the best locations and offering better value for money than the capital's grander caravanserai, where bedrooms tend to start at pounds 200 the night.

They have to be small - under 50 rooms. Above that level, says Mr Hadden-Paton, 'there are serious doubts about the one-to-one service which is one of the keynotes of these hotels'.

They also have to be in the right place, which means within easy reach of the West End.

Owners of more traditional grand hotels still dismiss the town house hotel as a passing fad, even though the model of the small hotel in which guests become familiar over the years has long been the Connaught, with only 70 rooms. Mr Naylor- Leyland, however, chose a night-club, Annabel's, rather than a hotel, as his model.

Town house hotels have existed in the Sloane Square area for some time. The Beaufort and Eleven Cadogan Gardens proved over the past decade that the formula could work commercially, as did Blakes in South Kensington, the most famous, thanks to the publicity flair of its owner, Anouska Hempel, wife of financier Sir Mark Weinberg.

Nevertheless, there is no guarantee. The Draycott, for instance, went under, though it has reopened under new management. Another, the Sloane, tries to improve profitability by offering for sale copies of furniture and fittings to clients'.

In theory, it should be easy to find suitable premises, since the smarter areas of Knightsbridge and Kensington are filled with large town houses. But it is almost impossible to find small hotels which can be converted to town houses. Only a few, such as the Halkin, were built as town house hotels - and in the late Eighties, with hotels selling for pounds 200,000 a room, there was no way gentlemen innkeepers could make money by buying and converting them.

Sensibly, most followed David Naylor-Leyland's rule: 'Never buy in a good market what you wouldn't buy in a bad market.' So most are converted from a couple of big Upstairs Downstairs-type residences, although one, Twenty Two Jermyn Street, was 'gentlemen's chambers' and another, Fortyseven Park Street, service flats for companies.

But the main opportunity for entrepreneurs was through a loophole in planning laws: many large houses classed as short- stay accommodation and used as hostels could be converted into the poshest of hotels without a change in planning use.

All the hotels have a basic formula which involves not only the right location and style but also the right staff. 'They have to be good-looking, agreeable, friendly and above all flexible and adaptable,' says Mr Hadden-Paton. But the services are not going to be as complicated as in your average grand hotel. The sort of client they are seeking is not the average tourist: 'The last thing you want to do is to eat in your hotel,' he says - though midnight snacks are another thing.

Their success also depends on finding customers through the old-boy network and executives, especially in big international financial institutions, who arrange accommodation for visiting firemen.

The gentlemen innkeepers have also had to hustle. 'We walked the streets in Los Angeles, New York and Toyko looking for likely institutional clients,' says Mr Hadden- Paton. Numbers are limited - the biggest possible group booking is five.

But because of customer loyalty, many of these hotels are full even in August, when clients take holidays, many in London. And at least one hotel is mining a rich specialist seam: the Portobello Hotel in Notting Hill Gate specialises in the top brass of the international music business, grateful to be able to stay somewhere where, even if they are recognised, they certainly won't be stared at, let alone asked for autographs.

The idea has now been formalised in The British Town House Collection, published by three marketing executives, led by Nigel Massey, who have stayed in all the hotels involved. Although the first edition produced 62 applicants for inclusion in the next, only four seemed potential members.

But the idea has spread beyond London - indeed, one of the pioneers was the Abbey Hotel in Penzance, a creation of Sixties model Jean Shrimpton in her role as Mrs Cox, wife of a wealthy antique dealer. There are also examples in Edinburgh and Glasgow.

In fact, there are far more opportunities in the provinces, where existing hotels, even on the finest sites, can often be acquired at reasonable prices. But then any centre which has enough business or leisure visitors (preferably both) to support one or more grand hotels can attract a town house hotel.

The success (and thus the size) of the Lygon Arms in the heart of the Cotswolds has allowed room for the establishment of the Close, an old merchants' house in Tetbury.

Now the idea is spreading abroad. In the centre of Brussels, a Swedish company is opening the Montgomery; in Dublin the Hibernian will open at the end of October, and in Paris there is the Montalembert - what the French would call 'le townouse'.

(Photograph omitted)