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How employee ownership saved the Priory Hotel’s identity

See how a new business model allowed this Highland establishment to carry on its role in the community.

10 Mar 2020 | 5 minute read

The Priory Hotel has been at the heart of the Beauly community in the Highlands for nearly 40 years. After becoming an employee-owned company in December 2018, it has continued to play an important role in local life under the direction of the people who know it best – its 46 employees.

Find out how the owner’s decision to sell to his staff helped preserve the hotel’s values and culture while allowing the business to thrive.

A Highland hotel with community roots

Founded in 1972 by Stuart and Eveline Hutton, the Priory Hotel rapidly became a local institution. It has since grown from 12 to 39 bedrooms, with a busy restaurant, bar and coffee lounge popular with locals and visitors alike.

As the Huttons’ son Kenneth describes it, “Beauly is a small town and many people from the area have worked at the hotel over the years. Many marriages were forged at our discos and musical events in the 70s and 80s. And people still travel from far and wide for our food, in particular the Sunday carvery and high teas.”

The hotel’s importance to the community was a major consideration when Stuart began to contemplate retirement. After nearly four decades of managing the hotel’s day-to-day operations, he felt it was time to take a step back – but wasn’t keen to turn the hotel over to just anyone.

Employee ownership as a succession planning solution

“My dad was at the stage where he was considering a step back from the business,” Kenneth explains. “He had put the hotel on the market recently and had a couple of trade sale offers; however, he didn’t feel that the prospective buyers were the right fit for the hotel.

“A staff member had once mentioned employee ownership as a potential solution to this – it meant the business would be sold to those who know it best, and it wouldn’t be taken over by a large chain.

“The option stuck with my dad. When he felt like he had the correct management team in place, the time was right to begin progressing the buyout.

“By selling to his employees, my dad knew that the business he spent 46 years building would be in the hands of a loyal and invested team that wants the best for the hotel and the local area.”

The staff of the Priory Hotel

How employee ownership can benefit people and businesses

Currently there are around 110 employee-owned companies based in Scotland, with around 7500 employee-owners. Together, these businesses have a turnover of around £950 million.

Employee ownership has numerous advantages as a business model. Statistics show that employee-owned businesses tend to be more profitable and innovative. They also show higher levels of resilience, even in times of recession.

More engaged employees also lead to improved productivity and worker well-being.

Once the Priory Hotel’s staff got to grips with the concept of employee ownership, they were keen to be involved. The model has also proved a selling point with new staff, helping improve retention and reduce turnover, and has generated a strongly positive response within the community and through social media.

Peter Allen is an account manager at Highlands and Islands Enterprise (HIE), which helped support the Priory Hotel through its transition. He explains: “Transferring ownership to employees is a great option for business owners and we were delighted to help Stuart and Kenneth and the team through the process.

“Employee ownership is an effective way to drive business performance by boosting productivity, increasing employee engagement and keeping the company in the community. We would encourage anyone thinking about options for future structures to choose employee ownership to help build a more diverse and sustainable economy.”  

Listen to our Priory Hotel podcast episode

Hear Stuart and Kenneth Hutton from Co-operative Development Scotland (CDS) discuss the hotel's transition to the new business model in our employee ownership podcast.

Setting up a new business model

Making the transition to employee ownership may seem daunting, but there is plenty of guidance available.

Co-operative Development Scotland and Highlands and Islands Enterprise both provided support to the Priory Hotel in setting up its Employee Ownership Trust, which holds 72% of the company’s shares on behalf of its employees. Kenneth Hutton kept the rest to demonstrate the family’s ongoing commitment to the hotel.

The process was managed by employee ownership specialists Ownership Associates, with additional support from Anderson Strathern Law Firm and Johnston Carmichael Chartered Accountants.    

“The support we received from Ownership Associates throughout the transition to EO was invaluable,” Stuart notes. “We were fully informed on how the model works and what it would mean for the business and we were given great advice on how best to structure the company. They were also very helpful in explaining the process to our staff.

“Our accountants, Johnston and Carmichael, and in particular John Todd, were superb as ever in making sure the numbers all worked. Anderson Strathern also provided excellent legal advice throughout.”  

After initially struggling to secure funding, the deal was eventually part-financed by Handelsbanken, with the rest coming from a vendor loan.   

“We’d spoken to a few potential funders and found Handelsbanken to be very supportive of our move to employee ownership,” says Stuart. “They had the deal prepared quickly and efficiently.”

A structure designed for ongoing success

Kenneth grew up with the hotel and, after pursuing a career in the golf industry for many years, decided to return to the business. Under the new EO structure, he took on the role of managing director and began overseeing operations so his father could gradually step back from his role.

Kate Melens became general manager, a role that makes use of her extensive experience and fresh approach to keeping up with the changing times. Other members of the existing management team also assumed positions on the board. This helped to ensure continuity with the hotel’s past even as it moves toward a bright new future.

Clare Alexander, head of Co-operative Development Scotland, says: “Stuart has spent over half his life building a successful and much-loved local business. By handing control over to a team that he knows and trusts, the hotel’s important standing in the community was protected, along with jobs and company ethos.”

Want to learn more about employee ownership?

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