INTERVIEW | Simon De Cesare: Taking leisure and entertainment seriously

Eden Leisure Group’s entrepreneurial journey started in the late 1960s, and in 1980 moved its operations to St Julian’s, diversifying into entertainment. ELG now includes two hotels, a cinema, a radio station, and more…. Was this massive expansion planned all along?

I don’t think it was a case of having a 40-year plan or vision going forward. My grandparents opened our first hotel – the Eden Rock Hotel – in Sliema back in 1967. Later, my father and uncle expanded the business to St Julian’s in the 1980s.

I think the expansion was the result of the successful businesses which they opened in the 1980s – the nightclub Styx, later Styx 2, and the Eden Beach Hotel which we opened up in this area. These were one of the first commercial enterprises in Paceville and St. Julian’s.

We built on our success, and grasped at opportunities which were lacking in Malta at the time – such as the fact that at the time the island had about 30 single-screen cinemas, which were all poorly invested in and were lacking the new technologies. We noticed there was an opportunity for us to open the first cinema multiplex with digital surround sound, in Malta, and these ended up being extremely successful.

Another thing which cropped up was the liberalisation of the radio market, which was an area we went into straight away. There are still a lot of radio stations out there on the market, but Bay Radio has undoubtedly been the most successful in terms of audience numbers.

It’s about always looking at what the next chance could be – whether it’s an international opportunity, or a new legislature, or the opening up of markets.

For instance, the launch of our casino in 2015 was a result of the fact that the government was looking to have another operator in Malta.

The same happened when we saw a great opportunity in bringing in the first branded three-star property – Holiday Inn Express.

In 2008 we had a gross profit of around €8 million, 10 years later in 2018 this had doubled to around €16 million. Last year, our company had €186 million worth of assets.

Your group includes about 11 different diverse units, all focusing on entertainment. Which one of these units is the most fun for you to work with?

They’re all very different. I moved into the CEO post at the start of 2017 and before that I was director of operations. I think the area which was probably the most fun was the cinema, because it is so diverse on a week-to-week basis with the film product changing all the time.

One has to come up with different marketing ideas each week through which you try to excite the public to come and see the film – whether it’s traditional events, midnight screenings…

And which is the most profitable?

The InterContinental is by far the largest and biggest contributor to the Group. But the entertainment basket as a whole is also very successful by itself. None of our operations post any losses. In fact, our principle of not tolerating businesses which lose money for too long has been an important strength for us. We’ve had our share of failures – one looks at the ice rink and our foray into mobile telephony– but we’ve realised there were flaws with their business models, and we moved on. Typically, we’d try to convert these into a business that works. Take the ice rink – this was converted into the InterContinental Arena Conference Centre, which has been a huge boost for the hotel.

All of the businesses are successful, and, on the entertainment side, all the different units have different needs and investment requirements. So far, we’ve been very fortunate to be on a very good streak where all our units have improved year-on-year for the last five years.

Some business-101 books advise against mixing family with business. But this is not what you did. What is the secret behind the De Cesare’s success? Is it easy to work with family members?

In Malta, most businesses traditionally are based on family. Recently, due to our growing size and the starting of our succession plan from the original founders of the company, we’ve amended our business to move away from a typical family outfit. We underwent significant restructuring since my father, who is one of the founding shareholders, retired in 2017.

We now function as a disciplined company with good corporate governance and shareholders value at its core. We brought in external directors, and we’ve put in place family policies and an understanding between all the family members of what is expected from them.

There is also a progression system based on merit, more so than it would have been were it a traditional family business.

This has posed its own challenges, but, ultimately, I think it was for the benefit of the business. Nobody can be guaranteed a job here unless they perform and are the best person for that job.

Such a system will allow us to go on for the next 10 to 20 years, contrary to the typical third-generation family businesses, which statistics show only have a 12 to 15% chance of success.

When my father and uncle first started the business, they held two different roles. My father was more disciplined and feet on the ground , while my uncle was more creative and looked at other opportunities to go forward. They were a very good team, and it worked extremely well for 30 years.

When your father Ian and uncle Kevin De Cesare first set out on their journey, did they always envisage St Julian’s and Paceville becoming the entertainment mecca they are now?

I think there was a general appreciation of the understatedness of the area and the proximity to a bay. Malta’s tourism product was very small at that point. There was clearly a lack of entertainment options available to the Maltese public back in the 1980s, and that’s what fuelled the success of the business at that particular point.

Did they know that it was going to turn into this? I don’t think so. I think they were convinced of the business model that they were going into. They realised there was a lack of good hotels on the market, and very few, if any, state of the art discotheques and nightclubs, and no multiplexes with digital surround sound and fantastic projection. There was one bowling alley in Malta when we built ours but it closed down shortly afterwards.

These were the defining factors rather than the actual location.

I would hazard to say that the potential projects, which are earmarked for this location in the coming years, could actually end up being quite a negative or detrimental aspect. Tourists who come to this area and are faced by cranes absolutely everywhere. There are places which have become more attractive, such as Valletta.

I’ve expressed concern about the future of the tourism industry, because over the next few years the number of hotel rooms is going to double, and it’s just simply not feasible and sustainable to expect the tourism numbers to double.

Everyone seems to be getting into small hotels without any real experience or understanding of the business, and they’re probably over-paying for land and for the building, because contractors are very hard to find at the moment.

This will create a squeeze on pricing and ultimately it will be detrimental, because some businesses will end up closing down. I believe that having the right international brands as well as a management team with the experience that we have, as well as the economies of scale will hold our hotel portfolio in good stead.

ELG is known for introducing new concepts to Malta. What’s the next thing we can expect from you?

One of the big things we’ll be investing in later this year is the refurbishment and upgrading of our cinema lobbies. We’ve always invested in the quality of the actual film product – such as in digital projection, sound, improving screens, light outputs, changing the seats, and so on. But the lobby area has been one of the areas which we haven’t put too much focus on, so we’ll be investing significantly later this year in upgrading, changing our bar area and signage…

When it comes to our gym, Cynergy, two years ago we changed every single piece of equipment at a cost of €600,000. This had the result of more than doubling our members in two years. When you invest in your existing properties, there are immediate returns.

We’ve also moved into the E-sports arena, which was a steep learning curve, and was a new thing for Malta.  We’re looking at being one of the big E-sports event organisers internationally, and the event we organised last year attracted over 9.2 million unique online viewers last December. This year we’re planning on improving on that and making it larger still.

Looking forward, virtual reality will become big. There’s a new E-sports platform, for instance, which utilises a kind of technology allowing the persons playing to actually walk and look sideways on a treadmill type flooring and so on. A lot of this can overlap into Cynergy and several other different areas. So we’re looking at virtual reality and seeing how to apply it from an entertainment point of view and from a business side.

In the meantime, we’re also consolidating our existing businesses and building up our team. There’s a lot of focus on the employees with the business, which we’re giving more importance to now. My role as a CEO is to ensure that our key team members are focusing and performing as efficiently and effectively as they can, to provide shareholder value. The engagement of staff is critical to be able to do that, and this is a key part which we’ve been focusing over the last couple of years.

Is it hard to retain staff?

All over the board there is a problem related to bringing in and retaining good people, and we’re not immune to this however we have a great work environment and our focus at the moment is to create a purpose for people to work for us that they buy into and I think it is translating into higher retention and better recruitment opportunities.

Moreover, we also have to compete with all the foreign businesses which have some advantages which we don’t have. Malta has one of the highest corporate tax rates in the world. All other countries have been pushing it down, but local companies are competing at 35%, which is insane. No wonder there is such a large black market out there. If the tax rate were more reasonable, people would think twice about avoiding or evading tax. And I think we would be in a much better position as a country.

Bay Radio remains one of Malta’s most popular radio stations. But is radio dying out?

Bay Radio typically has around 22 to 25% of the total market, which compares very favourably to the next radio stations. We’re extremely strong with the younger market, including the very young market. But we’re also the most popular up to the age of 50. We attribute that to having been around for 20 odd years, so people have grown up with us, they know the brand and know what to expect. We’re very careful about the quality which we put in place, and invest heavily both technically and in the people manning the station.

There are two facets to the business – without good quality programming, you don’t get the audiences, and without the audiences, you don’t make sales.

Is the medium dying out? I think typical traditional FMs days are numbered as we move towards digital radio, but I don’t know if it’s in terms of single or double-digit years in Malta. Even digital radio will struggle with people streaming their music and news. It is up to us to ensure that our product is entertaining on a local front as well as providing music and news.  

When it comes to Eden Cinemas, how do you keep your business profitable in the face of ever-increasing competition from things such as online streaming services and do your cinemas offer which would make someone leave the comfort of their homes?

I think the most important thing is the overall experience. You’re getting out of the house, so there’s a social aspect to it. While you can sit at home and watch a film with your partner, if you go out, there’s more of a social experience.

The overall experience is extremely important, and we believe it starts from when you park your car, to when you enter the cinema and later when you leave. People also want to be wowed when they enter the cinema building – which is something we’re focusing on in our lobby refurbishment.

We focus on good quality projection, comfortable seats, clean facilities and a level of policing to ensure that cinemagoers can watch a film without too much disturbance from others in the theatre.

I know some people who don’t go to the cinema because they can’t stand people eating crisps or popcorn. Certain chains in the UK have popcorn-free screenings.

In this context, we’ve introduced autism-friendly screenings, where the light isn’t too dark and there won’t be popcorn noise or sounds which are too loud. We’re putting this in place to offer something to this community which has never been catered for. It’s not a moneymaking thing, but a question of social responsibility.

As I said, all of our business units are successful, and some people are surprised to hear this about the cinemas, because they expect it to be on a downward trend. There has indeed been quite a steep downward trend from the beginning of the century, but the cinematic outing is still important for people when it comes to certain films. Take last year’s blockbuster Bohemian Rhapsody – this brought in many, many people. But when it comes to a type of film which they could watch at home in three months time, they might decide to wait instead of seeing it in the cinema.

Can you give me one-word reaction to the following:

Paceville

Disaster.

Joseph Muscat

Business-friendly.

Foreign workers

Necessary.

Competition

Always.

Family

Positive.

Regarding the business-friendly aspect of the government, this also has its drawbacks – whether it’s sustainability, or the ability of Maltese businesses to compete adequately with foreign businesses. So you can be as business-friendly as you want to be, but there are ramifications which you have to deal with.