In the City
The Direct Orient
Tony Rudd
An extraordinary feature of this recess- ion, so far at least, is that it still seems possible for companies to make money out of providing goods and services to the rich and to make much more money out of it than when providing them on a mass scale to the general public. The new Direct Orient Express from London to Venice at £250 for a one-way ticket is almost fully booked for the rest of this year. Far from being the loss-making quirk of an amateur railway buff the Direct Orient is the latest example of how to make money out of the top end of the leisure business.
The operation is run by the Sea Con- tainers Corporation which, as its name im- plies, is a huge shipping organisation specialising in container transport with a balance sheet worth around $1,000,000,000. Its founder and chairman, Jim Sherwood, has been trying to get his business more into leisure for some years now; so far he has succeeded in doing this to the extent of about 10 per cent of the overall operation — not as much as he would like but, as he says, the leisure business doesn't come in large units, not at least viable ones.
The idea of rebuilding (literally) the Direct Orient came in 1977 when the old Orient Express ran for the last time. This more or less coincided with a sale of several pre-war Wagon-Lits sleeping and dining cars by auction in Monaco. The first pur- chase was made on behalf of the new enter- prise at this auction, when several sleeping cars were acquired. Five years later the whole thing is operational.
It has taken all this while to acquire and refurbish seventeen vehicles on the Conti- nent and seven in the United Kingdom. They have been bought from various sources and in various states of disrepair. Every one has needed complete rebuilding. Some of the European Wagon-Lits turned out to be in particularly bad order, especial- ly those which in pre-war days had been on such as the Nord Express, which used to go from Paris to Riga and back. All the panels on all the cars were removed and the original skeleton was sand-blasted to the core. They were then painstakingly rebuilt. The sleepers were done by the Wagon-Lit Company itself (a private concern, the main shareholder of which is the Bank Lambert). The public room cars were done by a private German company in Bremen. In the UK the Pullmans were rebuilt at Carnforth where the requisite facilities were assembled at Mr Bill McAlpine's steam centre which was already there (and is of course well known to UK train buffs). Everything was rebuilt with no cost spared. Craftsmen, whose fathers, working for such firms as Waring and Gillow, had invested their skill in pre-war Pullmans, were recruited to carry out the work afresh. In some cases original patterns both of material and mar- quetry which had not actually been used in the Twenties and Thirties but had miraculously survived in store were used in the rebuilding. On the Continent the original decorations, some by such world. famous figures as Lalique, were similarly restored with loving care. Where new ar- ticles had to be provided such as cutlery, glass, silver, table lamps and so on and so forth, manufacturing facilities were established. Now the whole thing is running in its full glory complete with specially seconded and recruited staff numbering a total of 200, who give impeccable service on both sides of the Channel. The food is good to memorable (on the French side the chef comes from the famous Troisgros Restaurant with its three Michelin stars). The budget for the first full year is based on 18,000 passengers travelling one way; so far bookings exceed 20,000 and are being taken in New York alone at the rate of 100 a day.
The financial budget calls for an operat- ing profit after all costs of $3 million; so far it looks as though this is going to be met. Mr
Jim Sherwood has brought all his financial acumen, developed in the competitive field of container operating and leasing, to the business. The total cost of putting the show on the road is pretty high, at £11 million all in. Of this £8 million represented the fixed assets, mainly the rolling stock. On average each car has cost a quarter of a million pounds, which is approximately double what a new one costs. Recently a leasing deal was concluded with Cable and Wireless, the huge communications com- pany which was denationalised by a substantial public flotation last year, as a result of which Cable and Wireless bought the entire £11 million operation and leased it back on a ten-year lease to Sea Containers at a running yield of 8 per cent. For Cable and Wireless the deal makes sense because it can achieve 100 per cent depreciation of this cost this year thus giving tax shelter to profits of approximately double that amount. Furthermore Cable and Wireless didn't have to take a view of this leisure operation. A group of bankers were inter- posed who come up with a bank guarantee, so that the leasing deal contains no element of risk or exposure whatsoever. What is in- teresting, financially, is that bankers are usually notoriously suspicious of new ven- tures (they like carbon copies of ones that have been proven time and time again) and particularly new ventures in the leisure field, especially the ones with bezzaz, which the Direct Orient certainly has. Their qualms were apparently settled after they took a trip on the train and saw for themselves. But it probably wasn't just the excellent food of Monsieur Troisgros and the facilities of the bar-car which did the trick, rather it was more likely to have been their realisation that here was a thoroughly well-thought-out extravaganza which was going to make a very reasonable profit.
The long-term test of the enterprise will however come with the second and third year operations. If the current recession does, unhappily, turn out to have more than a resemblance to the deep recession of the inter-war years then there could be a more testing time ahead. Your correspon- dent, whose 'due diligence' (as the Americans call it) on this project has of course included a personal trip of inspec- tion, was interested to note that in each of the Wagon-Lits there was a little plaque containing the history of that particular car. The one in which he had the pleasure of travelling overnight, complete with its creaking mahogany inlays, had had an eventful if slightly unusual history, starting in 1929 with a spell on the Simplon Express and then on the Blue Train and ending up in the war from 1943 to 1945 as a brothel in Limoges (why Limoges?). The car had been retired from service between 1932 and 1938 and stored because of the impact of the depression. It is very much to be hoped that this is not an unfortunate but accurate guide to what will befall this beautiful sleep- ing car once again, meaning of course the danger of it being laid up rather than being used as a brothel!
Previous page
