Duke sets sights on estate expansion - Monday interview: Duke of Roxburghe

OUTSIDE is the sort of castle that only a fairytale with serious aspirations could conjure. Crafted into an imposing, ornamental confectionery by Scotland's celebrated architect William Playfair in the early to mid-19th century, Floors Castle's grandeur only serves to heighten the plainness of the little meeting room where the laird is serving coffee, albeit out of a very tasteful fine china service.

"It is a burden," admits Guy Innes Ker, the tenth Duke of Roxburghe, owner of the castle and surrounding estates that expand over 65,000 acres of fertile Borders farmland and countryside. "That is possibly something people don't understand."

He is not complaining. A Sandhurst man, there is something distinctly efficient and no-nonsense about the duke that suggests habitual whingers would find little sympathy. That and he well knows his "burden" could only be complained of in the utmost terms of noblesse oblige.

"We are very fortunate to live with that," he adds, "but we share it with the public. It is a national asset. But it is an expensive burden on the estate, having the cost of maintaining it on an annual basis without even getting into expensive things like refurbishment: it is expensive actually maintaining the fabric."

It is why the duke is expanding his business – that and he recently married off his eldest daughter in an intimate occasion for 500 this summer.

Recently he submitted planning permission to expand the Roxburghe Hotel, a former manor house his father, the ninth duke, bought in the 1960s. It was converted from estate offices to a 22-room hotel in the early 1980s, when the market for weekend getaways in country houses began to take off.

The plans are to expand the hotel to 58 bedrooms, plus build a number of time-share lodges. The hotel will also include a new restaurant, kitchen and corporate meeting rooms and wedding function rooms, and of course, a spa. Currently the hotel, which is linked to the adjacent Roxburghe golf course, turns over about 2 million a year. The duke is a golf nut and he added the parkland course to his operations in 1995.

"It has become increasingly apparent that a hotel with 22 bedrooms makes it very difficult to operate," says the duke. "It has been very successful, but from a financial perspective it makes sense to amortise your fixed costs over a larger room stock."

The duke is in the market for a joint venture partner to help develop and run the project. The competition is getting fierce, with the likes of Gleneagles and The Old Course making multi-million pound investments in spas, while the Dubai royal family is likely to spend freely on its recent acquisition, the stately Turnberry in Ayrshire.

With its sights set firmly on the weekend-breaks market, the Roxburghe will not be quite in this league. But closer to the duke's Kelso home, De Vere Hotels has joined forces with developer Manour Kingdom to build a five-star resort, Rutherford Castle Hotel, in West Linton. As the market for luxury dries up in the current wintry global climate, the duke realises he needs to bring extra talent on board.

"We would be looking to get an expert in to assist us," says the duke. "We appreciate we have our own skill sets, but we will be moving our operation on to a different level."

The estate is not just the castle, hotel and golf course. There are about 43 tenanted farms as well as five farms run by the estate. In all, he employs 90 full- and part-timers, either in the farming and forestry operations or at the castle tea rooms and garden terrace cafe, where the duke's chef, Iain Colingbourne, runs a deli and cafe year round.

"We have had a long-running, successful relationship with our farm tenants and we still see that as a very important core of the estate. That has worked for us extremely well and we don't see any reason for that to change."

But with estates comes land and opportunities to become a property developer. The estate has about 200 or so cottages – formerly used by farm workers – that are now rented out, which the duke says achieves "a sensible return".

A recent foray into property development along with housebuilder Charles Church – the firm that sponsored the duke's Scottish Seniors Open – was hit by the housing slowdown. With planning permission for 80 houses next to the golf course, the partners built 40 before putting the other on ice.

"The economic climate even a year ago was such we didn't proceed with the second phase, which we still have planning permission for," says the duke. Not that he looks too worried. He has done other small deals – a bit of land sold here and there. "We are releasing capital that way to invest either on the estate or expand out our own assets elsewhere into commercial property or other developments."

The duke has his models to follow. Not far from Kelso is the wee village of Buccleuch, and its ducal namesake, the Duke of Buccleuch, Europe's largest private landowner whose operations comprise commercial property as well as estate, farming and farm retail operations.

The Duke of Roxburghe's former brother-in-law, the Duke of Westminster, is the richest aristocrat in Britain – although with an estimated wealth of 91m, the former is far from the stereotypical poor laird with more state-protected assets than liquid cash.

"Historically, the northern Scottish estates have been asset-rich and cash poor. Yes we are a very wealthy family, but it is a business and the challenge we have is to make the best use of our assets without impacting deleteriously on the assets themselves and to put them in as good a state as we can looking forward to the future. Income and cash generation, particularly at the moment, is going to be crucial."

But duke plays down any comparison to – literally – his peers like Buccleuch and Westminster. "One could only admire other people's success without aping them unduly. One can certainly learn from their experience. They have a very successful model, the Duke of Buccleuch's estate. They are significantly larger than we are so we don't have quite the same ability to play in the same field."

Although Floors Castle is striking and well preserved, the attraction is not drawing the same crowds as it has in the past. Last year 30,000 came to visit "People's expectations have changed," says the duke. "There has also been huge expansion over the last ten years of different events and more modern tourist opportunities, some of them may have been lottery funded. There is only a limited degree to which we can change the underlying asset."

And despite working to attract younger audiences and children, the duke admits the castle tends to appeal mainly to "the older generation".

But there are ways to make it more popular. The 1984 British film Greystoke: the Legend of Tarzan used Floors as the titular character's ancestral home. Visitor numbers shot up, but since then the events have not been quite so glamorous: in 2005, 6,000 Citron 2CV enthusiasts descended on Kelso and the castle gardens for a world rally in celebration of the quirky French car.

Both the boon and the trouble with the Borders is it is very quiet and difficult to get to, except by car. Although it will not stretch to Kelso, the duke welcomes the Borders rail link. "It would be nice if it enables the commercial centre of Scotland to filter our way a little.

"It will have an impact on the Borders as a whole and it is likely to attract more people to come down and live here and, hopefully, will attract more businesses to locate here.

"We are very poorly served. One of the reasons we are this forgotten part of Scotland is the train goes around it and the main roads aren't that good. There was discussion years ago that the A7 or A68 was going to get dualled. I would have loved to see that happen.

"But it depends which view your taking. One of the joys of living here as a resident is it relatively unspoilt. We live in a beautiful part of the world and nobody knows about it."

His heir, the eventual 11th duke, now 27, has completed a five-year stint in the army and has served in Iraq. He is about to get his first job. The duke fully expects him to take over in due course, although having ascended to the title himself at a rather too young an age he is keen to see him have his own life as well.

"I was very fortunate – well very unfortunate – my father died when I was 19," says Innes-Ker. "I think it is important my son lives his own life for a period, to gain his own experience of life and of business before he feels either obligation or need to return here.

"There will come a time when I decide to step down and it is appropriate to take over the reins. I don't want him to feel he has to do that too soon. And he has had the experience elsewhere to bring to this job in due course."

BACKGROUND

GUY David Innes Ker, the tenth Duke of Roxburghe, is 53. A graduate of Sandhurst and Cambridge, he inherited the title at the tender age of 19.

He served for three years in the Blues and Royals before officially taking over the ducal seat, Floors Castle, Kelso, and the Roxburghe Estates.

He opened Floors Castle to the public in 1977, the year he married Lady Jane Grosvenor, sister of Britain's richest aristocrat, the Duke of Westminster.

They divorced in 1990 but the duke remarried in 1992, to interior designer Virginia Wynne-Williams. He has five children, including heir Charles Innes Ker, the Marquess of Bowmont and Cessford.