Premier Inn owner Whitbread is committed to improving the performance of its remaining pub restaurants after announcing earlier this year that it would relocate or sell 238 of its approximately 450 sites.
“200 pubs seems relatively small in our ecosystem, but it’s actually a sizeable business… this is the right size pub for us,” said Simon Ewins, managing director of UK hotels and restaurants at Whitbread PLC. UK Annual Hospitality Conference (AHC) on 30 September at Manchester Central Convention Complex.
He described the pub restaurants as the “heartland of Whitbread”, although admitted the group is “now more of a hotel business than a restaurant business”. He admitted that restaurants had “suffered a bit from the concentration on hotels”.
“It’s really important to our guests that we have food and drink everywhere and that sets us apart from our main competitors in the mid-market,” he added. “Now we have to run these companies sensibly and sustainably and also more commercially.”
Nigel Sherwood was recently appointed CEO of Whitbread’s restaurant division, tasked with improving the commercial performance of this segment.
Whitbread reported a 1% increase in total group sales for the first quarter of 2015 and unveiled more ambitious plans to create 3,500 hotel rooms at existing Premier Inns by converting the “lowest-profit branded restaurants”.
The plan includes converting 112 branded restaurants into hotel rooms after the food and beverage operations have been moved to an integrated restaurant. A further 126 branded restaurants are to be sold as going concern and Whitbread has already reached terms to sell 21 restaurants for £28m.
“They’re non-core assets, they’re a distraction to us, and so other people would covet those assets and do a better job,” said Ewins. “What it does financially is it takes away (238) lower performing and less attractive non-core assets and gives us the opportunity to build 3,500 more efficient and better performing assets that deliver across the group.”
Whitbread, which operates restaurant brands including Beefeater, Brewers Fayre, Table Table, Cookhouse + Pub and Bar + Block, is the UK’s largest hotel group with 85,000 hotel rooms. The company said the new rooms will be added in “high demand locations where we have identified a lack of supply”, allowing Premier Inn to expand to 97,000 rooms in the UK by the end of the 2029 financial year.
This expansion initiative is not expected to bring significant changes to the group’s core Premier Inn brand, which accounts for 97% of its portfolio, nor will it lead to an expanded brand portfolio or the asset-light strategy that many hotel groups have opted for. for the last few years.
Ewins noted that Premier Inn offers “a very consistent proposition” and stressed, “we don’t want to change that model too much.” He noted that the Hub by Premier Inn brand was created to allow the company to reach a wider range of locations not suitable for Premier Inn. Additionally, its vertically integrated, owner-operator business model allows the company to leverage detailed information to inform location and room number decisions.
“In a business of our scale, small improvements here and there really add up financially,” he added. “Ultimately, we intend to continue to grow aggressively in the markets where they (hub and Premier Inn) are both located.”
Ewins explained that this expansion initiative requires a flexible approach that includes both leasehold and freehold agreements.
He added: “We now have some non-core assets. Ironically, some of the smaller hotels that grew Premier Inn are now less financially viable as the cost of running hotels increases, so we have to think about that. So a mix of organic growth with a number of contract types, the turnover of our core properties and of course, the opportunity to grow our core property.”
The company has converted a number of former office buildings into Premier Inn and Hub by Premier Inn hotels, including two developments in the City of London. Last week it announced plans to build the north of England’s largest Premier Inn at Manchester Airport, which Ewins described as “a signal that the market is starting to turn more favourable”.
