Premier Inn owner Whitbread is focused on driving the performance of its remaining pub restaurants, after having announced plans to convert or sell 238 of its circa 450 restaurants earlier this year.
“200 pub restaurants looks relatively small in our ecosystem, but actually that’s a sizeable business... this is the right size pub restaurant estate for us,” said Simon Ewins, managing director of UK hotels & restaurants at Whitbread PLC, speaking at the UK Annual Hospitality Conference (AHC) on 30 September at the Manchester Central Convention Complex.
Renewed focus on restaurant performance
He described pub restaurants as “the heartland of Whitbread” even though the group is “now more of a hotel company than a restaurant company”, acknowledging that the restaurants had “suffered a little bit from a focus on hotels”.
“It’s really important to our guests that we have F&B everywhere and that is a point of differentiation for us from our main competitors in the midscale-economy marketplace,” he added. “What we’ve got to do now is run those businesses sensibly and sustainably, and also more commercially.”
Nigel Sherwood was recently hired as managing director of Whitbread’s restaurants division, tasked with driving the commercial performance of this segment.
Whitbread recorded a 1 per cent increase in group total sales for the first quarter of FY25 and outlined increasingly ambitious plans to create 3,500 hotel rooms at existing Premier Inns by converting “lower-returning branded restaurants”.
This included plans to convert 112 branded restaurants into rooms, once the F&B offering was transferred to an integrated restaurant, while a further 126 branded restaurants were set to be sold as going concerns, with Whitbread already having agreed terms to sell 21 for £28 million.
“They’re non-core assets, they’re a distraction for us, and therefore other people would covet those assets and do a better job,” said Ewins. “What it does economically is it takes away [238] lower returning and less attractive non-core assets and enables us to build 3,500 higher performing and higher returning assets which will be accretive to the whole group.”
A flexible approach
Whitbread – which operates restaurant brands including Beefeater, Brewers Fayre, Table Table, Cookhouse + Pub and Bar + Block, and is the largest hotel group in the UK with 85,000 hotel rooms – said at the time that the new rooms would be added in “high-demand locations where we have identified a shortfall in supply”, and would enable Premier Inn to grow to 97,000 rooms in the UK by the end of the 2029 financial year.
Ewins explained this expansion drive will require a flexible approach including both leasehold and freehold deals. He continued: “We’ve got some non-core assets now, ironically some of the smaller hotels that grew Premier Inn are now less economically viable as the cost of running hotels grows, so we’ll have to think about that. So, a mix of organic growth with multiple deal types, the churn of our core estate, and of course the opportunity to grow our core estate.”
The business has converted a host of former office buildings into Premier Inn and hub by Premier Inn hotels, including two developments in the City of London, and last week announced plans to develop the largest Premier Inn in the north of England at Manchester Airport, which Ewins described as “a signal the market is starting to become more favourable”.
Little tweaks but aggressive growth plans
This expansion drive is unlikely to see any big changes to the group’s core Premier Inn brand (which makes up 97% of its estate), an expanded brand portfolio or an asset-light strategy, which many hotel groups have elected for in recent years.
Ewins said Premier Inn offered “a very consistent proposition” and “we don’t want to play with that model too much”. He pointed out that the hub by Premier Inn brand was developed to allow the business to access a broader range of locations that didn’t work for Premier Inn, while its vertically-integrated, owner-operator business model allowed it to use granular-level data to support decisions from locations to room numbers.
“With a business the scale of ours, little tweaks here and there really add up when it comes to the economics,” he added. “Ultimately, we’re going to continue to grow aggressively in the marketplaces where they [hub and Premier Inn] both sit.”