Premier Inn owner Whitbread is committed to enhancing the performance of its remaining pub restaurants, following its announcement earlier this year to convert or sell 238 of its approximately 450 locations.
“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.
He described pub restaurants as 'the heartland of Whitbread,' despite acknowledging that the group is 'now more of a hotel company than a restaurant company.' He admitted 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 appointed as the managing director of Whitbread’s restaurants division, with the responsibility of improving the commercial performance of this segment.
Whitbread reported a 1% increase in group total sales for the first quarter of FY25 and outlined more ambitious plans to create 3,500 hotel rooms at existing Premier Inns by converting 'lower-returning branded restaurants.'
This plan includes converting 112 branded restaurants into hotel rooms after transferring the food and beverage operations to an integrated restaurant. Additionally, another 126 branded restaurants are slated to be sold as going concerns, with Whitbread having already reached 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.”
Whitbread, which operates restaurant brands such as Beefeater, Brewers Fayre, Table Table, Cookhouse + Pub, and Bar + Block, is the largest hotel group in the UK, boasting 85,000 hotel rooms. The company stated that the new rooms would be added in 'high-demand locations where we have identified a shortfall in 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 result in an expanded brand portfolio or an asset-light strategy, a choice many hotel groups have opted for in recent years.
Ewins stated that Premier Inn provides 'a very consistent proposition' and emphasised, 'we don’t want to alter that model too much.' He noted that the Hub by Premier Inn brand was created to enable the business to reach a wider range of locations that were not suitable for Premier Inn. Additionally, its vertically integrated, owner-operator business model allows the company to leverage detailed data to inform decisions regarding locations and 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.”
Ewins explained that this expansion initiative will necessitate a flexible approach, incorporating both leasehold and freehold agreements.
He added: “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 company has transformed numerous 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 create the largest Premier Inn in northern England at Manchester Airport, which Ewins characterised as “a signal that the market is starting to become more favourable.”