Skift Take
The most intriguing of Premier Inn’s plans is to replace many of Whitbread’s restaurants with mini-hotels. While this tactic is only a small part of the brand’s overall growth plan, it highlights how hotels are outperforming restaurants.
Whitbread, parent company of Premier Inn, unveiled on Wednesday an ambitious 5-year plan aimed at driving growth for the UK’s largest hotel chain.
“We … will extend our market leadership position in the UK and drive our business in Germany where we are on track to reach breakeven on a run rate basis later this year and become the number one hotel brand,” CEO Dominic Paul told analysts.
One tactic is to convert restaurants run by parent company Whitbread into Premier Inn-branded mini-hotels, adding about 3,500 rooms.
“We’re removing loss-making restaurants, and we’re replacing with extension rooms at a time where occupancy is very high and supply is down,” Paul said.
Goals by 2030:
- Expanding Premier Inn’s presence in the UK to 98,000 rooms, expanding its room count in Britain by 19%.
- Turning its nascent business in Germany profitable, with profits eventually reaching about $90 millIon a year (£70 million a year). Nearly doubling its room count in Germany to 20,000.
- Targeting at least $390 million (£300 million) in additional profit before tax, partly from cutting about $65 million a year in costs.
Converting Pubs to Guest Rooms
Paul described Whitbread’s plan as “a structural shift” in its UK business model where it will be removing loss-making branded restaurants and replacing them with higher returning hotel rooms at locations where the math says it will make sense. About a third of these planned 3,500 guest rooms are in the planning stages.
UK inflation has reduced demand for eating out and raised Whitbread’s costs for ingredients and workers.
For standalone Premier Inn hotels, the plans in the UK hinge on several assumptions, including that sales growth and efficiencies will offset cost inflation. Paul said a lack of supply in the UK hotel market will support pricing power through the rest of the decade.
For business in Germany, analyst Vicki Stern of Barclays had concerns about the local economy. Germany, the world’s third-largest economy, has struggled to have any recent growth in its gross domestic product. But Paul expressed confidence in the power of Premier Inn’s model in taking share from the independent hotel sector in the country.
Distribution Plans
Paul said Premier Inn on June 7 increased the range of inventory it sold through Trivago and other online travel sites and apps by “making family rooms and cancelable rates available.” This had led to a jump in bookings. The average number of family bookings doubled to 2,900 a week.
Accommodations Sector Stock Index Performance Year-to-Date
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