A quiet night inn
"A pie, a pint and a double room with en suite facilities when you're ready, landlord." If that is your order, then chances are that these days you will find plenty of pubs capable of fulfilling it. The time when a packet of dry-roasted peanuts was the most you could hope for in the way of "extras" at your local is well gone.
From the day the first tavern opened its doors, pubs and bedrooms have gone together, but usually it was a pretty amateurish business. The rooms filled up almost in spite of the publican and little was done in the way of promotion outside the immediate locality.
Chain reaction
But there are signs that the sector is becoming much more professional. It is not uncommon for hotel general managers to leave their big chain employers and set up on their own, running pubs with rooms as an alternative to buying a hotel. The capital outlay can be cheaper than buying a small hotel. There is also the comfort that the business can rely on two income streams, if not three if a good food offer is added into the equation.
The vast majority of "pub with room" operations are run by individuals. A notable exception is the Old English Pub Company, which has carved a niche for itself with its three-prong offer of good-quality ale with fresh food in character coaching inns. With £5m in venture capital, the company started trading in December 1992 with 10 southern England pub-restaurants.
In the early stages, 50% of revenue came from food sales. But very quickly the company saw that there was excellent potential for using the bedrooms in their buildings and promoting leisure breaks to the 45-plus "grey" market attracted to the pub-restaurants.
Six years on, the Old English Pub Company is contemplating dropping the word "pub" from its name because it no longer represents what the company does. "We have 112 coaching inns with 2,178 bedrooms and 60 pub-restaurants," says Barry Warwick, the company's chief executive. "At the present, 44% of business is from food, 36% is from drink and 20% is from letting rooms. At the end of this year, rooms will move to 22-23% of the business and in the long term, we will look to get up to 30% of sales from rooms."
As well as selling leisure breaks at the weekends, OEPC has a strong functions business - the company hosted 500 weddings this year - and is building up its corporate business. Some of the inns are equipped for meetings and small conferences, and on weekdays the rooms are usually filled with business travellers staying for two or three nights.
Business travellers are attracted by the combination of a homely environment and a low rate. It is a formula that appeals to female as well as male business travellers. "We are very female-friendly - you are unlikely to walk in and see a group of guys knocking back pints of bitters," says Warwick. "We don't have fruit machines and juke boxes. We have lovely country inns with good food and good ale and friendly environments."
According to Warwick, having the three income streams ensures the company is not vulnerable to a decline in any one market. "That's the reason we are so different from most other pub companies. Up to 90% of their income comes through drink alone, so if they have a very poor summer or winter their business could be badly affected."
Key information
Though OEPC trades on the fact that its inns are all individual in character, Warwick says that the operation of the business is run very much from head office. Every night, key financial information is fed from each unit to head office by computer. "We know what every house took, who sold it, what time it was sold and how it was paid for."
Each unit is also required to buy from suppliers that have been nominated by head office, though Warwick stresses there is flexibility in that they can usually choose from a list of five companies. "We impose financial disciplines and it leaves the managers to concentrate on growing the business and customer service."
Despite doing very little marketing to date, OEPC's average occupancy is 63% and its achieved room rate is £45.72. The company does not have a standard rate for rooms - it allows each house to trade on its own location - but a single room costs on average £45, rising to £65, including VAT and full English breakfast.
Warwick is confident that there is plenty of business out there and says the company will continue to expand with acquisitions from individuals as well as groups. He is aiming for 200 properties by the end of 1999.
In the past, OEPC has bought properties from hotel chains such as Regal (now called Corus Hotels), Jarvis Hotels and the Forte Heritage portfolio. The properties sold were all either too small or did not fit the criteria for the brands operated by the bigger chains.
Warwick says: "Our strategy is to build more bedrooms and buy more pub-restaurants and coaching inns, ideally with between 25 and 30 rooms. There is no shortage of them within our existing trading area. We are now as far west as Exeter and as far north as Cheshire and in the long term, we will move to the Yorkshire Dales, the Peak District and the Lake District."
According to Warwick, OEPC is benefiting from a chunk of business that would previously have gone to the lodge market, and from guests wanting to "downtrade". "I think the four-star hotels are being affected and we are going to see a lot more trading down, because people don't want to pay in excess of £90 for a single room," he says.
Quaint buildings and log fires may be the stock-in-trade of the OEPC, but also set to grow at a rapid pace are lodge-style hotels that are joined to pubs.
Of the 52 pubs owned by Surrey Free Inns, so far only five offer accommodation. Two are traditional coaching inns, but three trade under the Innlodge brand, which chief executive Tony Hill says is earmarked for expansion to about 50 over the next five years.
The three existing Innlodges are in Portsmouth, Bristol and Woking. Hill believes there are good reasons for developing lodges rather than conventional coaching inns. "An inn can have anything from six to 12 rooms, which is not commercially viable. If you can have a linked block added on to an existing property, it is going to result in a better standard of accommodation. It is more cost-effective in terms of management and operation and it means you are not restricted by the difficulties of a building constructed 50 or 100 years ago."
Lodges with character
Hill refutes the suggestion that lodges have a more sterile atmosphere than coaching inns. "In Bristol, we have an old character pub with a very strong food operation. The lodge is a natural addition to the building - all people have to do is walk a short distance through a door to a building that is full of charm."
Like OEPC, the Innlodges cater for business travellers during the week, and at the weekend they fill up with guests attending functions in the pubs.
According to Hill, corporate business is growing. "People are increasingly reluctant to spend £100-£200 a night for a bedroom. There is a very strong market looking for quality and value for money. Pubs can provide that where they can add on good-quality accommodation, because fixed costs are spread over a strong existing business.
"There is already a bar and restaurant management in place so the economies of scale start working where you can add upwards of 24 rooms. If you were to build a free-standing hotel the break-even point is much closer to 100 rooms."
Also expanding in the pub lodge market is Greenalls, which trades with the Premier Lodge brand. The group recently announced its intention to add another 600 bedrooms to the 61 lodges already in operation. Managing director Paul Dermody says the group is looking at a combination of acquisitions and new-build lodges.
