Rooms at the inn

A modern-day Mary and Joseph would not have a problem finding shelter this Christmas. As pub groups increasingly turn to converting accommodation into an extra source of revenue, there is ever-more room at the inn.

Many pub chains and independent operators appear to be addressing the bed-time issue. But are pubs and rooms a match made in heaven?

Surrey Free Inns is one of those companies that wants to capitalise on the overnight market. Its strategy is to build up its pubs business first and then to add accommodation if space allows. So far the company has 28 pubs, five of them with accommodation, plus two properties with budget accommodation branded as Innlodges.

Director of operations Eddie Lumsden says: "It is more likely that we will take a pub with land and bolt on accommodation next to it. Accommodation is not the first thing we set out to do but if we get the opportunity, we'll go for it."

That was the idea behind the Bridge Inn at Yatton, near Bristol, where a 29-bedroom Innlodge was added in the summer. "We always owned the pub and it had lots of spare land. The competition locally was not terribly interesting," Lumsden says.

Surrey Free Inns spent £500,000 adding the bedrooms at the Bridge, but the investment is already proving worthwhile. The property enjoys room occupancy of more than 60%, exceeding the group's targets for it, despite the fact that it is "miles from anywhere" according to Lumsden. He estimates that, across the group, every room-night booked in a pub will yield an extra £10 on average for the business in spin-off bar and food sales.

The fast-growing Old English Pub Company is another firm which is pleased with its investment in rooms. Accommodation is offered in 31 of its 63 pub-restaurants.

Chief executive Barry Warwick says that within the next five years he hopes to have 150 pubs, half of them with rooms. "We now have 450 letting rooms and I think it's a lovely balance for the business," he says.

So far, sales at the Old English Pub Company have been split equally between food and drink but by the end of this year accommodation is expected to contribute 20%, food earning 42% and bar sales 38%.

Warwick tries to buy character properties in southern and central England and to take advantage of business trade in the week and short-break visitors at weekends.

He says that an average pub with £5,000-£6,000 per week in revenue has the potential to enjoy another £100,000 each year in sales with the addition of 12 to 15 rooms.

But Warwick warns that pub rooms are not for everyone. He believes his own company's success comes from offering good quality food to an upmarket audience. "It's a niche market, we're not into boozers," he says.

"You have to give quality fare and good family surroundings. We have fresh food, and vegetables are sourced locally. If you haven't got the right food, people will come and stay in your rooms and then go off and eat in one of your competitor's houses."

Occupancy rates are around 50% but, with the help of a brochure launched this month, and some planned national press advertising, Warwick is hoping to increase average occupancy to 65% next year.

Extra income

Whitbread Pub Partnerships is finding that its licensees are becoming increasingly interested in earning extra income through accommodation and this year the brewery published a brochure marketing its 10 pubs with rooms in the Lake District.

But it is not just the management of idyllic country inns that are making a success of the accommodation market. Earlier this year Whitbread renovated the Oxnoble Hotel, a popular pub in central Manchester, and introduced accommodation for the first time. It has built seven en suite bedrooms for hire at £39 per night.

"It's near Granada studios [a popular tourist destination] and it's been full nearly every night," says a Whitbread spokesperson.

Despite these successes Whitbread, and a number of other major breweries, sees the big growth in the overnight market coming from budget rooms or lodges. Bob Ivell, restaurant and development managing director at Scottish & Newcastle, sums up the strategy for many of the major brewers when he says pub bedrooms are "incidental" when looking at new sites.

"We would have to be buying it to put in one of our food brands rather than because it's got 10 bedrooms," he says. "We and most of the other players are tending to put budget accommodation where we've got land adjacent to one of our major food brands."

Over the next year Bass is also planning to concentrate on the development of budget accommodation with its Holiday Inn Express network. The provision of rooms in pubs is best left to single entrepreneurs, Bass believes.

Greenalls currently owns seven Premier Inns and 46 Premier Lodges. But it is the lodges - situated next to its pubs - which it wants to develop. "We're looking at having 100 Premier Lodges by 2000," says a group spokesperson. Most lodges will be grafted on to city and town centre pubs situated on main roads.

With average occupancy at Premier Lodges currently running at 95%, the concept of having accommodation next to pubs is clearly working. But the group says that its core business on these sites will continue to be food.

Small independent operators are also seeing the virtue of offering rooms. Stephen Kalton, owner of the Bull's Head pub in Altrincham, Cheshire, has spent £600,000 building a 21-bedroom lodge on the same site - and in the same style - as the pub.

The lodge opens this weekend [1 December] and Kalton expects at least 65% occupancy, with half of the guests buying food in the pub and 70% of them buying drinks.

"I know a number of people that have developed four or eight rooms and moved out of their pub to a house around the back. It's making full use of your site," argues Kalton.

But pub rooms bring problems as well as extra revenue. Simon Chaplin, a negotiator in the free house and licensing department at property firm Christie & Co, says: "A lot of people come into the pub trade with the idea that they will add on rooms - but then they see the light when they're actually in the pub." Many publicans decide they want the rooms for their own housing, or that running paid-for accommodation is more trouble than it's worth.

As Chaplin says: "With opening hours until 11pm or midnight, the last thing they want to do is get up at 6am and cook breakfast."