As managing director of Whitbread Hotels & Restaurants, Patrick Dempsey is responsible for the UK's largest hotel group, Premier Inn. He tells Janet Harmer his plans for the brand's growth and why it has performed so well during the recession
As managing director of Whitbread Hotels & Restaurants, you have a considerable and diverse portfolio. How did you assume responsibility for a business which comprises more than 600 hotels and about 360 restaurants? I joined Whitbread in September 2004 from Macdonald Hotels to run the company's franchised Marriott hotels business, but the brand was sold soon after. I was then appointed managing director of Premier Inn. In February 2008, Premier Inn merged with Whitbread's restaurant division, which included Beefeater, Brewers Fayre, Table Table and Taybarns to form Whitbread Hotels & Restaurants. Three years ago I was appointed as an executive director on the Whitbread board.
Where does Costa Coffee fit into the Whitbread company? It is run by a separate managing board from Whitbread Hotels & Restaurants, under managing director John Derkach.
Premier Inn has shown considerable growth in recent years? What is the current size of the business and its plans for future growth? Over the past 10 years, Premier Inn has trebled in size and we plan to expand from the 45,000 bedrooms we have today to 65,000 bedrooms over the next five years. With 11,000 bedrooms in the pipeline - 90% of which have full planning permission - we are already well on the way towards achieving our target.
Our growth is rapid - we opened 4,000 bedrooms in 2011 and expect to open a further 5,000 this year.
As the largest budget hotel group in the UK [Travelodge is the second largest with 496 hotels], is there still room for growth of the sector? Absolutely. At the moment the budget sector accounts for 120,000 rooms, which is just 17% of the total hotel market in the UK - a figure that is behind both France and the United States where budgets rooms account for 24% and 33% respectively of their total room stock.
I think it is a realistic projection for the budget sector to reach 25% [about 175,000 rooms] of all UK hotel accommodation.
How are you going to go about recruiting and training staff for your expansion? We have 3,000 team members who have completed qualifications with us, including numeracy and literacy skills for life. About 200 of these have taken the full apprenticeship programme, which takes an average of six to nine months to complete and costs about £1,000 per person. This involves front-of-house, kitchen and housekeeping training to NVQ level 2, as well as the skills for life.
Our ambition is that by 2016, more than 8,000 people will gain qualifications with us and that 2,000 young people will benefit from work access and work experience. Not all these youngsters will want to stay in the hotel industry, but that is no bad thing, the important thing is to provide opportunities, life skills and confidence to these people.
Are you doing anything to help the long-term unemployed? Yes, we have recently committed to recruiting members for our new hotels from the local long-term unemployed through Job Centre Plus. At our newest hotels in London - in Old Street and Islington - 60% of staff are people who have been out of work for a long period.
What occupancy and room rates are you currently achieving? Like-for-like occupancy for 2010-11 was 76.2%, which means we are on track to achieve our target occupancy of 80%, with an average room rate of £55 to £56.
What are the key factors in achieving these figures? There are two major drivers - a dynamic pricing system, which we introduced three years ago, and the Good Night Guarantee.
We previously offered midweek and week-end rates, but we decided to introduce a pricing policy based on what the airline industry offers - lower prices at times of low demand, increasing prices when demand is high. It works very well. In 2010-11, we sold £1.5m worth of rooms for the saver offer price of £29 and special sale rates of £19 during periods of low demand. This increased volume and got new people to experience our hotels for the first time. Despite these very low room rates, we still managed to maintain our revenue growth during the year.
We introduced the Good Night Guarantee in 2000 and it has resulted in us paying out £3m to customers who have complained about not getting a good night's sleep. It doesn't matter what the cause of the bad night has been - it might be due to a noisy delivery van for which we are not responsible - we will pay out. We simply want people to come back to us again and this helps so much.
How do you set about guaranteeing a good night's sleep for your guests? The high quality of our Fogarty duvets and pillows and Hypnos beds is key. The pillows, for instance, are date stamped and replaced after one year. Whitbread invested £71m in 2010-11 in repairs, maintenance and refurbishment across all its brands, the majority of which was allocated to its hotels and restaurants. Every bedroom is completely overhauled every three years - sooner if required.
Few other hotel companies are putting this amount of investment in refurbishments, but we believe it is absolutely necessary to get the quality right and provide the best night's sleep.
To ensure the high standards are maintained, twice a year we employ an independent company to run an audit, which involves carrying out more than 1,000 quality checks in every hotel.
Looking ahead to the Olympics, Whitbread decided to remove the Premier Inn rooms from the packages being marketed by Thomas Cook. Why was this? The packages were being sold at inflated prices which could have potentially damaged the Premier Inn brand.
How are the 8,000 Premier Inn rooms within the M25, which will be open by the start of the Olympics, be allocated? Half of the estate has been allocated to LOCOG [the London Organising Committee of the Olympic Games] at rates agreed in 2007, for use by the media and other international delegates. The rest we are selling directly at rates which are close to our usual summer rates. For instance, the most expensive rooms at the Premier Inn County Hall, which usually sell at £189, will be marketed at £199 during the Olympics. Our aim is that people who come to stay with us for the first time during the Olympics will want to come back to us at a later date.
With all our bedrooms in London refur-bished in time for the Olympics, backed up by the Good Night Guarantee, we think there will be a good chance this will happen, which will have a long-term benefit for the business.
We've learnt lessons from those hotels in previous Olympic cities which overpriced themselves and were left with empty rooms. So far we've sold about 700 rooms per day throughout the Olympics.
The widespread view is that 2012 is going to be a challenging year for the hotel industry. What are your thoughts? Undoubtedly it is going to be difficult, but there is no point moaning about it. Hoteliers need to make sure they offer great value for money and invest in their product so that customers want to stay with them.
Previously a lot of corporate companies would never have used Premier Inn, but we now have executives - who previously went to Hilton, Crowne Plaza or Marriott - stay with us. They see that we offer fantastic value and are impressed with the Good Night Guarantee, comfortable beds and sparkling clean bathrooms. It is also important for them to show that they are not wasting shareholders' money.
Since 2006-07, we have seen revenue from our business account grow from £75m to more than £180m. About 55% of our turnover can now be attributed to corporate business.
Budget hotels have benefited from the economic downturn, largely as a result of the seismic shift to the sector from the corporate market. At Premier Inn, we have also seen a growth in the number of leisure customers taking advantage of our saver offers, with an increase of 9.7 percentage points in our weekend occupancy last year.
patrick dempsey a snapshot
â- Managing director, Premier Inn
â- Managing director, Whitbread Hotel Company
â- Chief executive, Macdonald Hotels
â- Chief executive, Restaurant Associates (part of the Compass Group)
â- Managing director, Forte Hotels UK
Current appointments â- Trustee, Hospitality Action
â- Member of the talent and skills leadership team, Business in the Community
â- Member of the Department for Culture, Media and Sport's Tourism Advisory Council