Hotels and Restaurants
The budget sector is the most attractive of the UK hotel market and Premier Inn is the best operator of budget hotels.
Our Hotels and Restaurants have achieved a strong performance in the challenging operating environment of 2009/10. Total revenues increased by 3.2% to £1,096.0 million with pre exceptional operating profit down 3.1% year on year to £247.0 million. Like for like sales were positive in the fourth quarter by 1.6%, but down 1.8% over the year.
We have strengthened Premier Inn's status as the leading budget brand by implementing a thorough commercial action plan to drive our revpar forward through a volume-led strategy. This included investing in sales and marketing, widening our distribution channels and launching Premier Offers in June 2009. Our new website, www.premierinn.com went live in November and has increased visits by 80%. The site now attracts over three million visits per month.
Premier Inn maintained its outperformance versus the hotel market, with business and leisure customers continuing their flight to value. Total sales at Premier Inn are up 4.7% to £629.8 million (2008/09: £601.5 million) with like for like sales down by 4.3%. Regional revpar was down 6.4% against a decline of 9.6% for the total regional hotel market.
| Hotels and Restaurants | 2009/10 £m |
2008/09 £m |
% Change |
|---|---|---|---|
| Premier Inn revenues | 629.8 | 601.5 | 4.7 |
| Restaurants revenues | 466.2 | 460.1 | 1.3 |
| Total revenues | 1,096.0 | 1,061.6 | 3.2 |
| Premier Inn like for like sales % |
|
|
(4.3) |
| Restaurants like for like sales % |
|
|
1.7 |
| Operating profit, pre exceptional | 247.0 | 254.9 | (3.1) |
| Operating profit, post exceptional | 259.9 | 240.4 | 8.1 |
Premier Inn is the leading choice brand among business travellers and, for the third year running, won Best Hotel Group Brand at the Business Travel Awards. Business guests can save over £33 per night compared to 3 and 4 star hotels and we attracted over 20 large corporate customers such as E.On, Honda, Lidl and some central Government departments to switch to Premier Inn during the year. Increased sales activity helped to grow business accounts with users up 13% on last year. Sales grew by 2.6% to £175.4 million.
In 2009/10, Premier Inn opened 2,240 new rooms (UK 1,624 rooms) and refurbished over 8,000 rooms. At the year end Premier Inn had a total of 42,799 rooms in 588 hotels (UK 41,720 rooms).
Eleven new Premier Inns were opened in regional locations and one new hotel in London, where Premier Inn has maintained its position as London's leading budget hotel operator. We have commenced development of a new 267 bedroom budget hotel at Stratford, located adjacent to the Olympic Stadium, creating some 90 jobs.
Premier Inn also announced its first purpose built green hotel and Beefeater Grill restaurant. It represents the latest stage in sustainable technology and follows our pioneering green hotel pilot in Tamworth, Staffordshire, which opened its doors to guests in December 2008. The 60 bedroom Premier Inn at Burgess Hill, due to open in autumn 2010, will adopt the best performing sustainable construction materials to deliver 70% carbon and 60% water savings.
Our continuous focus on tight cost control, through both procurement and operating efficiencies, has helped underpin our operating margin.
Internationally, we opened three new hotels this year across the UAE and India. We acquired the 50.1% stake we did not already own in the Indian joint venture with real estate developer Emaar-MGF and will take forward the development of new properties independently.
Our restaurants continued to outperform the market as we attracted customers looking for great value food and drink in a comfortable environment. We refurbished 95 restaurants, spending on average £125,000 per site, to ensure a quality environment with value for money at the heart of everything we do. Our restaurants increased customer recommendation metrics by 5.6%.
Revenues have increased by 1.3% to £466.2 million (2008/09: £460.1 million). Our restaurants achieved consistent like for like sales growth of 1.7%, driven by increases in average spend and like for like covers increase of 1.4%. In 2009/10 we opened five new restaurants. Some 333 of our 373 strong restaurant portfolio are located adjacent to a Premier Inn. This joint-site strategy enables us to deliver a superior customer experience and generate enhanced return on capital.
Strategic drivers
The key strategic drivers for the Hotels and Restaurants business are:
Premier Inn - volume share gain to 80% occupancy;
Restaurants - market share through a volume and value strategy;
Development - growth in UK network from 42,000 to 55,000 rooms; and
International - establish Premier Inn in existing markets.
KPIs
The WINcard results for Whitbread Hotels and Restaurants are shown below:
| 2009/10 WINcard results | |
|---|---|
| PBIT |  |
| Profit conversion | |
| Brand standards | |
| Guest recommend (Premier Inn) |  |
| Guest recommend (restaurants) | |
| Like-for-like sales growth | |
| Team turnover | |
| Health and safety | |
More information on the WINcard, together with the Group WINcard results, can be found in our KPIs section.
Markets and competition
Premier Inn's 42,000 rooms account for 6% of the total UK hotel market. Today four brands account for 80% of the budget sector of the market. The sector has strong long-term growth prospects with projected compound annual growth rate of approximately 10% over the next ten years.
The total UK hotel market has an annual value of around £10.9 billion, of which approximately £1.6 billion can be attributed to the budget sector. In 2009/10, Premier Inn outperformed the budget sector in terms of regional RevPAR by 2.1% points.
Whitbread's pub restaurants compete in the total out-of-home eating market of £40 billion. Whitbread has outperformed the pub restaurant sector of the market over the last two years in terms of like-for-like sales.
Our people
We are dependent on our people to deliver our brand promises, day in and day out. We offer every team member the chance to work towards NVQs and Skills for Life. In 2009 Whitbread achieved an 'Outstanding' grade for our Apprenticeship training programme following an inspection by Ofsted. This year we will help our people gain over 3,000 new qualifications.
We have continued to be recognised for quality and value. Premier Inn has been named the leading economy hotel brand in Europe for the second year running. Premier Inn also scooped the Business Travel Awards Best Hotel Group for the third year running.
This is an excellent achievement for the Premier Inn brand and is a testament to the hard work and dedication of our team members.
Corporate responsibility
We promise our guests a good night's sleep. Our people serve great value food and drink in clean, comfortable and well looked after environments. We intend to deliver this in a sustainable manner. Key areas of progress for the Hotels and Restaurants team have been:
- We will open our first purpose-built green hotel and Beefeater Grill at Burgess Hill, in West Sussex. This follows Whitbread's pioneering green hotel pilot project in Tamworth, Staffordshire. The 60-bedroom Premier Inn at Burgess Hill, due to open in the autumn of 2010, will adopt the best-performing green technologies from our test in Tamworth, targeting 70% carbon and 60% water savings. Adjacent to the hotel, we will develop our first low-carbon restaurant, a 220-cover Beefeater Grill;
- In 2009/10 we rolled out an Environment and Energy Guide to all outlets. Our teams now have information and tools to help reduce energy and water wastage. Teams at our support centres can also see how their efforts can make a difference with energy monitors located in reception areas;
- We have been working in partnership with our waste management providers Veolia, and with Biogen, towards our target of achieving 80% of waste diverted from landfill by 2012;
- We are very proud of our commitment to the communities where we live and work. We have raised over £300,000 for WaterAid during 2009/10, a good start towards our £1 million target; and
- We offer development opportunities for our team members as described in the Our People section.
Risks and uncertainties
Details of the risks and uncertainties for the Group are outlined in our section on risk. Many of the risks and uncertainties at Group level are also applicable to Whitbread Hotels and Restaurants.
Risks specific to the hotels and restaurants business include:
- the integrity of booking channels and other key systems;
- the failure to deliver rooms growth profitably;
- the failure to deliver market leading performance;
- the failure to attract and maintain high calibre teams;
- the failure of health and safety policies and procedures;
- the inability to achieve profitable international growth; and
- the potential financial failure of a key third party supplier.
Mitigation plans are in place for each of the risks and uncertainties outlined above and are reviewed by the Whitbread Hotels and Restaurants Management Board on a quarterly basis. The potential failure of a key third party supplier has been a particular focus during the year due to the general economic conditions.
