Rooms at the top: time for pubs to think letting accommodation
More pubs are turning to letting accommodation to maximise potential and profit. Phil Mellows takes a look.
As the British tourist market begins finally to shake off the devastating impact of September 11, this could be the right time for the pub industry to start taking seriously the opportunities offered by letting accommodation.
Latest figures from Deloitte & Touche show that room occupancy outside London for the whole of 2002 was only very slightly down at 70.3 per cent - although it was at the cost of a cut in average room rates. As a result, revenue per room was down one per cent.
In the capital the effect of price-cutting was more pronounced.
Occupancy was up but room rates fell 6.5 per cent resulting in a drop in revenue per room of 4.7 per cent. But at least people are prepared to travel again - at the right price - and the consultant confidently predicts the market has reached "the bottom of the cycle".
Many pubs - especially those outside London - are well-placed to take advantage of any growth in demand for accommodation. After all, a lot of them started life as inns and hotels and still carry that suffix on their names.
There is more pressure than ever for licensees to make every available square-foot pay its way, and that includes those unused upstairs rooms and perhaps that forgotten corner of the car park.
If you decide to convert that space to letting rooms, however, it is important to do it properly. People these days expect rooms to be of a certain standard. Just take a look at the budget accommodation chains which will probably be your main competition.
So will it be worth the investment? Yaser Martini at property agent Fleurets believes the time is right and "a very good idea if you can afford it and - if you are a tenant - your lease agreement allows it".
"Letting accommodation is relatively cheap to run and any money you take is clear profit. For that reason it will also add value to the business when you come to sell it," he said.
It does all depend on being able to fill those rooms, however. An occupancy rate of 70 per cent is a good figure to aim for but you have to be confident about exactly where it is going to come from.
According to Yaser, there are two basic markets to target. You can either settle for putting up itinerant workers, which could be an effective strategy if you are in a town or city which never seems to be without building sites, or you can attract tourists, which requires a higher initial investment but can be a more consistent source of income if you get it right.
Either way, you should do your homework. Scottish & Newcastle Pub Enterprises (S&NPE) is keen to encourage its lessees to maximise their potential and the possibility of accommodation forms part of a full analysis of the business.
Mike Pope, the company's projects manager, says the decision to go for letting rooms should be based on "gut feeling backed up by hard information".
"You really must get 70 per cent occupancy," he said. "The first step is to go to the local tourist information office and ask whether the area is under-bedded. It could be they are crying out for rooms. Talk to the local authority too, use your feet and get to know the area."
Once you are sure there is a market there, and have satisfied yourself about certain practical considerations such as car parking, the next big decision is about the standard of the rooms.
If you are hoping to attract tourists certain basic standards are required. En suite bathrooms are a must. Broadly copy what successful budget hotels have done - the Premier Lodges and Travel Inns - but, unless you are really going up-market, keep the frills to a minimum.
Tea and coffee making facilities are expected, as is a television set. But do you really need a telephone in these days of mobiles?
If you are expecting business people to stay, somewhere to plug in a lap-top and perhaps have access to the internet could be quite a draw.
Greene King Pub Partners, another tenanted group which is expanding accommodation around its estate, has three set categories for licensees to choose from - traditional, contemporary and mid-range - covering furniture, fabrics, decor and bathrooms.
This aims to assure the licensee that everything is provided at a reasonable cost because of the economies of scale available to a company like Greene King.
S&NPE offers a similar discount service off the back of the S&N group's Premier Lodge hotels.
Your pub's edge in the accommodation marketplace could, of course, come from sourcing your own furniture and fittings and creating a more individual feel for your rooms.
As a pub, you already have a head start in this. You can offer a more personal service and use the character of the pub as a point of difference.
S&N has, in fact, recognised the value of this and is actively looking to locate Premier Lodges alongside its managed pubs, in particular the food-led Chef & Brewer brand.
Out of the 128 Lodges around the country, 105 are linked to a pub brand. And the benefits are not just in creating a more interesting location. In S&N's experience more than a third of residents will book a seat in the restaurant and the figure is higher when the outlet is more like a traditional pub - so you should see an increased take across the bar as well as the money for the room.
"Location is the first consideration," said S&N's Phil Urban. "Then it's the quality of the product. We are in the second year of a refurbishment programme which is bringing every single bedroom up to new specifications at a cost of £6,000 to £10,000 a room."
The refurb includes installation of power showers - and brings back telephones as a result of customer demand.
"Only seven or eight per cent of the British hotels market is in the budget sector," Phil pointed out. "In other countries it is above 20 per cent, so there is a lot of room for growth."
Pictured: The Kings Arms at Stow-on-the-Wold is one recent accommodation development by Greene King Pub Partners and lessee Peter Robinson.
Time to activate your bookings
The obvious key to filling those letting rooms is to make sure people know you are there. Getting registered with the tourist authority is a must, and you can also market to local businesses and the council who may be looking for accommodation for visitors.
But the fastest growing marketing tool in the hotel sector is the internet.
One advantage is ease of booking. But as a small business you might have trouble getting people to find your own website in the first place. A possible solution is to join a scheme which, acting a bit like an electronic consortium, can provide a bigger attraction for surfers searching for accommodation on the net.
Greene King Pub Partners has recently offered tenants and lessees with letting accommodation use of an organisation called Active Hotels. This extends the group's own website onto the worldwide market.
Active Hotels is targeting independent hotels and pubs with rooms that don't have the advantages of being part of a chain with a centralised booking service. It takes a 15 per cent commission on bookings but it widens your net. It is also experiencing, says the organisation's Maria Murphy, "huge growth".
"The market isn't yet back to pre-September 11 levels and prices are depressed but it will get there by next year.
"Online bookings are growing anyway," she continued. "We were 20 per cent up in January over last year and we expect it to rise more, which guarantees a steady stream of interest for our clients. Many of them are already taking 30 per cent or more bookings through the internet."
Licensees are in control of their area of the site and Active Hotel
