Whitbread: The double act

PATRICK DEMPSEY is a fan of pubs. "There's a great pub in my village - a Greene King lease, in fact - they've got the offer, the service and the atmosphere just right. That's where I choose to go."

In the current climate, the pub trade needs to rally every enthusiast it can muster. However, the fact that Dempsey is in charge of the pub strategy for one of the industry's most venerable and respected operators makes his enthusiasm all the more welcome. Dempsey, managing director of Whitbread Hotels & Restaurants, was the subject of the recent Arena Face to Face interview at the Dorchester, where he was put under the spotlight by TV journalist Alastair Stewart.

Afterwards, along with Paul Flaum, chief operating officer of Whitbread Hotels & Restaurants, Dempsey spoke to The Publican​.

The question of Whitbread's view of pubs and the company's place in the trade is a fair one. A decade ago, Whitbread was at the heart of the pub industry, operating around 3,500 high-quality leased and managed outlets as well as brewing leading brands such as Stella Artois and Boddingtons.

The business today is a very different one, and still more different from the brewing empire built up by Samuel Whitbread from Chiswell Street in East London back in the 18th century.

Since disposing of its brewing operation in 2000 to Interbrew, and spinning off most of its pubs into Laurel Pub Company a year later, the once diverse leisure giant has slimmed down even further.

Britvic, in which Whitbread had a stake, was floated, Pizza Hut and David Lloyd have also gone, as have the standalone Beefeater and Brewers Fayre pub restaurants - mostly sold to Mitchells & Butlers in 2006. The company is now focused around its Costa Coffee operation, the Premier Inn hotel chain and its pub-restaurants.

When Whitbread announced last February that it would combine its hotel and restaurant divisions, with Dempsey at the helm, it looked to some to be the triumph of the hotels business over the pubs. Beginning his career in 1980, Dempsey held significant senior positions with Forte Hotels and MacDonald Hotels before joining Whitbread, and has been the driving force behind the expansion of Premier Inn to become the UK's biggest hotel chain, plus taking the brand into international markets, with the first Premier Inn in Dubai now trading.

However, Dempsey insists that pubs are as important to the business as ever.

Crucially, each pub operates alongside a Premier Inn or is on a site where there is potential to build one, and it was this symbiosis which was behind the decision to combine the two elements.

"We don't do a lot of different things now, we do a few things well. There's been a change from the days when big companies were driven to keep diversifying - the focus now is on what you do best," he says.

This requires reining in the enthusiasm of his team on occasion. "Sometimes you have to resist good ideas," he says. "People in the business will ask why don't we do gyms, or room service, or laundry - but that's not what we're about."

What Whitbread is still about, though, is pubs. "We don't just operate hotel rooms, we run restaurants and bars, and the whole thing has to come together. I think a pub trading alongside one of our hotels works so much better than a restaurant in the hotel - I'd much rather put on my jeans and go and have a pint and a steak."

The fact that Whitbread has doubled the number of pub restaurant brands in its portfolio is strong evidence that the company remains serious about pubs. Last year saw Table Table and Taybarns launched alongside the existing two offers.

This was mainly achieved through the conversion of existing outlets to the new format, the result of a careful segmenting exercise based on ongoing consumer research. "Basically, Brewers Fayre and Table Table are pubs which also have restaurants, while Beefeaters and Taybarns are restaurants which also have pubs."

Such distinctions may seem arcane, but are essential to understand when it comes to pitching the offer of each outlet correctly. It's notable, for example, that the signage and branding for Table Table was refreshed soon after it was launched to emphasise the phrase 'restaurant and pub' - this helps to ensure that potential customers are clear about the offer.

"Our target customers prefer the pub to a formal restaurant setting," says Dempsey.

With Taybarns pitched as a fixed price, all-you-can-eat offer, the other brands are flexing their pricing to compete hard in a managed pub sector currently characterised by deals and discounting. Whitbread has initiated a two-for-£10 offer at Table Table, and has similar deals in place at Brewers Fayre and Beefeater.

However, Flaum stresses that these deals only account for a minority of offers. "At the moment you have to have the deals and vouchers to bring customers in. But we find that customers are attracted by the breadth of the menu, and will trade up on their next visit," he says.

Flaum believes some of Whitbread's rivals are storing up problems for themselves. "If the offer becomes all about the deal, then it's very hard to move away from that," he points out. "If you keep slicing at the quality of food to hold the price, customers notice the fall in standards. Whatever they've spent, they have to go away feeling they've had value for their hard-earned money."

Dempsey makes the point that the company buys high-quality beef through Chitty's, an established trade supplier. "We could buy zebu," he says, in a reference to last year's Undercover Mum TV probe, "but that's not what we're about." Suppliers are treated well in negotiations, he says: "We're good buyers, but we're fair buyers."

There are plans for the existing estate to be refreshed and refurbished regularly - a new Beefeater format at Ashford in Kent is performing well - and for around a dozen new pubs this year, although expansion plans have been scaled back in the current market.

The dual-site hotel and pub format is definitely the way forward for the business, though. "There are some great pub operators out there," says Dempsey. "I admire Mitchells & Butlers, and there are some very professional independent operators.

"But if someone offered us 50 standalone pub sites ideal for conversion to Beefeater, we wouldn't be interested. If it's a site with enough land for a hotel as well though, that's another story..."