With Britain becoming an increasingly popular destination for holidaymakers from both home and abroad, accommodation can add a lucrative new line to pub operators’ budget sheets.
Between January and September 2017, there were 47m domestic holidays or ‘staycations’ in the UK, according to holiday comparison site Travel Supermarket.
Paul Nunny, director of pub accommodation booking site Stay in a Pub, predicts the increase in demand for accommodation could drive pubs to compete with hotels in the same way they’ve come to compete with restaurants on food.
Guy Simmonds managing director Stephen Taylor adds that effectively run accommodation can reshape the fortunes of a business.
“For the ‘right’ pub, in a good location, run by a professional operator, the addition of letting bedrooms can transform a modestly profitable unit into a highly lucrative, multifaceted business.
“Both wet sales and catering revenue should also be significantly enhanced as a consequence of the letting bedrooms essentially providing a ‘captive audience’.
“Also, assuming letting bedrooms culminate in the projected and expected revenue and thus increasing net profits for the overall business accordingly then the business valuation and asking price should also be proportionately enhanced.
“Pubs with letting bedrooms are especially sought-after by our discerning purchasers.”
With the rapidly expanding market poised to grow over the next few years as the knock-on effects from Brexit cause British holidaymakers to look closer to home, how can pubs add accommodation, and a new revenue stream, to their offering?
Know your market
Taylor highlights the importance of being thorough in planning and research of your site’s surrounding area.
“You will need to consider the proposition very carefully and ensure you do your own research and due diligence, and establish there is proven demand in your locality for letting bedrooms.
“One great advantage a professional hands-on operator of a pub with attractive, boutique letting bedrooms can offer is a highly personalised service, compared with the many ‘anonymous’ corporate, branded hotels available.”
Nunny concurs: “You need to survey your market. You need to see who’s got pubs in your area. What would be the reason for people to come to the area and what can you market on your site? Can you link in to local attractions?
“If you’ve got a famous garden nearby, or something like that, get your website linked to that website – because you’re sending people to that landmark and vice versa.
“I’d certainly do a survey of the competition in the area and what prices they’re charging. How is your offer going to be different? What’s the unique selling point for the pub? You need to clearly identify what your offer is in the marketplace. It might be the food, the beer, it might be discounts to landmarks because you’ve done a deal.
“You’ve got to work out what the unique selling point is. Research is absolutely critical.”
“Unless you are a freeholder, you will need the permission of your landlord before making any alterations to the premises,” says Taylor. “In such circumstances, it is highly possible the freeholder or landlord may want to control the entire project, dependent on whether you have a pub company landlord or private landlord, and the terms of your lease.
“In any event it is wise and pragmatic to discuss any proposals or ideas with your landlord prior to spending your hard-earned money on any professional fees.
“Some landlords may even be willing to fund the entire project, in return for a reasonable increased rental return on their investment.
“Either way, and whether you are a freehold operator or leasehold, you must ensure you have the requisite funding in place, prior to embarking upon the project.”
Taylor outlines any changes made to a licensed premises will require “formal appropriate consent and the approval of the local licensing authority and the local planning authority”. This means that in-depth plans will need to be submitted.
Nunny’s Stay in a Pub website lists the legal matters that pubs need to take care of on their website.
In addition to the planning permissions outlined by Taylor, Stay in a Pub flags that an operator looking to add accommodation to their offering will need to discuss the maximum number of people who can stay at any given time with their insurance company.
Alongside investigating relevant music and entertainment licenses, licensees will need to have a fire risk assessment, have their boiler inspected for gas safety, and ensure that a smoking policy is in place. While smoking has been forbidden in public places since 2007, guest rooms aren’t public and therefore it needs to be determined whether guests will be allowed to smoke in their rooms. If so, relevant safety measures need to be taken.
On top of this, an operator should register with their local environmental health officer, who will carry out an assessment in order to ensure food safety standards are high.
Call the professionals
Taylor adds: “Once you have determined what development and number of rooms you would like to pursue, it is essential you consult an architect – preferably one you have checked to ensure they have a proven track record in designing and managing similar projects for licensed premises.
“Your architect should deal with all aspects of the scheme for you including management, costing, permissions, timescales, construction, etc.
“It is vital you do your research thoroughly and enrol the services of professionals, including licensed property valuer or agent, chartered accountant, commercial or specialist architect.”
To find out more about pubs for sale, lease and tenancy visit our property site.