Chief executive Richard Ferrier revealed the group currently operates 271 bedrooms, with another 113 acquired and at various stages of development.
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Heartwood is also under offer on sites containing a further 105 rooms, which would take the total to 489 bedrooms across 15 pubs.
“We’re starting to plan what 1,000 rooms looks like,” Ferrier told The Morning Advertiser (MA). “We’re an ambitious bunch. We’d love to get to 1,000 bedrooms and beyond.”
Once the sites currently under offer complete, Heartwood expects to operate 42 pubs, including 32 freehold sites, with around 90% of profits coming from freehold properties.
£200m investment
Ferrier estimated the business would have invested approximately £200m in sites over five years by the time the current pipeline completes.
The operator only opened its first site with rooms in February 2024 but has rapidly increased its presence in the accommodation market. “It’s a very different business now from the one Alchemy acquired back in 2022.”
Heartwood has completed on a site in Solihull and has two further Warwickshire properties at different stages of the legal process. The group is increasingly looking to build geographical clusters, allowing sites to share operational support and resources.
Heartwood typically looks for properties capable of accommodating at least 15 bedrooms and approximately 200 pub and dining covers, although it will consider sites with as many as 60 rooms.
“It has to be a great pub first and foremost, and then the rooms are the cherry on the cake,” Ferrier explained. “If we wouldn’t do it as a standalone pub, we won’t do it just because it has rooms. The food and beverage offer has to stand up on its own two feet.”
Locations near major events, corporate headquarters and established leisure destinations are particularly attractive because they can generate demand throughout the week.
Ferrier said accommodation had helped transform traditionally quieter trading periods, with some pubs achieving Saturday style levels of activity between Monday and Wednesday.
“You have this captive audience staying in the pub that can really drive the non peak days in food and beverage,” he added.
Transforming pub trade
Heartwood’s eight currently trading accommodation sites have recorded occupancy of more than 80% during recent weeks.
Average room rates are above £150, while revenue per available room is more than £120.
The sites are generating more than £90,000 in weekly sales on average, with the most recent opening achieving approximately £115,000 a week despite having traded for only three months.
Food and beverage sales across the accommodation estate are also running around 60% higher than at Heartwood’s pubs without rooms.
“It’s playing through into profitability as we hoped it would, and it almost feels like we’ve got a couple more gears to go,” Ferrier said.
The move into accommodation has also helped Heartwood offset rising employment costs.
Ferrier said the national living wage had increased by 42.5% during the past five years, compared with inflation of around 26%, placing continued pressure on pub margins.
“The labour cost attached to the sale of a bedroom is much lower as a proportion,” he explained. “For every room you sell, you bring the labour percentage down for the company.”
Heartwood currently expects to add between five and eight sites annually and has no plans to slow down after reaching its initial bedroom target.
“Once you’ve got the machinery of the business working, you don’t want to stop. We have the people in the right roles to deliver the plan. When you get to this steady state growth, you want to keep the momentum in it.”
