More rooms at the inn: why pubs are converting rooms into revenue

Pubs with bedrooms offer an individual, stylish experience for those who want an overnight stay at a reasonable rate with gastropub-standard food. Neil Gerrard reports

 

When it comes to British pubs, for much of the past 50 years it hasn't been so much a case of ‘no room at the inn' as ‘no rooms at all'.

 

With the exception of a minority of places offering basic facilities (pine furniture and perhaps a shared bathroom for £50 a night), the British public had largely eschewed the delights of staying at traditional country pubs and coaching inns for the motorway Travelodge, Premier Inn, and boutique and country house hotels, which meant pub accommodation was scarce.

 

But after the financial crash of 2008, something changed. Growth in the number of rooms at inns may not yet be of biblical proportions, but it is certainly significant.

 

Individuality and affordability
The shift came after a few enterprising operators cottoned on to the idea that pubs could offer a stylish, fun and affordable place to stay at a reasonable price to cost-conscious consumers. Dan Brod and Charlie Luxton, who both worked for Soho House & Co before taking on their first pub, the 10-bedroom Beckford Arms in Tisbury, Wiltshire, with the backing of investors including founder of Soho House & Co Nick Jones, unwittingly became part of the phenomenon. “At the back of the recession, we realised that people didn’t want to go to country house hotels so much any more because they were boring,” Brod explains. “Back then, there were very few people doing good pub accommodation. I could say we were really clever and we thought of it, but we just stumbled across it.”

 

The Beckford Arms was a great success. Until recently it charged less than £100 a night and combined the key ingredients that have made pubs with rooms such a phenomenon: genuine hospitality, little touches to make the guest feel special, great food and a high standard of fit-out and finish coupled with individuality and atmosphere.

 

Luxton and Brod took on a second site, the eight-bedroom Talbot Inn in Mells, Somerset, in 2013, and along with Matt Greenlees have recently bought the five-bedroom Lord Poulett Arms (pictured top) in Hinton Saint George, Somerset, too. While pioneers like Brod, Luxton and Greenlees helped set off the trend, it didn’t take long for other operators, big and small, to sit up and take notice.

 

A strong revenue source
Not only is there demand among consumers for a special and different experience at an affordable price, there are also plenty of good reasons for pub owners to provide exactly what customers want.

 

“It’s just such a strong revenue source,” says Andrew Buchanan, director of pubs at Daniel Thwaites, which offers a mix of full-service hotels, historic coaching inns and “lodges” under its House of Daniel Thwaites collection. In a competitive marketplace, and one in which casual dining perhaps doesn’t provide the boon it once did, rooms make a pub more sustainable, he explains.

 

“Drinks volumes might be declining and food volumes might be in growth. Those two net off against each other, but the profitability often still is not quite there. Add rooms into the mix and all of a sudden it drives profitability, because you have got people dining and having a couple of drinks as well.”

 

Buchanan reckons that 60% of guests who stay (and almost universally among the companies The Caterer spoke to, a typical stay lasts just one or two nights) will have dinner in the pub. It’s a similar story at family-owned JW Lees, where Tony Spencer is retail director of the pub firm’s hotels and inns division.

 

“We have seen the cost of operating managed houses go up, be it National Living Wage, business rates or utilities,” he says. “This trend towards larger, multi-income stream businesses are a way of making the managed house model stack up and, of course, the average spend by a guest is significantly higher on both food and drink because they are not driving. And they are either there on holiday, in which case it is a treat, or they are on business, in which case they are on expenses.”

 

Investment costs Pubs often have a ready supply space waiting to be converted into accommodation, helped along by the fact that the number of live-in pub managers is declining.

 

Pub firm and brewer Fuller’s has driven dramatic growth in its room stock, up from around 200 or so a decade ago to 781, following its recent acquisition of Joel Cadbury’s six Bel & the Dragon pubs with rooms.

 

Jonathon Swaine, managing director of Fuller’s Inns, would like to see that figure rise to 1,000 rooms in the next five years. He envisages more acquisitions, as well as more rooms being created in existing Fuller’s pubs. “Pubs being inns of 200-300 years ago means you are quite lucky, and you often find the proportions of bedrooms are pretty good and they can take a good-sized double bedroom and an en suite bathroom,” he says.

 

That said, it doesn’t come cheap. Estimates on how much it costs to create a new pub bedroom range from anywhere between £20,000 and £80,000, and typically £80,000 in Fuller’s case, counting the installation of drainage and mechanical and electrical costs. The general consensus is that rooms will pay for themselves within five years, although the ongoing maintenance cost can be hefty too â€" Swaine puts it at another £15,000-£20,000 every five years.

 

Opinion on how many rooms are needed to make a project workable varies considerably. Tim Bird, the former managing director of Brunning & Price, who now runs seven-strong independent pub firm Cheshire Cat Pubs and Bars with Mary McLaughlin, former managing director of La Tasca, reckons on at least four rooms, preferably six. Meanwhile, Spencer, who has seen Thwaites grow from 160 rooms to just over 290, says “it gets interesting” once a building has at least 15 en suite rooms.

 

Whatever the number of rooms, most businesses appear to consider the capital outlay worth it. Paul Nunny, who in 2013 founded www.stayinapub.co.uk, which lists around 1,700 independent pubs with rooms across the country to a domestic and international audience, points out: “The pub companies are actually quoting their accommodation figures in their accounts now. That shows you how major an investment it is.”

 

The challenge for independents For the independents though, raising the cash required can be a little tougher, as Brod and his business partners have found. “We are not a group that wants to expand massively because we know that you can’t do this sort of place properly in a chain format,” he says.

 

“We make a reasonable profit, but basically it is a passion project run as a proper business. One of the big problems with pubs with rooms is to do them well, and that costs a lot of money. The bank will usually lend you about 70% of the value of the business. You save up to get the other 30% to buy it. But what is hard is getting the money to do the pub up or add rooms.”

 

In fact, while the continued coverage of the number of pub closures makes it tempting to believe that pubs still provide a low-cost route for hospitality professionals to start up their own business, it’s no longer as easy for
independents as it once was.

 

Bird and McLaughlin are seasoned operators who have picked up a slew of awards and recommendations, such as ‘Best Newcomer’ for the Fitzherbert Arms in Swynnerton, Staffordshire, in the Sawday’s Pubs & Inns Guide of England & Wales 2016/17, but Bird sounds a note of caution to younger operators thinking of trying to break into the market.

 

“Pubs offered an opportunity back in 2009/10 when everyone was running away from them. You could negotiate rent and tie options and freehold acquisitions more competitively,” he says. “Now, there are fewer pubs because, ironically, people see them as the future. Mary and I got in at the right time, but with Brexit and the economic unknowns, young entrepreneurs will need deep pockets to survive.”

 

The bigger groups, then, could well find themselves at a competitive advantage. But is there a danger that in their collective eagerness to roll out more and more rooms, operators may lose sight of the very appeal pubs with rooms currently have?

 

Brod fears it could. “The pubcos own most of the pub stock and that leaves little for the independents to acquire, but it’s the independents that make these things work,” he says. “Whether the large groups can deliver pubs with rooms with the independent spirit and passion you need â€" that’s a very big question mark.”

 

Perhaps unsurprisingly, Swaine, who can point to award-winning pubs of his own â€" such as the Wykeham Arms in Winchester, Hampshire, which has won The Good Pub Guide Town Pub of the Year three times â€" has a different view. Maintaining individuality among pubs with rooms isn’t that different to running managed pubs in general, where all sites are slightly different anyway, he argues.

 

"You have to ensure that bedrooms have certain elements â€" Hansgrohe showers, a certain standard of flatscreen TV, premium mattresses â€" and you layer that with some individuality. We get our design teams excited about the community a pub is in and its history and then we try to reflect that in each of the rooms.”

 

Whether part of a big group or an independent, all pubs need well-trained staff. Spencer, himself a hotelier by training, having worked for the likes of Corus and Regal and Holiday Inn Express, recognises the challenge. “It’s a double-edged sword because operating a pub with rooms adds another level of complexity to the job of the landlord â€" at the same time as a barrel needs changing and there are 80 people booked in the restaurant, we are also expecting managers to be looking at their bedrooms and what rate they are selling them at three months down the line,” he says.

 

Many groups â€" JW Lees, Daniel Thwaites and Fuller’s among them â€" offer training to help, and Fuller’s has its own dedicated revenue team to help assess demand and set rates dynamically.

 

It’s perhaps telling that Brod and his team have extensive hotel experience, too. He is happy to see the revival of the inn and passionate about promoting high standards. “We really believe in this sector as a fundamental part of British hospitality,” he concludes.

 

“Hospitality is such a clichéd word, but it means so much. For me, it is about making every single person who comes inside your building feel like they are having a really good time.”

 

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The hotel critic’s view
The Telegraph Travel’s hotels expert Fiona Duncan on what customers want in a pub with rooms “I so much prefer independent pubs. The big operators are thinking about money and volume and I don’t think many of them make nice rooms, although some are better than others. What they tend to do is to get designers in with their mood boards and I can spot it a mile away.

 

“What people are looking for is somewhere affordable where they can still feel they are having a great time and that there’s a bit of pizzazz. People want a bit of glamour and a story to tell, all for £100-£120 a night. I am quite happy in some lovely old-fashioned place, but the young want really good beds and Bramley products, Roberts radios and power showers. The good pubs will provide all of this. They want real atmosphere and character. And what they also really yearn for is really good pub grub that makes people feel happy.”

 

Some of Fiona Duncan’s favourites
• The Talbot Inn, Mells, Somerset
• Felin Fach Griffin, Brecon, Powys
• The Gunton Arms, Norwich, Norfolk
• The Mash Inn, Radnage, Buckinghamshire
• The Cat Inn, West Hoathly, West Sussex

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The growing appeal of accommodation in pubs Accommodation still makes up a relatively small proportion of overall pub revenue, but pubs with letting rooms as their main focus, have a much more diversified revenue profile.

 

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