When Hemant Patel is on a business trip, it can take a few moments after waking to recall where he is. He stays in near-identical rooms at Premier Inns around the UK as chief financial officer of Whitbread, the budget chain’s parent company, so it gets confusing.
Patel’s problem is Premier Inn’s strength. With 850 hotels, it is the UK’s largest hotel chain and it plans to increase the number of its rooms by 12,000 to 98,000 in the next five years. From a modest start in 1987, when it started to build small motels next to Whitbread pubs, it keeps adding more outlets with purple signs of a sleeping moon and stars.
Their selling points are low prices and relentless consistency. While global chains such as Hyatt and Marriott often franchise their brands to other operators, Premier Inn controls everything from room insulation to Silentnight beds and £10.99 cooked breakfasts for an average UK price of £79 per night’s stay.
“I like all of those things [as a customer] but most importantly, I know I’ll always get them . . . A budget brand has to be ruthlessly efficient,” says Dominic Paul, Whitbread chief executive. As it expands in the UK, buying and converting vacant office blocks and adding rooms, economies of scale make its value hard for smaller chains to match.
But Whitbread’s attention to detail and focus on maintaining customer loyalty has not pleased investors until recently. Its share price fell by a third from January 2024 before staging a recovery in April on signs that a five-year growth plan unveiled last year may be starting to work. Whitbread has pledged to raise profitability and return up to £2bn to its shareholders by 2030.
One challenge is beyond its control: it is largely a UK business, with a smaller operation in Germany. It is thus exposed to an economy struggling to grow, while April’s rise in employer national insurance contributions has hit profits of hotel and leisure chains. Its UK revenues per available room fell about 2 per cent last year, while its revenues in Germany rose sharply.
The other is a matter of strategy. Chains with an “asset-light” approach of franchising brands or managing them for other owners have performed more strongly in recent years, including IHG Group, the UK-listed company with brands including Holiday Inn. Whitbread’s main rival Travelodge, which is owned by GoldenTree Asset Management, leases most of its 610 hotels.
Whitbread’s faith in ownership allows it not only to control how hotels are run but pick the sites it prefers. It is now developing a 693-room freehold hotel under its urban Hub brand on the Strand in London. If its decline in revenue from each available room in the UK reversed with an economic recovery, it would capture more of the upside than a franchised operation.
