Corporate customers now account for about two thirds of Premier Inn’s sales, up from about 50% in the recent past. Paul Flaum, the chain’s chief operating officer, explains what attracts them
Corporate customers now account for about two thirds of Premier Inn’s sales, up from about 50 per cent in the recent past. Is this as a result of economic conditions?
I’d say it’s something that has been progressing for a number of years and has been accelerated by the tough economic times. Slowly across all sectors people have gradually been moving towards budget, whether its retail, airlines, hotels or whatever. But we have also dramatically improved so it is now the best budget product by quite a long way. We refurbish every two years, we have a 1,200 brand audit check list by a third party and a 100% satisfaction guarantee. We take our guest journey part of it very seriously and we focus on value which is price plus quality. As more people experience it, they realise it’s a complete no brainer to make the switch and they tell their fellow corporates.
Everyone is looking at every penny on their P&L and specifically their travel and expenses bill and we are perfect for them because we make sure that their team members get a good night’s sleep. But we are also fantastic value for money. Unlike any of the other budget operators, we can guarantee food and beverage at every site including hot breakfast, a pint and an evening meal and we also have an account product which allows the corporate clients to manage their compliance to the brand.
Did the rebranding of Premier Inn help?
It did. Our product had moved on significantly. People were still looking at the budget brand generically, and so we were doing all this hard work and wanted this reflected. We didn’t want guests coming and being confused about which brand they were staying in, so we got rid of the word “Travel” so there was no confusion with Travelodge. We are at the premier end of it the budget sector.
We are very clear that the main part of our brand is the bedroom and it has to be consistent across the UK. London has different competing pressures than Wigan, but our guest scores tell us we are good in all of these places. A lot of corporates are up and down the country and they want peace of mind that there is consistency.
How will your expansion continue this year and next?
We are 99% managed with only a few franchises, and the main reason we do not franchise is that we don’t want anyone not dealing with our brand properly. The Whitbread covenant and the Whitbread cashflow allowed us to build 4,000 bedrooms in 2008, which made us faster growing than any other hotelier in the UK, yet we also have total control of our brand.
In deciding new locations, we’ve got a stringent technical model which shows where we need bedrooms. We know exactly how many people we turn away from existing properties and we know where our corporate or leisure guests are. We also have more and more people saying ‘Have you thought about that location?’
Generally I see the expansion slowing slightly and we will take a prudent approach to our finances in the next couple of years since you don’t know what will come round the corner in the next year. That said, we will still grow and probably build more hotels next year. I also anticipate land banking a lot of sites so when the economy comes back up we can put the accelerator back on growth.
There are still bags of opportunities, though. In the UK the budget penetration is only 12-13%. In America it is 25%. If you look at the amount of sites where we are completely full and we need more rooms that also shows loads of opportunities for more expansion. Then look at the general economic downturn. It will change the way consumers buy. They won’t want to waste money any more, whether buying top end or bottom, they will want complete value for money. The other statistic is that only one in three people has ever stayed in a hotel before, so there are big growth opportunities for us. We have aspirations to get to 55k in the next four years.
Is there a typical size to your hotels?
It completely varies from 40 rooms to 600 rooms at Heathrow, City centres tend to be around the 150 mark, provincial towns might be 50 or 60. The model works for all sorts, typically next to the Whitbread pub restaurants.
Do meetings contribute to your revenue?
We don’t have many meeting rooms, and where we do they are mostly at the largest Premier Inns such as Heathrow. It wouldn’t work in most of our 600 locations. And we’ve found that the consumer is having many more informal meetings. Our sister brand is Costa and people are having more meetings over a cup of coffee, or in our pub restaurants arranging to meet someone to meet in the pub restaurant – it’s a free car park so there’s no hassle.
Is your expansion all new builds?
We bought a number of going concerns, including eight Holiday Inns we converted and spent £10m getting them up to our standard since they weren’t good enough to be Premier Inns. We also bought 21 Express by Holiday Inns from M&B and the Tulip business a few months ago. But we also do office conversions and new builds.
Would you ever launch a loyalty programme?
Up until now all our cost has been on delivering fantastic value, refurbishing our rooms and establishing the good night guarantee. Over the next few years we will be looking at the way we can ensure our guests become more loyal, so a programme is a possibility. Too many people look at loyalty programmes and see it as discounting, and we don’t do discounts for anyone, whether you are a large corporate or people turning up for the night . But we are looking at new ways to give value to our customers.
How did the Account Card idea come about ?
We email 100,000 customers each month and get around 40,000 responding, asking them what they want from us and we also run focus groups. Out of those groups, business customers told us that for their bookers and decision makers, one of their biggest problems was compliance with their travel and expenses programme. They also didn’t want their people putting everything on personal expenses. They also wanted management information so they can understand where their employees are staying, how much they are spending and so enforce how much they spend on food and beverage. So as a result of that feedback we created the business account card and it’s been unbelievably successful. It stops the team members going into town to eat at a local Italian, but then, they don’t mind because they are eating in the Beefeater in the Premier Inn restaurant. And most of our pub restaurants serve the local community as well so there are two big sets of customers. We work hard on that as well, and we are relaunching the menus in February/March. There is no loyalty programme fixed to the account card, but it works.
Not enough businesses ask their customers what they want. We use our guest recommender emails and focus groups to ask them to trade off stuff. One example was asking guests if they’d prefer bigger towels or biscuits and they voted to have bigger towels. We are not an organisation that sits in the office guessing what our customers want. We ask them. That’s why we have Freeview in the rooms, because customers said they had it at home so they wanted it in the room.
The good night guarantee works in the same way. We explain it to guests as they check in. The great thing is that it focuses all our team members and all elements of our organisation that we’ll get it right and it gives confidence to customers. It deals with any problems there and then and if there was ever a problem with the room, the team will put it off sale. It’s also been a great tool to go to corporates to persuade them to trial us for the first time.
How large a part does the internet play?
A very large part. We only do direct sell, we don’t operate all the end direct stuff. Over 50% is through the web. We also have a direct connect sales tool to allow the business travel agent or the large corporate to book direct into their system to take cost out of their system and we now have 16 business travel agents signed up for it.