Brexit Britain: business as usual for Premier Inn?
With 93% of hotel rooms booked direct, the UK’s most successful budget chain argues the case for consistency. Pamela Whitby reports
It may be tough times for the European hotel industry but for Whitbread-owned Premier Inn it’s business as usual. So says the UK budget brand’s managing director Simon Jones who EyeforTravel caught up with last week after his presentation at the TripTease hosted Direct Booking Summit.
Although there has been speculation about, among other things, the possibility of a boost to UK inbound tourism following the slump in sterling, which yesterday fell to a 31-year low, Jones says it’s just too early to say what the impact of UK’s Brexit vote will be.
Instead the firm will ride out these choppy waters by “preserving the purity of the value proposition” and continuing to deliver on the basics they know matter to customers. Among those: good location and transport links, a hot and powerful shower, clean comfortable rooms and beds, free Wifi and a self-service breakfast, all delivered at the right price.
“Our aim is to tell customers the truth, set the expectations of what we offer and then consistently deliver time after time across all our hotels,” Jones says.
What he is clear about, however, that price is just one part of the value proposition, a strategy that seems to be working, with Premier Inn regularly ranked top of customer satisfaction surveys, most recently in the 2015 Which? Hotel Report.
Hotel brands need to think more broadly about how they integrate the digital experience with the physical experience
For Jones hotel brands today need to think more broadly about how they integrate the digital experience with the physical experience. And after “hundreds of hours of customer research,” according to its annual report, it now has a “site built on a complete new technology platform, making it a much faster and better experience for the user”. And the result is that four out five bookings today are made through premierinn.com.
“Direct bookings today stand at 93%,” says Jones, who is, however, quick to admit that though the landscape may have changed since launching 15 years ago, this isn’t a recent development. Unlike many other hotel chains, Premier Inn’s business model has always been geared towards driving direct bookings, he says, and consistency, across all aspects of the business, the name of the game. In fact, Jones believes that the transparency of the online environment has made honing the product, consistency in marketing and a focus on the basics more critical today than ever before.
A pragmatic approach
So what about the remaining 7% of bookings? They come from Booking.com, the only OTA partner that Premier Inn works with; and no they don’t work with wholesalers. Although booking.com has faced criticism for ‘bullying tactics’ it must finally be doing something right. As CitizenM’s Lennert de Jong explained earlier this year in Hotels and the dirty battle of distribution, today Booking.com “is the only OTA which is playing – and has to play - the game fair and square because it only sells commissionable agent rates”.
So is Premier Inn’s ambition then to deliver 100% of bookings via direct channels? Not really, says Jones, who says the group’s distribution strategy will depend on the ebb and flow of supply and demand, one of the reasons for applying a dynamic pricing model. He is also cognisant of the “hugely helpful” role that OTAs can play, particularly in new destinations. This year the group opened its first hotels in Germany, Thailand and Indonesia. There are now six hotels in the Middle East, three in India, two in South East Asia and one in Germany where it aims to six to eight by 2020.
More are in the pipeline but this is one area where Brexit uncertainty could have an impact. Speaking to the Daily Telegraph prior to the referendum Alison Brittain, who joined Whitbread as CEO from Lloyds Banking Group in December, said that the group has capital that it would like to spend [on ambitious plans to boost room numbers in the UK from 64,926 to 85,000 by 2020] but [in the event of a Brexit] “would be very careful about the choices that we make”.
Now that the UK has voted to leave the EU, and in the ensuing economic and political uncertainty, a question hangs over whether hotel property investments, be they by Premier Inn or others, are likely to be put on hold – at least in the short to medium term.
According to Karen Friebe, a partner at law firm Berwin Leighton Paisner, though some (predominantly Asian) investors in UK are not seeing the outcome of Brexit as negative at this stage, the majority seem to have put investment decisions on hold at least for the short-to-medium, biding their time before making the next move. “
“It’s true to say,” she says, “that many have been totally blindsided by the Brexit vote”.
How Premier Inn will move on its new properties remains an unknown but it will be weighing up the pros and cons against thedifficult trading conditions of the past few months. With the recent attacks in Paris and Brussels, and uncertainty around the UK referendum, the past quarter has seen Revenue per Available Room (RevPar), a key industry measure, dip by 6%. However, Premier Inn’s steadfast approach has helped it to remain the best performing of the UK budget hotel groups across the UK. Even in London, where occupancy rates during the quarter saw a 0.3% dip in like-for-like sales, occupancy rates remained healthy at 84%.
Staying on top of tech
Whether it’s a new take on automated check in or the rise of the chat bot, Jones is clear of the need to stay abreast of technology trends and changing consumer behaviour.
Why? Because the hotels of the future are likely to be quite different; hub by Premier Inn, for example, came in response to a shifting landscape. Such trends are also shaping how they hire new people, a process Whitbread takes seriously.
“We invest massively in our teams,” says Jones, adding that given their current focus on middleware, such as property and reservation management systems, finding people with the right skillset is paramount.
Premier Inn may have a great UK business, but in these volatile and uncertain times, “there is no time to rest on our laurels,” says Jones.