Changing rooms - pubcos and brewers in the hotel game

This is not the best time to be a hotelier. The foot-and-mouth crisis has slashed bookings in rural areas and scared off American tourists who are apparently worried about returning home from Buckingham Palace covered in festering sores.

Pub companies specialising in accommodation, such as Old English Inns and Cumbrian brewer Jennings Brothers, are among the victims, warning of falling sales in rural areas.

But it isn't a totally bleak picture. According to reports last month, the hospitality industry in towns, cities and coastal resorts has been little affected, with some pubs enjoying a brisk trade despite the cold wet weather.

Because of this, it appears that foot-and-mouth is not deterring a number of leading pub operators and brewers from diversifying further into the accommodation sector.

Mitchell's of Lancaster, which exited brewing two years ago to focus on pubs, has begun building up a new division to run hotels with function facilities within a 20-mile radius of its headquarters.

Managing director Dermot McCarthy said the company needed to find a new income stream because it was unable to compete with the national pub companies over buying new sites for pubs.

"We will be the largest independent hotel operator in this part of the world and the most significant player other than the big nationals," he said.

It is certainly nothing new for pub companies to run hotels - after all, pubs were historically inns where travellers could rest during long coach journeys.

Dorset-based Eldridge Pope, another former brewer, has taken the decision to focus on pubs with food and accommodation. On the other hand, Jersey-based brewer Ann Street Group has turned its back on hotels on the mainland. Its British managed house operator, Lionheart Inns, last year sold its 10 inns to Eldridge Pope, spending its cash instead on food-led pubs.

But it is clear that London brewer Fuller's is firmly committed to developing a high-profile stock of hotels alongside its beer business and 227 pubs. It is halfway through a £23m two-year programme to develop three more hotels for its successful English Inns brand.

Hotel operations have been put under Justin Huber who previously worked in sales and marketing for Thistle hotels and Granada Travelodge.

There are now five English Inns, after the opening of the White Hart by the river at Hampton Wick, near Kingston-upon-Thames, Surrey, last month. It was formerly the site of a basic Fuller's pub but, after a £2.3m investment, it now has 37 bedrooms to the level of three-star facilities.

Despite the rebranding, it continues to be fronted by a traditional pub which aims to attract local people as well as the hotel's residents.

Mr Huber said the pub was intended to have a brasserie-style feel while still offering Fuller's ales, such as London Pride and ESB. Its menu ranges from steak and chips or sausages and mash to more exotic dishes such as red snapper wrapped in banana leaf with sweet chilli sauce.

"We want a mix of regular and local people, which you wouldn't normally get in a hotel," he said. "The hardest thing in the world is to get your guests to eat with you but we have created an environment where men and women would feel comfortable eating by themselves."

It certainly helps that Mr Huber was born just a mile away from the inn and knows his market well. "To me as a local, this is the kind of pub I would want," he said.

After years working for national branded hotel chains, he enjoys the more individual approach that a pub company can take towards creating new sites.

"The attraction about joining Fuller's is there are fewer restrictions on what you can offer," he said. "You're able to develop a character to the place.

"It's not standardised for every unit. We look at every unit and decide what is right for that hotel and for the customers in that area. We are not locked into how many bedrooms we must have and which curtains they should have."

Last year, Fuller's raised £6.7m by selling the Master Robert Hotel in Hounslow, West London, which is on top of sums already raised by selling its off-licence chain for £8.05m last year. This cash is contributing to what will be the brewer's biggest-ever hotel developments.

In July, it is opening the Brigstow, a 117-bedroom hotel overlooking Bristol's harbour, which will also have a brasserie bar called the Ellipse. This site was bought for £2.4m and has been built at a further cost of £7.2m.

On a similarly grand scale, it is opening the Chamberlain, a 64-bedroom hotel in the Minories in the City of London in October. This former office building was bought for £4.6m and is being redeveloped with a further £5.1m.

Mr Huber said Fuller's was keen to acquire more sites for hotels but only if it was absolutely sure about the price, location and the market.

"We want to grow the estate but not for the sake of it," he said. "Unlike the big chains, we are not forced to open a certain number of hotels in a certain time period just to keep up."

The new Chamberlain hotel will share a site with a pub operating under its traditional Ale & Pie brand, much like its existing Mad Hatter in Southwark and Sanctuary House by St James's Park.

While Mr Huber was involved in food and beverage operations at his previous hotel companies, he was attracted to the company because he could get involved in the much broader demands of running pubs.

The challenge of operating a pub as well as a hotel provides an extra opportunity for Fuller's employees to develop their skills. The managers of the Mad Hatter were brought in to boost the pub's food and drinks sales after running a straightforward food pub, the Head of the River, in Oxford.

Training is aimed at reaching standards of service and food that are as good as the best restaurants and hotels. Mr Huber began his career on the frontline with an industrial placement in chef Anton Mosimann's kitchen at the Dorchester in London. His father, who comes from Switzerland, has been involved for many years in the hospitality industry and instilled in his son the need to have high standards.

"When my father arrived in this country, he couldn't believe the way people were treated in the hospitality industry," Mr Huber said. "He looked on it as a craft and an art. The quality of food that we are turning out is equal to continental Europe but we need to value the industry as a profession as it is in Europe.

"When people come into Fuller's hotels, I want them to be treated and get the same service and quality that they would at the Dorchester."