MyShout

Room for improvement? Colin Wellstead looks at the increasing popularity of letting rooms

Pub operators are always looking for alternative income streams. The addition of letting rooms can increase the operating profit for a managed house and also allow pubcos to charge more rent on a leased pub, leaving the lessee with an enhanced retained profit.

Pubs have provided accommodation since the days of the coaching inn. Unsurprisingly, the hotel market has evolved significantly since the 1800s and, like the pub industry, has undergone significant change over the last 10 to 15 years.

The budget hotel sector is by far the industry's fastest growing and the UK's three largest hotel companies — Whitbread (Premier Travel Inn), InterContinental (Express by Holiday Inn), and Travelodge — all operate within the budget market.

Today's travellers want to secure competitive room rates, but they also tend to reject "standard" accommodation in favour of individuality. Many pubs can respond by offering rooms with a bit of character.

A number of pub companies have recognised the potential of letting bedrooms. Eldridge Pope, which was taken private by Michael Cannon in 2004 and subsequently acquired by Marston's earlier this year, has championed letting rooms. By 2005, the company had amassed some 500 letting bedrooms in an estate of 25 pubs and coaching inns across southern England. Eldridge Pope's Room at the Inn brand was launched in the summer of that year, offering a central reservations number and online booking facility.

Greene King and Brakspear were also ahead of the accommodation game. Greene King acquired Old English Inns in September 2001 and now operates more than 70 inns and hotels across the country. Brakspear has an estate of almost 30 pubs offering "Room for a Night", which are predominantly located in Berkshire, Buckinghamshire and Oxfordshire.

Other pub companies/breweries, such as Charles Wells, which sold off its hotel portfolio in the 1990s, have chosen to re-enter the accommodation market. Charles Wells acquired a portfolio of 10 freehold pubs from Traditional Freehouses through Christie+Co at the beginning of this year. The fact that five of the pubs offer letting rooms was highlighted by Charles Wells as one of the prime motivators behind the acquisition.

Improvements in the quality of pub food are also having a positive impact on the desirability of letting rooms. A number of the top-end gastropubs are now providing overnight accommodation for the benefit of their diners. The Hand & Flowers pub restaurant in Marlow, Buckinghamshire, won its first Michelin star within 10 months of opening and recently received the Christie+Co-sponsored Newcomer Award at the the Cateys. Chef proprietor Tom Kerridge is currently developing a neighbouring cottage in order to offer his diners overnight accommodation.

Many diners seek good value overnight rooms, that enable them to make the most of the pub dining experience and the fine selection of beverages. Where it's not possible to develop letting bedrooms on the premises, operators are buying neighbouring properties for conversion into accommodation.

For individual purchasers, a small number of letting rooms can generate significant profit for limited outlay, which is also likely to be reflected in the sale price achieved when the property changes hands.

Colin Wellstead is Christie+Co's director and head of public houses