Premier Inn: From Strength to Strength

Euromonitor’s Michelle Grant reveals the secret behind Premier Inn’s success.

NOTE: This article was originally published in the Q3 2014 edition of Hotel Industry Magazine.

In 2004, Premier Inn, owned by Whitbread PLC, ranked third in the UK hotels market in terms of room revenues and only had a share of 3%. Nine years later, the company ended 2013 ranked first in the country with a share of 12%.

The company’s strong product, superior service and value for money, along with its ability to finance its own growth, have all propelled the company to the top.

The future evolution of the company, though, depends on the strong execution of its new brand, hub by Premier Inn, and international expansion in the face of growing competition in the UK.

Hotel Company Share of Room Revenues

 

UK Leader

The company has been able to obtain its leading position through a variety of means.

By leveraging its own balance sheet, the company has been able to continuously build hotels, even during the recession when financing was scarce.

Another smart move was the introduction of dynamic pricing in 2010, which allows the company to better manage prices in times of low and high demand.

But the company’s emphasis on its product and service has helped it gain traction with travellers.

In 2000, it introduced the “Good Night Guarantee.” Guests can obtain a refund if their sleep is not satisfactory.

The company also invests heavily in maintaining its product.

Between 2013 and 2014, Whitbread invested close to £80 million in repairs, maintenance, refurbishment and systems.

To further improve the customer experience, the company has bolstered its online presence, stimulating traffic on its web and mobile sites.
It has engaged travellers through relevant content, such as customer reviews, TripAdvisor ratings and social media activity, to encourage direct bookings.

In 2013, Premier Inn had more than 34,000 followers on Twitter and over 96,000 Facebook fans. This helps drive traffic to its website, which accounts for three quarters of its bookings.

Fierce Competition

Although Premier Inn is the leader in the UK hotels market, it faces competition from a great deal of budget competitors.

Travelodge, its main competitor, has lagged in recent years, but it has almost finished revamping its entire portfolio with brand new room designs and it is expanding beyond traditional roadside hotels into more key city centre and leisure locations, with five new hotels set to open in London between 2014 and 2015.

In November 2013, Travelodge announced the construction of six new hotels (579 rooms) across the UK, with an investment of £41.5 million.

The company also faces threats from high-design, low-price hotel brands, such as Citizen M, and pod hotels, such as Tune and easyHotels.

New Product for Evolving Markets

In response to the changing competitive environment, Whitbread announced a new brand, called hub by Premier Inn, in July 2013.

The brand is eyeing the pod hotel business, which consists of small but contemporary rooms located in city centres, which means lower costs and highly competitive prices.

The initiative represents a major opportunity to sustain future growth, as consumers remain price sensitive and are willing to exchange extra space for unique room designs.
Cities like London and Edinburgh are key targets for hub by Premier Inn. The first hotel is set to open later in 2014 in St Martin’s Lane in London. Another eight hotels are in the pipeline, including two in Edinburgh.

Pipeline Development

Whitbread has set ambitious goals for Premier Inn, reporting over 10,000 rooms in the pipeline.

By 2018, it plans to have 75,000 rooms in the UK, up from 55,000 rooms in 2013, and reach close to 10,000 internationally. International expansion is focused on select international markets, including India, Dubai and Abu Dhabi.

On the Right Path

Given the company’s success with Premier Inn, it is likely that hub by Premier Inn will be launched successfully and allow the company to penetrate markets not viable for the main brand.

It will be a strong source of new growth for the company and help fend off new rivals, such as Tune.
Its heavy dependence on the UK, though, makes the company vulnerable to its mature economy.

Because it is relatively late to the international expansion game, Premier Inn may struggle to gain a foothold—it will be competing against global chains that have more experience in those markets.

The gains, though, certainly outweigh the risk, as economic power shifts away from mature economies towards developing economies.

With these two main initiatives, Premier Inn is on the right path to retain its leadership position in the UK and grow beyond its borders.

NOTE: This article was originally published in the Q3 2014 edition of Hotel Industry Magazine.

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