The budget hotels chief who plans to spend £100m on rooms

Paul Flaum, the chief executive of Whitbread’s Premier Inn hotel and restaurant business, has good reason to smile.

The company has dismissed fears of a downturn in consumer spending — like-for-like sales in the 50 weeks to February 14 were up 10.5 per cent. And Premier Inn, already credited as the most dominant force in the British budget hotel market, could become a whole lot bigger if recent reports are anything to go by.

The group, which last year sold the David Lloyd fitness chain for £925 million, has recently been linked with a takeover of rival chain, Travelodge, in a move that would create a £3 billion hospitality giant. Although declining to comment on such reports, he acknowledges that things are looking good. Premier Inn this week announced plans to spend £100m on 1,200 new rooms in Central London, making it the largest chain in the capital by the time of the 2012 Olympics.

“The business is booming,” says Mr Flaum, 37. “The consumer downturn is not necessarily bad news for us. There might be a bit of pressure because there is less disposable income, but I actually think we are in a good position.” Premier Inn owns 506 hotels across the UK, and Mr Flaum says he turns away between 30,000 and 40,000 people on a good day. “More and more the British consumer is making sure they get value, and in a downturn, they will focus on this even more.” He says the consumer is more likely to opt to pay £60 in a Premier Inn hotel, than over £100 in a more expensive hotel. “People start asking themselves why they are spending almost double the amount.”

The other thing with a downturn, he notes, is that an increasing number of people will take short breaks — which make up for half of Premier Inn’s clientele. “In a downturn, people still want to get away but they want to get maximum value for those short breaks.”

Mr Flaum joined Premier Inn (formerly Premier Travel Inn) in 2002. Last month, he was appointed CEO of Whitbread Hotel and Restaurants under a company re-shuffle whereby Whitbread will operate its hotel and restaurants businesses as one integrated business. Now responsible for Premier Inn, Beefeater and Brewers Fayre, Mr Flaum says he has aggressive expansion plans.

“We have a massive recovery agenda for the restaurant business and a massive growth agenda for Premier Inn,” he explains. “While we have grown significantly over the past three to four years at an annual rate of around 10 to 15 per cent, our aim is to grow significantly more in the next five years.” Premier Inn will open 4,000-4,500 new rooms over the next 12 months, compared with 3,400 in 2007-08.

He acknowledges that growing the restaurant side of the business is the more challenging. The restaurants make an annual profit of around £56m, compared to Premier Inn’s £200m. “They are inconsistent, need refurbishing and they haven’t defined their brand proposition well enough,” he notes. “And in a downturn, people eat out less often. The competition is also heating up as more pubs are focussing on food, following the smoking ban.” Yet he remains optimistic. “We are going to drive this [recovery] very hard and very quickly. There is huge potential here.”

The strategy, he says, is that every Whitbread restaurant will sit alongside a Premier Inn within two years, to ensure extra dining revenue from customers at Premier Inn, which reportedly has the best occupancy of any large hotel brand in the UK. Is there not a stigma about staying attached to staying in a budget hotel like Premier Inn? “I don’t think there is a stigma. But I think people are surprised with the quality they get when they stay there. We are the top end of the value market.” He says: “There are those with the mentality; ‘Let’s stay in a Premier Inn. I’ll get a good night’s sleep and have more money to spend in Harrods.’”

He is quick to point out that Premier Inn is significantly different to Travelodge. “We want everyone to realise this. Premier Inn changed its name from Premier Travel Inn to Travel Inn a few months ago as we wanted to get rid of ‘travel’ from our name.” Nonetheless he admits they are competing with Travelodge for share of the market.

Mr Flaum started his career as a chartered accountant at PWC before joining Odeon Cinemas in 1998. He moved to Whitbread in 2002, as operations director for Whitbread’s Premier Inn.

Home is in Bushey, Hertfordshire, where he lives with his wife Gail and their three children. They are members of Bushey United Synagogue.

    Last updated: 1:45pm, April 10 2008