Belt-tightening consumers take to pub grub price war

Belt-tightening consumers take to pub grub price war

A pub food price war has broken out among Britain's biggest budget pub restaurant operators as consumers are increasingly reining in their discretionary spending.

Yesterday Whitbread, which operates the Beefeater and Brewers Fayre chains, showed a surprising surge in sales - up 6% for the 24 weeks to August 14 - after revamping about a quarter of its pubs last year and keeping prices tight on its menus. The pubs, many of which are located next door to Whitbread's Premier Inns where the food and drink offer is very limited, increased comparable sales by 2.4%.

Analysts suggested that Whitbread was one of a band of large pub restaurant operators using value-meal promotions to grab market share. At Brewers Fayre a daytime two-meal offer of a 10oz gammon steak and chicken tikka masala for £9 has been very popular, as has Cornish pastie, chips and baked beans for £4.99.

Chief executive Alan Parker said visitors to pub restaurants were up 9.3%. Paul Hickman, an analyst at the brokerage KBC Peel Hunt, said this strong growth suggested "energetic promotion activity, which will have a margin effect".

Similar promotional pushes are being seen at several rival budget pub restaurants, including Mitchells & Butler's "pub and carvery" format, where the average cost of a meal is £3.96, Greene King's Hungry Horse chain and Wetherspoon's.

JD Wetherspoon, which publishes its full-year results this morning, is expected to report a decline.....continued below

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in profit margin, blaming higher costs of promotional deals, many of them centred around food. Wetherspoon's promotions include meal and drink promotions for £5.99 at some pubs and price freezes on a range of drinks until March 2009.

Meanwhile, at Whitbread's Premier Inn budget hotel chain, cost-conscious business travellers and holidaymakers have boosted sales. The leisure group, which also runs Costa coffee shops, has emerged as a beneficiary of the credit crunch as Britons find ways to economise on travel and eating out.

Premier Inn, which accounts for the bulk of Whitbread's profits, has outperformed the wider hotel market, with like-for-like sales up 10.2% for the 24 weeks to August 14. The 570-strong hotel chain is on track to open more than 4,000 new rooms this year. Despite Premier Inn adding 1,157 new rooms, overall occupancy rates were down only 2% while revenue per available room - a key measure for the hotel industry - was up 5.8%.

Alan Parker, the chief executive, said Premier Inn was increasingly attracting business customers as companies cut their travel budgets amid fears that the economy is sliding into recession. "Large companies realise they have to save money," he said. "Why pay more than £100 to stay in a four-star hotel when you can pay £50?"

Business travellers make up 60% of Premier Inn sales in cash terms, with leisure travellers accounting for the remaining 40%. Business customers tend to stay two nights and spend more while leisure travellers usually stay one night. Leisure bookings slowed in June and July, though August was strong.

Paul Hickman at KBC Peel Hunt said Premier Inn was "currently enjoying an Aldi effect through corporate buyers' cost-cutting, though we feel this may be overtaken by headwinds in 2009 as unemployment rises".

Like-for-like sales across the group climbed by 7%, with growth also seen in Whitbread's two other divisions: pub restaurants and Costa coffee.