A cut above the rest

With its sights set on a cost cutting target of €26 million a year, Whitbread has left no stone unturned in its bid to trim the fat from the organisation – shedding unprofitable brands and outsourcing services. Diana Milne meets CIO Ben Wishart to find out why the hospitality giant needs to shrink before it can grow.

“Our focus is to, at least once a year, have a really good look at our overheads”
-Ben Wishart, Whitbread

There’s nothing new in today’s economic climate about an organisation streamlining its operations. But, back in February 2008 Whitbread’s announcement that it was to undertake drastic cost cutting measures sent shockwaves through the UK’s hospitality industry. At the time, the credit crunch was for many, little more than a distant rumble from the US and few UK businesses, could have predicted that the storm was set to erupt in Europe. Whitbread, however, was ahead of the pack when it came to forecasting the downturn – and at a time when most companies were expanding – it announced streamlining process aimed at saving it €26 million a year.  Already it had disposed of four of its key brands – Pizza Hut, TGI Friday’s, David Lloyd Leisure and Marriot hotels. Now the time had come for the company to look within and explore how it could reduce its operating costs.

Key to this strategy was the streamlining of its IT and logistics operations and the outsourcing of these to Kuehne + Nagel in April 2008.

The next stage will be to outsource finance and accounting services to India through a multi-million euro five-year deal with Steria. Heading these changes is Ben Wishart, CIO of Whitbread, who has the ruthless task of trimming the fat from the organisation’s operating costs – one regarding which he is unapologetically pragmatic. “The rationale is one of focussing on opportunities to reduce cost. Largely it is that simple. The team who used to manage the finance and accounting - and still manage them today but are in the transition process - are great people who used to do a really good job.  But the truth is that in the 21st century there are also people in India who will do a really good job and they will cost the business a lot less money to do it. Our focus is to, at least once a year, have a really good look at our overheads and look at the next list of opportunities that we could go for. So does the company plan to do more outsourcing of its IT operations when it conducts the next assessment of its overheads?  “I can’t think of anything that we’ve got line of sight on outsourcing at this stage,” says Wishart. “We feel that we’ve bitten off quite a big chunk in terms of doing finance and accounting in parallel. So when those two are both up and running and stable, we’ll go back to the drawing board.”

Saving pennies is not the only motivation behind Wishart’s overhaul of Whitbread’s IT and logistics operations. The organisation, he says is now a very different from the one he joined four years ago when Whitbread was made up of eight business units. Today it comprises five  key brands – Premier Inn, Costa Coffee, Beefeater, Table Table and Brewer’s Fayre – on which it is now entirely focussed– with the aim of increasing the number of Premier Inn businesses by 50 percent to 55,000 rooms and to double the size of the Costa Coffee business to 2000 in the next five years.

The streamlining of parts of Whitbread’s operations has meant consolidating IT and logistics systems not just to cut costs, but also to bring in greater efficiency to help drive the company’s expansion plans for its remaining brands. One of the problems Wishart inherited when he took up the role was that there were disparate IT systems for each of the company’s business units – a situation he has since remedied by creating an IT shared services centre: “When I joined the business four or five years ago, there were eight business units and they were largely independent of each other in terms of the IT business decisions they took. What we started off by doing was we created an IT shared services centre around the things that were common across all of the businesses. So for instance everybody used the same till process around every business and they all used the same HR and accounting software. Then once we started selling more businesses, it was largely about taking volume out of those areas rather than doing something radically different.”

Describing the problems the fragmented nature of the IT systems was causing, he says: “Obviously if you are managing an IT operation in a fragmented away across a multi brand operation like Whitbread, then you’ve got more management overhead and if you’re not terribly well co-ordinated you end up paying different prices for the same thing in different parts of the business. Also you just don’t notice the areas where there is operational efficiency because it doesn’t stare you in the face.”

Despite having successfully re-modelled Whitbread’s IT systems, and established a shared services centre, Wishart says he is still not satisfied that the systems in place are simple enough for staff to navigate – adding that he believes that in their present state, the systems are preventing staff from doing what they do best – pulling pints and serving customers with a smile. “We don’t think the systems are simple enough at the moment,” he says. “We think there are a number of areas where the way in which the business process has been constructed and the system that’s been designed to support it drives re-work, errors and non compliance to process. Frankly if you manage the Dog and Duck Beefeater in Wellingborough, you want to be out at the front of house with your guests, serving great food and giving people a good time. But in actual fact you get dragged into the back office to carry out some processes for more time of the week than you’d like to. We want to take that problem away from our managers so that we can get them focussed on what we think is absolutely the right thing to do which is serving people a great meal and great drinks in comfortable surroundings.”
Keeping IT aligned with businesses processes is the main role of any good CIO, but in the case of Whitbread, because IT plays such a crucial role in frontline operations, it is even more important for Wishart to convey the importance of his department’s role within the organisation.“I think the key challenge of my job is keeping everybody focused on the fact that this is about business processes not about systems,” he says, admitting that ensuring the company’s systems are up and running 24/7 gives him sleepless nights: “The number one priority that I wake up in the night worrying about on a bad day is the availability of our systems that drive availability into our hotel business:  “We have 38 and a half thousand rooms in the UK. We book on average about 19,000 of those every day through our internet site and the rest come through a direct conversation with us either in a hotel or in the reservation centre where they are booking directly into the reservations system that sits behind the website.

The average lead-time for a reservation is between two and three days. So the availability of those systems and their use for our guests and the people who are talking to our guests on the telephone is more important than anything else.”

However those numbers are set to become even more daunting for Wishart as the company expands its hotel and Costa businesses both on its UK home turf and internationally. Last year Whitbread announced plans to boost its hotel portfolio by over 1000 rooms and to add five new pub restaurants. This followed the announcement that it was to acquire 21 Express by Holiday Inn hotels. It is also expanding the Premier Inn brand internationally having entered into a joint venture agreement with Emirates Group to launch the Premier Inn brand in the GCC, where it has already launched its first property in Dubai. India is another important market for Whitbread and it has entered into a joint venture agreement with the developer Emaar-MGF which will see it build 80 hotels in the country over the next ten years – an investment worth up to €320 million. Costa Coffee too is undergoing expansion with Whitbread planning to open outlets in China and Russia through joint ventures it has established there.

The expansion of the business into new markets overseas in particular will bring new challenges for Wishart  - however he says he is confident that the international operations can operate using the same IT systems as their UK counterparts: “The IT that we’re putting in place is learning from the model that we’ve built in the UK because we think that we are pretty good at delivering a low cost IT environment,” says Wishart. “We can’t put exactly the same IT that we used in the UK into the international marketplace because some of the things that we used in the UK won’t travel because of different currencies and tax regimes and so forth. But we’re working generally with the same people and partners that we worked with in the UK that have other products that are more susceptible to international travel.”

He goes on to say that his department has implemented a reservation system in Dubai that will also be used in India and that the Premier Inn website is able to interface in Dubai and India with local reservation systems.

Whitbread’s streamlining and efficiency drive is clearly paying off. Cutbacks made in other areas are helping to fund the expansion of the company’s core brands – resulting in an increase in overall revenue by 12.6 percent in 2008.

Clearly thinking ahead has paid off for the company. But according to Wishart there is only one factor driving Whitbread’s success and its IT strategy – putting the customer first: “We have achieved our success with a relentless focus on what’s right for our customers. Our focus goes on what’s right for our customers and what is right for our customers is to create an environment where you can have a really good meal, a pleasant drink, where the environment is really pleasant.”

About Whitbread PLC
Whitbread PLC is the UK's largest hotel and restaurant company operating market-leading businesses in the budget hotels and restaurant sectors. Its brands include Premier Inn, Beefeater, Table Table, Brewers Fayre, Taybarns and Costa Coffee.

Whitbread PLC employs over 33,000 people and serves 8.5 million customers every month in its 1500 outlets across the UK.

In the financial year ending 28th February 2008, Whitbread PLC reported an 11.3% increase in Group Revenue to £1.18 billion and 26.3 percent increase in Pre-tax Profit to UK£210.3 million.
Whitbread PLC is a FTSE 100 company, listed on the London Stock Exchange. It is also a member of the FTSE4Good Index.  In August 2008, Whitbread's market capitalization was circa £2.0 billion.

Whitbread brands:

Premier Inn
Premier Inn is the UK's largest and fastest-growing hotel brand with over 36,006 rooms and 518 hotels across the UK. Premier Inn bedrooms are 22 square metres and feature en-suite bathroom, TV, and internet access for business guests. Premier Inn offers customers a ‘Good Night Guarantee' of a good quality room, comfortable surroundings and friendly service, which is unique amongst Britain's leading hotel chains.

Premier Inn was the first Britain-wide hotel group to sign up with national tourist boards, VisitBritain, VisitScotland and VisitWales; this means Premier Inn is now part of a new quality assessment scheme, specially created for budget accommodation.

A joint venture with Emirates has seen the Premier Inn brand develop in the Gulf region, with its first budget hotel in Dubai opened in Spring 2008. Premier Inn also has a joint venture in India with Emaar-MGF to roll out 12,000 rooms in 10 years.

Beefeater
Part of the Whitbread family, Beefeater launched as a brand back in 1974 with the opening of its first restaurant The Halfway House in Enfield. As the name suggests we were predominantly known as a steak house, providing fantastic food at great value prices.

Whitbread has invested heavily in the Beefeater estate which now stands at 141 restaurants nationwide with more opening 2008/2009. The new look Beefeater is warm, modern and stylish and offers our guests their own personal space to enjoy their dining occasion at their leisure. Our restaurants come complete with low lighting, warm cosy booth seating, contemporary artwork and a welcome smile.

Table Table
Part of the Whitbread family, Table Table is an all-new eating out experience with stylish surroundings designed to match your every mood, with delicious dishes to satisfy your every appetite. Plus great value meal deals and a kids menu.

Table Table first opened its doors in 2005 at the Moseley Park in Wolverhampton, and now has over 100 restaurants nationwide, with more opening in 2008/2009.

Brewers Fayre
Every business needs a 'mission statement', something to aim for. Ours is simple - 'To serve our guests the nation's favourite pub food, at great value for money, in a family friendly environment.'

We want our restaurants to be easily accessible; a place that you can visit for any occasion, without having to worry about booking in advance. We want to create a warm and friendly atmosphere where you can take your time ordering at the bar, then relax and enjoy yourself at the table while our team does the rest.

Costa Coffee
Costa is now officially the largest and fastest growing coffee shop chain in the UK.  It opened its 1000th milestone store in March 2008 in Moscow.

In 2007/08, Costa reported turnover up 23.5 percent to UK£216.3 million, like for like sales up by 6.5 percent and profits of UK£20.8 million up 16.9 percent.

Costa was founded by Italian brothers Sergio and Bruno Costa in 1971. With over 750 stores in the UK and over 300 internationally, Costa has enjoyed a remarkable period of growth since it opened its first store.  It now operates in 23 countries.

Costa Coffee is the first UK coffee shop chain to commit sourcing Rainforest Alliance Certified Coffee.

Costa's in-store baristas are all coached in the art of coffee making at the company's unique Costa Coffee Academy based at its own roastery in Lambeth, London.

Costa set up a registered charity (no.327489) in 2006 called ‘The Costa Foundation' to give something back to the communities within the countries from which Costa sources its coffee beans.