I bought £2,000 worth of Whitbread shares to get free Premier Inn breakfasts

Am I biting into the world’s most expensive hash brown? It’s the question that always haunts me as I tuck into one of the ‘All You Can Eat’ breakfasts at the Premier Inn.

Several months ago, realising that we were spending rather more of our income than I would like at the ‘purple palace of dreams’, I opted for a tactical investment that I hoped would give us jam on our toast today, rather than simply buttering our bread when we’re in our 60s.

Whitbread, the former brewer turned hotelier and restaurant group, is one of many businesses that offers ‘perks’ to its shareholders. Firstly, it gives you a 10 per cent discount at its chain restaurants but, more importantly, the company also promises a free breakfast for shareholders and up to four guests for every night that they stay in one of its hotels.

Whitbread gives shareholders a 10 per cent discount at its chain restaurants and a free breakfast in its hotels 

With the going rate on these breakfasts at £11 an adult, I did some quick calculations to see how much the perk might be worth, and eventually took the plunge. I should explain that we spend rather more time in budget hotels than most. 

This year we have two Year 12 teens visiting seemingly every university in the country to decide where they might apply. And, somewhat unexpectedly, our 14-year-old daughter is currently boarding at a music school 100 miles away from us in Somerset.

The local Wells Premier Inn has become a real ‘home from home’ while we navigate drop-offs, pick-ups and attend our daughter’s many concerts.

fWhile Premier Inn rooms can be very good value, an additional cost of £22 per couple for breakfast is steep. This year alone, I expect we will have 15 stays at the hotel, so I made a decision and bought nearly £2,000 worth of Whitbread shares in March.

My free breakfasts make me feel good, but what is the real cost? And is it really a solid enough motive to warrant my investment?

Crunching the numbers 

Whitbread demands you buy 64 shares or more to be eligible for its Shareholder Benefits card, and with each share now worth just under £30, you’d need to invest at least £1,870 in today’s prices.

That’s enough for nearly 90 breakfasts for two – more, I hope, than we will ever have to eat. Plus, the thought of investing in a share because of a gimmick makes me feel queasier than an overdose of black pudding.

Susannah Streeter of investment platform Hargreaves Lansdown, certainly agrees. She says: ‘Offers and discounts should be seen as a minor and unreliable bonus of owning shares.’

My investment performance so far suggests I should have heeded her advice. My Whitbread shares are down £200 since March, and my breakfast count is a measly four, so each one has cost me over £50. For that price, I could have gone to the Ritz.

However, I’m hopeful of a better outcome over time. After all, investment is a long game.

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Besides, I’ve bought my 64 Whitbread shares in my Sipp (Self-Invested Personal Pension), so while I can sell the investment, I can’t access the money for at least another decade. As it’s in a pension, I have also benefited from tax breaks when I put the money in, receiving relief at my marginal rate. That’s 40 per cent tax relief on my free breakfasts – 20 per cent in the Sipp, and 20 per cent claimed through my tax return.

Also, I believe my Whitbread shares will do all right over time. From my frequent stays, the hotels seem busy and the company’s strategy of ditching underperforming restaurants to increase space for rooms seems set to pay off.

Stockbroker Liberum has a target price of over £45 on the shares. Analyst Anna Barnfather says the company is buying back shares, which will support the share price, while the disposal strategy should pay off in the long term. If she’s right, my Whitbread shares could turn into the goose that lays the golden (fried) egg.

Risks and pitfalls 

If you, too, are tempted by a free fry-up or other alluring perks, you need to do your homework first. As well as the obvious fact that your shares can fall in value, there are other pitfalls that come with buying shares with perks.

The first is there is no guarantee the company won’t change its mind – especially if too many people decide to cash in on its freebies. What’s more, finding out whether you are eligible for perks can be a bit of a puzzle. Each company has its own rules – you must usually hold a certain number of shares and may have to have held them on a qualifying date in the year.

If you hold your shares via a fund, you will not be eligible for the perks. In some cases, even holding the shares on a DIY investment platform such as those offered by AJ Bell, Hargreaves Lansdown or Interactive Investor will invalidate you.

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Once you’ve negotiated these obstacles, you will need to check whether your Individual Savings Account or Sipp provider passes on the perk, and if so, how. I had to apply to Hargreaves Lansdown, where I hold my Sipp, for a Whitbread Shareholder Benefits card.

Another major pitfall is that even employees of the company in which you own shares may be unfamiliar with the system.

In Wells, the Premier Inn desk staff had never seen a shareholder benefit card before. After a very long time, they finally managed to find a code on the system to put the offer through.

Other perks 

Of course, if Premier Inn breakfasts aren’t your thing, there are a host of other perks available, from credit to spend on your Carnival Cruise to a third off Bloomsbury books.

If you already hold shares, it may be worth checking if there’s a perk available.

It is going to be years before I work out if my Whitbread gamble really will bring home the bacon, but for now it certainly sweetens the necessity of tucking money away for my old age.

They say there’s no such thing as a free lunch – I’ll wait and see if that’s true of breakfast as well.