Hotel News Now
In one of her last major earnings conference calls before she retires from Whitbread PLC, CEO Alison Brittain said the company’s hotel performance is edging out its competitors.
Brittain said results for the first half of this year have positioned the owner of the United Kingdom’s biggest hotel brand, Premier Inn, 35% ahead of pre-pandemic levels and 26% ahead of its market competitive set.
Brittain said she will conduct the next earnings conference call, for the third quarter of 2022, in January, before handing over the reins to Dominic Paul. In July, it was announced that Brittain will become the chairwoman of the English soccer league, The Premier League.
Brittain said Paul is well-versed in Whitbread, having been the managing director of its coffee division Costa Coffee before it was sold to Coca-Cola in November 2018.
About the firm’s latest earnings results, Brittain said “the results have been outstanding … and position us very well in a recovering market.”
She added that an economy-sector hotel brand such as Premier Inn is situated to weather any financial turmoil. The brand’s steady performance in Germany, the firm’s second market outside of the United Kingdom, has also contributed to that confidence.
Brittain said Germany’s hotel industry has only operated without COVID-19 restrictions for a few months, but Whitbread’s 18 hotels there that have been open for more than a year have now become profitable.
“That gives us confidence we will achieve our goals in this important market,” she said, underlining that the company has 42 hotels in operation and 38 in the pipeline there.
“Trading performance [in Germany] underlines our long-term goal of realizing between 10% and 14% return on capital,” Brittain added.
She said revenue per available room in Germany now is 58 euros ($57.14) across the portfolio.
“To date, we’ve invested 1 billion pounds sterling ($1.13 million) in Germany, where we have the clear ambition to be the No. 1 hotel chain,” Brittain said.
Hemant Patel, Whitbread’s chief financial officer, said guidance for the full year includes an expected loss before tax of between 40 million pounds sterling and 50 million pounds sterling.
He added that expected U.K. inflation of between 10% and 11% would affect the bottom lines and that spending on utilities is expected to increase by approximately 20 million pounds sterling.
Patel said overall Whitbread is positioned to manage such inflationary pressures, with the goal to keep the firm at an investment-grade status.
Brittain was also optimistic about the health of the company despite macroeconomic headwinds.
“We are disciplined. We have never operated an inefficient balance sheet, although we have been through a pandemic,” Brittain added.
Executives anticipate full-year capital expenditure spending between 500 million pounds sterling and 550 million pounds sterling.
“Strong cash flow generation underpins continued investment,” Patel said.
Brittain said Whitbread is forging ahead with its dual strategy of driving occupancy and average daily rate.
She said new account sign-ups from small and medium-size businesses grew 73% in the past year and Whitbread has invested significantly in proprietary pricing platforms and hotel management systems to provide access to guests who cannot book for business directly with Whitbread’s website.
She said U.K. accommodation sales are 101.4% above full-year 2021 numbers and 34.8% above 2019, but food-and-beverage sales at its in-house restaurant chains are down 7% from 2021.
“Where we have [food and beverage], RevPAR is higher, so the benefits of it sit in the [profit-and-loss statement],” she said.
Patel added adjusted earnings before interest, taxes, depreciation and amortization in the U.K. for the full year to date was 527.5 million pounds sterling, up from 182.7 million pounds sterling in 2021 and 447.9 million pounds sterling in fiscal year 2020, which is essentially trading in the run-up to the pandemic.
Brittain and Patel said they see opportunity for another 15,000 hotel rooms in the U.K. and Ireland, for a new total of 125,000 rooms in U.K., or 17% of market share.
Zip-code-level analysis in more than 1,700 markets helps to pinpoint likely success, Britain said.
In August, Whitbread acquired a “prime freehold property” on major London avenue The Strand, adjacent to Trafalgar Square. Subject to planning, the property is due to become a Hub by Premier Inn hotel in 2027, with asset purchase and construction and development costs of more than 200 million pounds sterling to be funded from cash reserves.
Whitbread has 182.1 million pounds sterling in net cash available, Patel said.
Additional hotel conversion opportunities will derive from the shrinking independent sector, Brittain said.
“There has been a three-times declines in the independent sector over the last two years, and we expect flat supply through 2026,” she said.
Whitbread currently has 82,700 rooms in 844 hotels in the U.K., and with only 1% of bookings coming via online travel agencies, she said.
She added the firm is rolling out 65,000 new beds, and 1,200 rooms in fiscal year 2023 have been converted to Premier Plus.
Another major step for the firm, she said, is that construction has started on its first net-zero hotel, a hotel in Swindon, Wiltshire.
In her “last big results event for the firm,” Britain reflected on her seven-year tenure at the helm of Whitbread.
“During the period we have had a great deal of economic, political and social turmoil, and with some financial insecurity. This is a mischievous of me, but I have been here through five (U.K.) prime ministers, seven chancellors of the exchequer, six home secretaries and six foreign secretaries, as well as Brexit and the small matter of a global pandemic,” she said.
“But [Whitbread is] 280 years old, and I suspect some of my predecessors would say I am a bit of a wuss for even mentioning such issues. We’re a long-term business, and that continuity is set to continue with our senior staff and board, all of whom have long connections with the firm.”
As of press time, Whitbread’s stock was trading on the London Stock Exchange at 26.07 pounds sterling per share, a decline of 16.24% year to date. The London Stock Exchange’s FTSE 100 index was down 4.3% over the same period.
Return to the Hotel News Now homepage.