Whitbread Benefits From Strong Domestic Demand for UK Budget … – CoStar Group
Hotel News Now
In her final earnings call as Whitbread PLC’s CEO, Alison Brittain said she leaves the firm in an advantageous position, with demand for its budget hotel brand Premier Inn having recovered to pre-pandemic levels.
Dominic Paul, Brittain’s successor in the CEO role, will take the reins of a hotel brand that outperformed its competition in the United Kingdom by 24.1 percentage points in its most recent quarter, with 90% of its guests coming from domestic markets.
Paul, once the CEO of Whitbread’s Costa Coffee division, which was sold to Coca-Cola in August 2018, was on Thursday’s earnings call but did not answer any questions.
In the company’s earnings release, Brittain said the strength of forward bookings, robust pricing and plans to grow the Premier Inn portfolio “all underpin our confidence.”
“I am pleased to be handing over to … Paul at a time when the business is performing well and when prospects for the future look bright. We have a strong balance sheet and compelling growth opportunities both in the U.K. and in Germany,” she said.
Demand for both accommodations and food and beverage improved in the quarter, Brittain said, adding that Premier Inn’s performance has fully recovered in its core, home market of London.
“This time last year London was not recovered, and inbound and occupancy were low, while in regional U.K. we had seen rebound,” she said.
“London has consistently recovered quarter on quarter and now is firing on all cylinders. We have rate opportunity also, as we did not push rate as much as did the competition. Every [market] has risen during the course of the year, but our highest rate market consistently is London,” she said.
The firm also noted earnings improvement in Germany, its secondary market, where it has 45 open hotels and 36 hotels in the development pipeline.
In the U.K., and to a lesser extent in Ireland, Whitbread announced in October that its new long-term network target is 125,000 rooms, equivalent to a 17% market share and up from the current 82,700 rooms.
Its committed pipeline in the U.K. and Ireland market is 8,875 rooms.
Despite domestic demand leading the way, record numbers of international guests are booking at Premier Inn hotels, Brittain said, noting that food and beverage are big drivers of rooms bookings and revenue.
Staffing and wages are among the most difficult challenges in the hotel business, but Brittain said Whitbread is bearing them well.
“We are in a really good place in labor. We have a lot of stability, and two-thirds of our team have been in place for more than a year, which is a percentage the industry does not often see,” she said.
“We have been through that acute [labor] difficulty … and we can budget future wage increases because we can predict them.”
Energy costs and the rate of inflation also alarm hoteliers. The U.K. economy has taken a hit from double-digit inflation and a wave of strike action across the country in the past year.
Whitbread PLC Chief Financial Officer Hemant Patel said that occupancy at Premier Inn Hotels has recovered for every day of the week except Sunday.
“Operationally, we’re much more comfortable, managing our current operating levels very well. Our robust operational standards have not dropped and underpins us,” he said.
Patel added strong operating cash flow continues to fund ongoing investment in both the U.K. and Germany, while the firm maintains a healthy balance sheet and net cash of 284 million pounds sterling ($345 million as of Dec. 1, 2022.
Accommodations revenue improved by 23.8% over full-year 2022 and by 37% over the same quarter in 2022 in what Whitbread management described as “pre-pandemic” performance.
In Germany, those increases were in triple digits — up 172.8% from full-year 2022 and 770.2% from the same quarter in 2022 — but coming from a much lower base.
As of press time, Whitbread’s stock was trading on the London Stock Exchange at 29.75 pounds sterling per share, an increase of 15.8% year to date. The London Stock Exchange’s FTSE 100 index was up 4.5% over the same period.
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