The owner of the UK’s largest budget hotel chain Premier Inn today voiced caution over the coming year due to increased uncertainty and high inflation.
Whitbread, which completed the £3.9 billion sale of the Costa coffee chain to Coca-Cola on January 3, is now focusing on its 800 hotels in the UK, Germany and Middle East.
The company reported total accommodation and food and beverage sales growth of 2.5% in the third quarter to November 29. Total accommodation sales in the period rose by 3.5% driven by more than 2,000 new rooms bring opened in the financial year.
Total Premier Inn sales in London grew by 9.8% year-on-year, described as being in line with the midscale and economy hotel market.
Regional accommodation sales growth at 1.8% came as additional capacity offset the weak market.
“The start of the fourth quarter has seen a continuation of regional weakness, with a strong central London market,” the company said in a trading update.
“Premier Inn’s long-term strategy to win market share and customer loyalty in the structurally attractive UK market continues as planned. Over 8,000 rooms have been added to the network over the last two years, representing a 13% capacity increase, whilst maintaining high occupancy levels of over 80%.
“With an increasing proportion of customers booking direct and approximately 14,000 rooms in the committed pipeline, Premier Inn is confident of continuing to win market share with incremental investment at a good return on capital.”
But Whitbread added: “The UK environment remains subdued and sustained inflation continues to be a significant challenge.
“As a result, Whitbread expects underlying profit before tax in the February 2020 financial year to be consistent with the February 2019 financial year.”
Chief executive Alison Brittain said: “Whitbread is now a focused hotel business with over 800 hotels in the UK, Germany and the Middle East, operating under the Premier Inn brand, with a committed pipeline of over 20,000 additional rooms.
“Premier Inn has made good progress this year, growing total sales by 2.5%, which along with strong results from our efficiency programme, means we are on track to achieve full year expectations for full year 2019.
“The UK business achieved total accommodation sales growth of 3.5% in the third quarter. Our performance in the quarter reflects a strong central London market and a weak regional market.
“We are cautious about the macro environment for the next financial year due to increased uncertainty and continuing high inflation.
“Although we are confident in our ability to create value from ongoing investment in the UK and increasing investment in international growth, in this environment we expect underlying profit before tax in FY20 to be consistent with this year.”
She added: “We continue to be excited about the opportunity in Germany and our first hotel in Frankfurt remains the number one choice for customers.
“Our second hotel in Germany will open in Hamburg in February and this year we have continued to extend the total committed pipeline in Germany, which now stands at over 6,000 rooms across 34 hotels.
“Our unique model and leading market position in the UK puts us in a strong position to capture structural growth opportunities in the UK and internationally.
“Investing in growth through our disciplined approach to capital allocation ensures we can create sustainable value for shareholders over the longer-term.”
Whitbread plans to return £500 million to shareholders after the sale of Costa.
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