ii view: Whitbread's Premier Inn chain keeps outperforming

A recovery from the pandemic and expanding in Germany. We assess prospects for this budget hotel operator. 

First-quarter trading update to 2 June

• Total UK accommodation sales up 31% versus FY 2020
• Total UK food and beverage sales down 4.3% versus FY 2020

Chief executive Alison Brittain said:

"The strength of Premier Inn's recovery in the UK continues to be ahead of expectations with a particularly strong first quarter (Q1) performance that is well ahead of pre-pandemic levels and we continue to significantly outperform the market.

"This impressive Q1 performance together with improved visibility into Q2, gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year."

ii round-up:

Whitbread (LSE:WTB) is the largest hotelier in the UK. Its Premier Inn chain give customers access to more than 80,000 UK rooms across over 820 hotels. Its restaurant brands include Beefeater, Brewer’s Fayre and Cookhouse Pub. 

It opened its first Premier Inn in Frankfurt, Germany back in 2016 and now has 40 open hotels with a further 38 in the pipeline.

For a round-up of this latest update, please click here.

ii view:

Starting life as brewery company over 250 years ago, Whitbread today employs almost 30,000 people. It generates around two-thirds of revenue from its hotel operations and the remaining third from its pubs and restaurants. Most of its revenue - over 95% - still come from the UK. 

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For investors, rising costs and a tight hospitality labour market continue to offer challenges. An extra £20-£30 million investment in labour, refurbishments and IT is now planned for the current full year. UK food and beverage sales have yet to recover to their pre-pandemic levels, while the backdrop for consumers more generally has become challenging given a cost-of-living crisis. 

On the upside, a recovery from the pandemic is clearly evident and its expansion in German ongoing. A cost saving programme continues, while the dividend payment has been restarted. A new five-year £775 million revolving credit facility also offers reassurance regarding its finances. On balance, and with its budget offering likely to remain appealing to cost squeezed UK and German consumers, grounds for longer term optimism look to remain. 

Positives: 

• German expansion
• Restarted dividend payment 

Negatives:

• Lacks the geographical diversity of other hotel operators
• Uncertain economic outlook

The average rating of stock market analysts:

Buy