Premier Inn sales still on the slide
Whitbread, the UK’s largest hotel operator, has blamed ‘weak trading conditions’ for a fall in demand for its rooms. Sales at Whitbread’s Premier Inns open at least a year fell 4.6% in the first three months of 2019. Total sales fell about 1%.
As political and economic uncertainty continued, the regional business market was less confident, the firm said. However, its performance had been ‘resilient’ in ‘tough conditions’.
Chief executive Alison Brittain added: “We continue to make good progress with our efficiency programme, which is helping to partially offset another year of high industry cost inflation.”
Whitbread shares were down about 1% in morning trading. The trading update is the first since Whitbread sold the Costa Coffee chain to the Coca-Cola company for $4.9bn (£3.9bn). The deal completed on 3 January.
Whitbread said it intended to return up to £2.5bn of the sale proceeds to shareholders, “unless more value-creating opportunities arise and subject to prevailing market conditions”.
Of that amount, £482m had already been returned through a share buyback programme, while a tender offer to repurchase another £2bn of shares would go ahead subject to shareholder approval.
Premier Inn is Whitbread’s biggest brand, with more than 785 hotels and 72,000 rooms.
Whitbread said its expansion of the hotel chain in Germany was ‘firmly on target’. After opening Premier Inns in Frankfurt and Hamburg, it had bought the 19-hotel Foremost Hospitality chain and was in the process of re-branding those properties as Premier Inns.
The company also owns three UK restaurant chains: Beefeater, Brewers Fayre and Table Table.
According to analyst Michael Hewson of CMC Markets, Premier Inn would do well to boost its occupancy rates, which currently stand at 74.8%.
“This appears to be the area that the Premier Inn needs to work on the most,” he said.
“The business is adding new rooms at a time when they are barely filling 75% of their current capacity, and this needs to change to effectively claw back the investment, not only in the UK, but Germany as well, where the company is looking to add over 2,000 new rooms, when occupancy rates are at similar levels.”