Wage inflation is definitely going to be a factor at Premier Inn owner Whitbread. The company is a victim of the mounting labour shortages in the UK hospitality sector which mean it is going to have bump up pay significantly and pay out bonuses to attract enough staff to keep things ticking over.
This explains why Whitbread is unable to offer a timescale on a return to pre-pandemic margins even if it is confident it will get there eventually. At least the company has a strong balance sheet to help it meet staffing and supply chain challenges.
“The upwards pressure on wages is the main black mark in an otherwise encouraging set of first half results from Whitbread. Some kind of rebound from the previous Covid-impacted performance was inevitable but what is more telling is that the company is recovering ahead of the wider market,” said AJ Bell’s Russ Mould.
“This suggests the Premier Inn brand is resonating with domestic leisure travellers and that the company is taking market share. The exit of weaker peers from the market and constrained investment at some of its rivals should further bolster Whitbread’s position.
“In August sales were even up double digits on 2019 figures, with the company benefiting from the staycation boom as restrictions limited foreign travel. Such helpful conditions will not persist indefinitely.
“The German business is a key part of Whitbread’s growth plan and the company will be encouraged that, while occupancy levels are lagging the UK, the trend is an improving one. The company’s continued roll-out of new sites in Germany demonstrates its continued commitment to this part of the strategy.”