In an environment clouded by inflation and interest rate worries, it’s refreshing to see some good news from UK plc.
Whitbread is having no problem getting people to spend the night at its Premier Inn hotel chain and its sites in London are proving to be a strong magnet for tourists and business travellers.
AJ Bell’s Russ Mould said: “Premier Inn has managed to distance itself from Travelodge and other budget chains in terms of how it is perceived by people needing accommodation. In particular, business customers seem happy to stay at one of its hotels, including those forced by their employer to seek a cheaper option.
“Having bounced back strongly as the pandemic faded away, the focus is now on making sure its rooms are as full as possible so it can charge a little bit more per customer. There is still plenty of room to grow occupancy rates, particularly in Germany where hotels were less than two thirds full on average over its past financial year.
“The market is also focused on what Whitbread plans to do with its pubs and restaurants which are up for sale. Mitchells & Butlers is rumoured to be among the interested parties. How a business separation would work in practice is an unknown – Whitbread relies on many of these sites to provide food for Premier Inn customers so it will either have to enter into a formal arrangement with the new owner or come up with a different solution.
“The big unknown for demand going forward is consumer confidence. With interest rates going higher, there will be a chunk of its customer base who might need to think twice about a weekend away. However, plenty of people haven’t been impacted by higher rates such as those who have paid off their mortgage or are on fixed rates and don’t need to re-mortgage in the immediate future. It’s feasible to suggest they could keep spending merrily, with Whitbread a likely beneficiary.
“Travelodge is up for sale with a rumoured £1.2 billion price tag – getting anywhere close to that amount could put the spotlight on Whitbread and whether Premier Inn sites are currently undervalued.”