Whitbread Boosted by Strong Premier Inn Sales

2nd September 2008 (Last Updated September 2nd, 2008 18:30)

Whitbread, Britain's biggest hotel and restaurant operator, reported strong first-half sales growth, weathering the consumer slowdown as its Premier Inn hotels benefited from business travellers looking to save money. Shares in Whitbread were up 3.75% to 1,162 pence at 0801 GMT on Th

Whitbread, Britain’s biggest hotel and restaurant operator, reported strong first-half sales growth, weathering the consumer slowdown as its Premier Inn hotels benefited from business travellers looking to save money.

Shares in Whitbread were up 3.75% to 1,162 pence at 0801 GMT on Thursday, having outperformed the FTSE All Share Travel and Leisure Index by 2% since the start of the year.

The company reported group like-for-like sales growth of 7% in the 24 weeks to 14 August, above analysts’ forecasts of a 4-5% increase.

Whitbread said that its Premier Inn budget hotel chain, which accounts for about 70% of profits, had outperformed the wider hotel market, with total sales up 17.9% and like-for-like sales up 10.2%.

The growth was driven by 7.6% more rooms being sold across Premier Inn’s expanded estate, and revenue per available room (RevPAR) increasing 5.8%. Premier Inn has picked up trade as cash-strapped Britons look for better deals on hotels and businesses to cut spending. Whitbread said strong demand had been maintained in the commercial market, with corporate buyers attracted by Premier Inn’s value-for-money price and facilities.

Chief executive Alan Parker told reporters that sales derived from Premier Inn’s Business Account scheme increased by 36% during the period.

“Over the past six months, we’ve seen increasing strength in the business market, particularly from corporate buyers as large customers recognise that they’ve got to save money on travel,” Parker said on a conference call.

Restaurants, Costa Coffee gain

Parker said that corporate customers now account for about 60% of Premier Inn’s revenues. The customer mix is roughly 50:50 but Parker said corporate customers generally stay longer and spend more money.

Whitbread has opened 14 new Premier Inns this year, incorporating 1,157 rooms, and is on course to add 4,000 rooms to the estate this year. That would take Premier up to 40,000 rooms in 570 hotels in Britain.

The group’s pub restaurants business, which incorporates Brewers Fayre, Table Table and Beefeater, and accounts for about 20% of profits, increased like-for-like sales by 4.4% and total sales by 6% over the period.

Whitbread said it had responded to food and energy inflation by improving operating efficiencies and putting lower-cost options on the menu, including an offer of two meals for £9 at Brewers Fayre.

The Costa Coffee chain, which contributes about 10% of Whitbread profits, increased total sales by 23.6% and like-for-like sales by 3.7%. The estate now incorporates 1,100 stores, including 331 overseas. New outlets have recently been opened in Russia and Beijing.

Numis reiterated its “buy” recommendation and 1,369 pence price target on the stock, describing the trading update as “very encouraging.

Investec kept a ‘buy’ recommendation and 1,594 pence price target, saying the stock is one of its key sector picks.