Hotels back to pre-slump levels, says Whitbread
Wednesday 08 September 2010
The leisure group Whitbread has said that revenues at its budget hotel chain Premier Inn have surged beyond pre-recession levels and dismissed any fears over a double dip in the economy.
Whitbread, which also runs Costa Coffee and pub restaurants including Beefeater, said that revenue per available room (revpar) – a key performance measure for hotels – jumped by 9.8 per cent during the 24 weeks to 19 August.
Alan Parker, the outgoing chief executive of Whitbread, said: "We are passing the revpar we had two years ago. We are not in recovery, we are in real growth going forward." The uplift in revpar reflected increased occupancy rates at Premier Inn, driven by marketing initiatives for business and weekend leisure customers.
Mr Parker, who retires on 25 November, said Premier Inn grew its business with the Government by an additional £7m in the 24-week period, as the public-sector cost-cutting drive continued. He said: "If you are in Government, Premier Inn is a great place to stay," adding the policy had the support of George Osborne, the Chancellor of the Exchequer. Like-for-like sales at Premier Inn jumped by 10.7 per cent.
While the hotel chain's results were flattered by a weak performance over the same period last year, Jamie Rollo, an analyst at Morgan Stanley, said Premier Inn was the "first hotelier to get back to peak revpar", which he added was "well ahead of the market".
Mr Parker declined to name companies, but said it was grabbing market share from "across the board, particularly from the other budget hotel chains". He added: "Our revpar is more than double our competitors'." Premier Inn has opened nine new hotels in the financial year to date.
Another strong performance at Costa Coffee helped Whitbread deliver group sales up by 14 per cent and by 7.9 per cent on an underlying basis. While Premier Inn was badly buffeted by the recession, the coffee chain continued to grow robustly.
Costa – which has 1,698 outlets worldwide, including in Syria, Russia and India – grew like-for-like sales by 8.3 per cent in the 24 weeks. Total sales, including a rapid opening programme, at Costa were up by 28 per cent.
The growth was also helped by it signing up more than 3 million loyalty card members to its Costa Coffee Club since the launch in March. Accounting for the boost from its loyalty card, Costa's underlying sales growth would have been 1.5 per cent lower at 6.8 per cent. The chain, which has 1,124 coffee shops in the UK, benefited from the popularity of new drinks, notably its new flat white coffee drink, which is stronger than a latte but less frothy than a cappuccino. The flat white now accounts for 5 per cent of Costa's sales.
Elsewhere, Whitbread's four restaurant chains – Beefeater, Brewers Fayre, Taybarns and Table Table – grew underlying sales by 3.9 per cent.
On the economy, Mr Parker said: "We are not seeing a double dip. The economy is clearly fragile and I am sure there will be challenges ahead. But Whitbread's growth is consistent and we have improved profitability every year during the recession and we cannot see any reason why that cannot be in the future as well."
Andy Harrison, the former chief executive of easyJet, the no-frills airline, joined Whitbread on 1 September as chief executive-designate and will take the helm when Mr Parker retires.
Simon French, an analyst at Panmure Gordon, said: "Over the medium term, we expect that the arrival of Andy Harrison – who started as chief executive-designate last week – will lead to further reshaping of the group. This may cause some concern in the market, but we think short-term trading momentum currently outweighs the risk from any change in the strategic direction of the group."
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