Whitbread has revealed a sharp divide between the performance of its Premier Inn budget hotels in London and the rest of the country, as the leisure group posted a 15 per cent jump in half-year profits.
But Chris Rogers, the finance director at Whitbread, which also owns the Costa Coffee chain, described the UK consumer spending environment as "volatile". He said: "We see huge variations from week to week and month to month and discerning a trend we find very difficult."
Underlying profits at Whitbread jumped by 15.2 per cent to £174.9m in the six months to 1 September, on total revenues up by 10.7 per cent to £893.1m.
At Premier Inn, like-for-like revenue per available room (revpar) – a key measure for the hotel industry – surged by 11.4 per cent in London over the half year but by just 3 per cent in the provinces. The strong performance in London – driven by an increase in tourists and domestic visitors to its hotels – helped Premier Inn grow total revpar by 4.4 per cent over the half year. The hotel chain's revenues jumped by 10.6 per cent to £393.4m. This was boosted by it opening 11 new Premier Inns in the UK and five in the Middle East and India, bringing its total to 607 hotels.
Mr Rogers said: "At Premier Inn, we have seen growth both at the weekend and during the week," indicating increases in both leisure and business customers at its hotels. He added: "Revpar has been driven by both an increase in occupancy and room rates."
But Mr Rogers does not expect next year's Olympic Games to have a major impact on Premier Inn and said that only 15 of its hotels in central London will be directly affected.
Premier Inn is making 3,000 rooms a night available during the key 17-day period of the Games, of which an unspecified number are still available. This is in addition to the tranche of rooms Premier Inn has agreed to provide to the London Organising Committee of the Olympic Games. Mr Rogers said: "I think it [Olympic Games] will have a small positive impact but not particularly material."
Costa Coffee, which has more than 2,000 shops, delivered a 41.8 per cent rise in operating profits to £27.8m, driven by booming sales in China, continuing growth in the UK and a rapid opening programme globally. The coffee chain grew like-for-like sales by 6.7 per cent over the half, which means it has delivered 38 consecutive quarters of growth.
Costa has more than 100 shops in China, where it sells some different products, such as green tea-latte. But Mr Rogers said: "The coffee is the same. We do vary some of the food offer to the local palate. In China, they find it difficult to eat a UK-sized muffin. If you walk into a Costa in Shanghai or Beijing you will know you are in Costa."
The sales picture was not so rosy at Whitbread's restaurants division, which includes Brewers Fayre, Beefeater and Table Table. Its like-for-like sales fell by 1.6 per cent, as it was affected by the widespread discounting.
But the group lifted its dividend by 55.6 per cent to 17.5p, in line with its policy of rebalancing the first-half dividend. Paul Hickman, the analyst at Peel Hunt, said: "Excellent brand management, focused on market-leading brands in independently growing markets, has produced performance well above sector norms."