Whitbread gets a boost as business travellers start to tighten their belts

Whitbread weathered the consumer slowdown with strong second-quarter sales as cash-strapped business travellers and diners turned to its budget hotels and restaurants.

Like-for-like sales rose 7 per cent from a year earlier, ahead of analysts' forecasts and in line with the first quarter, on strong performance at the Premier Inns hotel chain. Total sales at Premier Inns, which makes up more than 70 per cent of Whitbread's profits, rose 18 per cent, with like-for-like business up 10 per cent.

Alan Parker, Whitbread's chief executive, said companies tightening their belts were increasingly booking senior managers into Premier Inns to save money.

"Every cloud has a silver lining. We are seeing very strong demand from the commercial market as big companies, in particular, look at ways of saving money," he said. "We have always had a very strong segment of middle managers and now we are seeing more senior people staying with us. This is finance directors using their influence."

Business customers stay longer than leisure guests, choose to dine in Premier Inns' restaurants and pay a higher rate for weekday accommodation, Mr Parker said. Whitbread's experience echoes that of Travelodge, its rival mid-market hotel operator, which has also reported rising levels of corporate business.

But Mr Parker added that Premier Inns' rate of like-for-like growth was likely to slow to 5-6 per cent and that he was wary about the difficult wider business environment.

"The outlook in general looks uncertain. There is considerable pressure on the consumer at the moment, that is well known. We are focused on value for money in terms of our proposition and that has made [our performance] resilient and even positive. I look forward to that continuing in the next six months."

He said the emphasis would be on expanding the group, possibly through acquisitions of hotels. Whitbread has opened 14 Premier Inns this year, adding 1,157 rooms, and is on course to add 4,000 rooms this year, taking it to 40,000 rooms in 570 UK hotels.

The company's pub rest-aurants business, which includes Brewers Fayre and Beefeater, boosted like-for-like sales by 4.4 per cent in the second quarter as diners turned to deals such as a Cornish pasty with chips and beans for less than £5. With food accounting for two-thirds of Whitbread's pub business, the company has benefited from the smoking ban because people want to eat free of cigarette smoke, Mr Parker said.

Costa Coffee, which generates about 10 per cent of profits, increased total sales by 23.6 per cent as it opened new stores but like-for-like business growth slowed to 3.7 per cent from 6 per cent in the first quarter. Mr Parker said the second quarter suffered from comparison with a year earlier, when sales were boosted by last summer's bad weather. The company's shares closed up 0.6 per cent at 1,127p.

Ian Rennardson, an analyst at Merrill Lynch, said: "The company continues to benefit from corporate customers trading down. Whitbread has again produced a solid trading performance, underlining the resilience of its budget hotels and the continued recovery in pub restaurants."