Premier Inn’s London growth leads the way for Whitbread

The London budget hotel market is enjoying strong growth, according to the latest figures from Premier Inn owner Whitbread today.

The bulk of the 1270 new rooms it has added so far this financial year are in the capital and sales here have grown by a staggering 17.7% in the first six months.

“To be able to add that sort of capacity and still see occupancy in London rise by 2.5% is phenomenal,” said chief executive Andy Harrison. “The return of what I call our normal customers — the UK businessman and the regular international tourist — has more than made up for any boost we received from the Olympics.”

Premier has opened new hotels at Waterloo, Blackfriars and Old Street and, along with next year’s launch of its high-tech “hub” hotels, is on course to increase its London room count from 8,000 to 20,000 over a five-year period.

Whitbread shares dipped 3% on today’s trading update, largely because investors worried over the slowdown at Costa coffee where first-quarter growth of 8% dropped to 3% in the second quarter.

Harrison said this was entirely down to a single month. “July this year was an absolute scorcher whereas July 2012 was very wet and cool,” he said. “When it is that hot people want a cold drink rather than a hot coffee. I think it is far more representative to look at the 24 weeks figure of 5.7% growth.”

He also pointed out that with new store openings — including the 1000th Costa coffee shop outside the UK, which opened in Bangkok last month — Costa’s total sales were up 20.8% at the first half. Its overseas operation now covers 28 countries

Whitbread’s restaurant arm, which includes Beefeater, Brewers Fayre, Table Table and Taybarns, saw sales drift down by 0.2% in the second quarter after a flat first quarter.

Harrison said: “We have barely any restaurants within the M25 and our sales are very much in line with the rest of the industry operating outside the London area.”

Harrison said the group was on track for both its annual and five-year plans.

The shares fell 85p to 3131p.