Whitbread to focus on expanding Premier Inn after selling Costa to Coca-Cola

Group has just introduced low-cost brand Zip as part of plans for hotel business expansion

Caitlin Morrison@citycait
Tuesday 23 October 2018 08:26
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Premier Inn owner Whitbread has announced plans to expand the hotel chain after selling its Costa coffee business to Coca-Cola for £3.9bn.

The group also revealed a modest rise in profits in the first six months of the financial year.

On Tuesday, Whitbread boss Alison Brittain called the Costa deal, which was struck in August, “the highlight of the first half”.

The sale has been approved by shareholders but now requires regulatory approval from authorities in the EU and China.

“Much work still remains to be done to ensure a smooth and successful separation from Whitbread at completion and during the following transitional service period, which we are confident in our ability to execute efficiently,” said Ms Brittain.

She added: “Following the sale of Costa, Whitbread will be a focused hotel business with operations in the UK, Germany and the Middle East.”

The company said its UK network has grown to more than 74,000 rooms, with a further 13,000 in the pipe line and long-term plans to increase the total to 100,000.

The plans tie in with Whitbread’s recently introduced hotel brand Zip, which will offer no-frills rooms from £19 a night.

The group is also aiming to expand in Germany, with a target of almost 6,000 rooms.

In its interim report for the first half of the financial year, Whitbread revealed revenue was up 2.6 per cent to £1.08bn, compared with £1.05bn in the same period of last year, while pre-tax profit edged up 0.2 per cent to £257m.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said flat sales at existing Premier Inn hotels are “not to be sniffed at given the weak consumer environment”.

He also noted that Whitbread has added 14,000 new rooms over the last three years, 2.5 times the number added by Travelodge, Holiday Inn Express and Ibis combined over the same period.

Mr Khalaf said there is real growth opportunity in Germany, where the hotel market is 35 per cent larger than the UK’s and has a lack of branded budget options.

The expansion will be helped by cash from the sale of Costa but Mr Khalaf noted that it is unclear just how much of those funds will be available for investment.

He added: “Whitbread will be a slower and steadier business once Coke has swallowed Costa.”

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