DUNSTABLE, England—Growth must be seen as growth, even if it is marginal, in a challenging business environment and after a company’s previous two earnings reports showed negative performances.
That is the message senior management at Premier Inn’s parent company Whitbread gave today during an investor news conference to announce its third-quarter earnings.
Whitbread CEO Alison Brittain said overall sales in the United Kingdom, where the firm has the vast majority of its portfolio, were up 0.3% year-over-year. London performance helped to get that number over the line despite weaker numbers in the regional U.K.
The firm’s F&B products also boosted overall performance above that of accommodation sales, as U.K. like-for-like sales declined 1.3% in the quarter and 2.2% year to date.
During the conference, Brittain underlined Premier Inn’s standing and planned growth in the U.K., and said its rollout of assets in Germany is going well. The company has three hotels in operation in Germany with another 8,500 rooms across 48 hotels in its pipeline, including “22 hotels from the Foremost Hospitality and AcomHotel acquisitions.”
She said Premier Inn will open approximately 20 hotels in Germany in 2020.
The Foremost Hospitality deal is due to be completed in February, Brittain said.
“We are increasingly optimistic and firmly on plan (in Germany) … especially pleasing as we have achieved that with 100% direct bookings across our three open hotels,” she said, adding the firm is still in search of leasehold and freehold opportunities and bolt-on portfolios.
Despite the feel-good factor with Germany, costs to ramp-up operations are expected to result in losses across the German portfolio of £12 million ($15.6 million) over the year, Brittain said.
B2B push
Nicholas Cadbury, group finance director, highlighted a plan to roll out Premier Inn Plus rooms and sales efforts aimed at the business-to-business community.
“We’ve trialled in 19 of our sites, and early reading of them has been very encouraging. We will continue to roll them out over this year, hopefully 2,000 before the end of 2020,” he said.
“Our focus is on growth and how we optimize to improve our product proposition and driving that top line, particularly in the business-to-business sector,” he said. “This year, if you look back, we performed pretty well in the consumer sector, and weekends have been busy; but as you know there have been headwinds in the business sector, and we want to make sure that if those headwinds continue we are making the most of them.”
Cadbury said emphasis will be on how those B2B customers are targeted.
“We get 97% direct, and while you might see that as full, we want to make sure we are getting even more coming direct, especially in the (small and medium enterprises) B2B environment,” he said.
State of the UK
Brittain said that while she is cautious on the U.K. business environment, Whitbread performed well in the third quarter.
“We improved our year-to-date run rate,” she said.
London hotels reported sales growth of 4.8%, outperforming regional U.K. hotels as well as the midscale and economy sector, for which sales grew by 3.7%. In the U.K., approximately 6,000 rooms have been added in the past two years, and the pipeline will add a further 12,000, Brittain said.
“We are seeing more market share from the independent market. There is also opportunity to optimize our large portfolio. … We are continuing to invest in growth, optimization of our portfolio,” she said.
Inflationary costs are projected at approximately £70 million ($91.4 million) in the financial year, to be offset by efficiency-program savings of between £40 million ($52.2 million) to $50 million ($65.3 million), she said
“It is difficult to predict business confidence in the short term, (so) we are using planning assumptions for the next financial year to provide some prudence to take into account the uncertain economic and political landscape. … To give you an idea of the sensitivity, every 1% movement in (revenue per available room) impacts our profit by £12 (million) to £15 million. We expect a net margin headwind of about £60 million next year,” Brittain said.
“We expect to deliver full-year results in line with expectations,” she added.
As of press time, Whitbread’s stock was trading on the London Stock Exchange at £4,571 ($5,968) per share, a drop of 5.5% year to date. The Baird/STR Hotel Stock Index was down 3.2% for the same time period.