Whitbread has big plans for its Premier Inn budget hotel brand, which executives say is making major strides in Germany, its second largest market.
By 2030, Whitbread executives hope to reach profit levels of £300 million [$389.4 million] a year and return more than £2 billion to shareholders, CEO Dominic Paul said in the firm's latest earnings call.
Whitbread's hotels are dominating the economy segment in both the U.K. Germany, he said. The company's strategy for its Germany portfolio is likely to reach maturity by the end of 2024.
The publicly listed company anticipates 2030 to be a pivotal year, Paul said. He added he did not feel the need to change guidance for the rest of this year.
“Our trading performance and the progressive maturity of our [Germany] estate mean we are set to reach break-even on a run-rate basis later this year. Our longer-term plans to become the country’s No. 1 hotel brand are also on track as we move towards replicating our success in the U.K. market, delivering double-digit returns on our current open portfolio by full-year 2030,” he said.
Whitbread's sales in Germany in the first half of its fiscal year increased by 22%. Premier Inn's revenue per available room at its German portfolio similarly increased 22% year over year to €79 ($85.79).
Paul said there has been a little softness in the U.K. economy but that Whitbread's goal is to grow its Premier Inn portfolio to 98,000 rooms by full-year 2030 and 125,000 rooms across the U.K. and Ireland after that first milestone is reached.
Hemant Patel, chief financial officer, said he did not consider that softness to have notably affected Whitbread.
In year-over-year terms, Whitbread's earnings before interest, taxes, depreciation, amortization and restructuring or rent costs had decreased 3% to £611 million. Overall revenue dipped 0.25% to £1.57 billion.
Patel added that Whitbread “remains highly cash generative,” with adjusted operating cash flow for the period reaching £411 million, which he said reflected the movement in adjusted operating profit and working capital.
“This cash flow funded our expansion in both the U.K. and Germany, as well as £278 million of dividends and share buybacks completed in the period,” he said.
In the first half of its fiscal year, Whitbread opened 780 hotel rooms, including its first dual Premier Inn-Hub by Premier Inn hotel in the Paddington area of London. The property is close to Paddington rail station, a major transport hub.
Paul said 304 hotel rooms were closed in the period and that the Premier Inn portfolio includes 855 hotels and approximately 86,000 rooms.
Since the end of August, Whitbread has completed two sales-and-leaseback deals for “a total consideration of £56 million, representing an average yield of 4.1%,” Paul said.
He added that the firm continues to offload parts of its hotel restaurant business, with offers accepted on 51 branded restaurants for a total consideration of £56 million.
“We remain on course to realize expected proceeds from property-related transactions of between £175 million and £225 million in full-year 2025,” he said.
At the recent Annual Hospitality Conference, Simon Ewins, Whitbread’s managing director for U.K. hotels and restaurants, said the growth plan for the firm has not changed.
“It is a virtuous circle. Constantly, we learn about what makes hotel postcodes and micro-markets successful, and we do not think any other hotel firms think that way. That allows us to build product with consistency,” he said.
As of press time, Whitbread PLC stock was trading at £32.58 a share, down 9.8% year to date. The London Stock Exchange’s FTSE 100 index was 7.8% up over the same period.