A new era has begun at Whitbread PLC, which owns Premier Inn, the United Kingdom’s largest hotel company by property number.
In his first earnings call as the new head of Whitbread, CEO Dominic Paul praised the company for reaching a new milestone with its U.K. portfolio exceeding 2013 supply levels.
“U.K. hotel supply is now back to where it was in 2013,” he said. “This is hugely significant, and we think [this] represents a major structural shift in the hotel cycle.”
Paul previously led Whitbread’s Costa Coffee division, which was sold to Coca-Cola in August 2018, but returned to the parent company upon the resignation of former Whitbread CEO Alison Brittain.
“I am excited to be back at Whitbread, and the company is in great shape,” Paul said, noting the performance of Whitbread and Premier Inn beat market expectations.
Paul said the firm’s rooms-revenue mix is now divided equally between leisure and business travel, and 93% of guests are domestic U.K.
Demand for budget hotel rooms has surged due to economic constraints, he said.
Paul said the performance of Premier Inn is a testament to the strength of the firm’s operating model and brands — it also owns and operates the Hub by Premier Inn brand. He added Premier Inn is well-positioned to withstand inflationary pressures.
Hemant Patel, Whitbread's chief financial officer, said the earnings report gave the company confidence in both of its two major markets, the U.K. and Germany.
Adjusted earnings before interest, taxes, depreciation, amortization and restructuring across the company for full-year 2022 was 888 million pounds sterling ($1.11 billion), an increase of 88% versus 2021 and 18% versus 2019.
Patel said the firm’s 2019 debt level of 323 million pounds sterling is now a surplus of 171 million pounds sterling, even with a full-year capital-expenditure program of 546 million pounds sterling, up 92% over 2021 numbers.
Germany Gains
Another boon for Whitbread is the further maturation of its German portfolio, Paul said.
“We have a great opportunity to grow profitably, not only … in the United Kingdom, but also in Germany,” he said.
He added the firm’s strategy of seeking sustained growth at superior returns will be driven by technology improvements, cost efficiencies, investment in staff and replicating its U.K. market-leading position in Germany.
“Yes, there is work to do,” he said.
Whitbread's Germany hotels traded restriction-free from the second quarter of 2022, “so they still have some way to go before they reach their full potential,” Patel added.
Paul said German accommodation sales in 2022 increased 140% versus 2021, adding the country was the last large European market to relax pandemic regulations but that also there has been a return of many German trade fairs, for which many markets are dependent.
Paul said in the last quarter of 2022, average daily rate at its German Premier Inn hotels reached 35 euros ($38.69), although ADR reached 42 euros over the year at its 18 hotels that have been in operation for more than 12 months.
Paul also cited the 182-room Hamburg City Zentrum as an example of the strength of Whitbread's Germany Premier Inn portfolio. The property, which opened in February 2019, posted 82% occupancy and ADR of 89 euros in 2022. Paul said he expects to see that success replicated throughout Germany.
Across the entire portfolio, compared to 2021, full-year 2022 occupancy was up 7%, ADR was up 17% and revenue per available room was up 37%.
The firm’s revenue for 2022 rose 27% versus 2019 to a little more than 2.6 billion pounds sterling, while adjusted operating profit rose to 544 million pounds sterling.
More Beds
Patel said 4,000 hotel rooms were added in 2022 across Whitbread's portfolio, 54% of which are under freehold mortgages and 46% under leasehold. In 2023, Whitbread anticipates another 1,500 to 2,000 rooms added in the U.K. and 1,000 to 1,500 added in Germany, most of which will be leaseholds.
Paul said the firm's total portfolio has approximately 83,500 rooms, but he said he is confident to increase the pipeline from a previously reported 7,500 rooms to a new total of 41,500.
“Hotel demand in the U.K. has remained strong, with accommodations sales up over 15% versus last year, representing a continued RevPAR premium versus the market. Our forward occupancy booking position remains in line with last year but at much higher average room rates,” he said.
Paul added the strength of the earnings has permitted the firm to recommend a dividend of 100 million pounds sterling, an increase of 43% over last year’s dividend.
The company also announced it is buying back up to 300 million pounds sterling of its shares in two tranches.
As of press time, Whitbread’s stock was trading at 32.72 pounds sterling per share, up 27.2% year to date. The London Stock Exchange’s FTSE 100 index was up 4.5% over the same period.