The omicron variant has produced a slight blip in hotel performance, but the overall outlook for Whitbread PLC — which owns and operates the largest hotel portfolio in the United Kingdom — is improving “significantly ahead of the market, compared with the same calendar period in 2019,” according to company executives.
Speaking during Whitbread's third-quarter fiscal year 2022 trading numbers conference call, CEO Alison Brittain said that for the 13 weeks of trading through Nov. 25, 2021, the firm has seen continued market outperformance in the U.K. Its Premier Inn accommodation sales were up 10.6% compared to full-year 2020, and “like-for-like U.K. accommodation sales 5.5% ahead” compared with the same period.
Total U.K. accommodation sales growth was 14.9% ahead of the midscale and economy market, driven by strong leisure demand and recovering business demand, she added.
“We were running at 90% of pre-COVID [occupancy] levels, but as we have gone into [the fourth quarter] that is more like 83% of pre-COVID levels,” Brittain said.
This was due to continued high levels of leisure demand, and the return of some business demand.
In addition to those third-quarter numbers, resilient trading in the six weeks up to Jan. 6, 2021 — despite the effects of omicron — has seen U.K. accommodation sales revenue increase to 5.1% ahead of full-year 2020 numbers.
Brittain said she expected revenue per available room would return to pre-pandemic levels within the next 12 months, which is in line with previous guidance.
Supply-chain and staff-absence concerns are adding some strain, but Brittain said winter numbers historically show weaker demand both for accommodations and food and beverage.
“If you are going to have an issue, then [now] is the time to have it,” she said.
Brittain added that supply-chain issues have been eased in the last few months.
“We’re working hard with suppliers, so we were able to deliver a good festive period, with 97,000 guests on Christmas day, but cost inflation has not eased,” she said.
The area in which that is most challenging is in construction materials.
“We will have a bumper crop [of new hotels] opening this year, with a high number of rooms, but it is on the [refurbishment] program that we will have to slow down on, and some will slip into next year,” Brittain said.
Whitbread Group Finance Director Nicholas Cadbury said laundry and utility costs have increased, but that trend is economy wide and not specific to Whitbread. The conference call is Cadbury's last with Whitbread after almost a decade at the hotel company. He nows moves on to International Airlines Group, which owns and operates Aer Lingus and British Airways.
Brittain said the food-and-beverage side of Whitbread’s business saw a greater effect from omicron than its accommodations division felt.
She expects better numbers to start from Jan. 10, a date she said many U.K. businesses were starting to enact return-to-office policies.
“We are very optimistic about performance [in 2022]. … Costs will be above historical records,” she said, adding those costs can and will be offset.
Roll Call
Brittain said staff absences at Whitbread's hotels also have not been a major issue.
“We have the advantage of a lot of people, and we have the flexibility to move people around,” she said.
Employees have also have been willing to help in this regard.
“Post-Christmas, there is lowered occupancy, which is normal, and that has coincided with absences," Brittain said. "Absences are in the region of 10% [of approximately 30,000 staff], so we are not feeling this as an operational constraint."
Whitbread is following government guidelines in terms of vaccination policy, and Brittain said no wage penalties are in place for those who are sick and not vaccinated.
Brittain said labor absences did increase by the end of 2021, but Whitbread is offsetting that by recently enacting wage increases at the bottom scale of pay grades.
“The government has now announced what the rises will be in its National Living Wage, and we were broadly in the right space, even if we had to have guessed,” she said.
She said there have been no changes in the company's vaccination policy.
“We have no compulsory guidance. We go with what the government describes is the right thing to do, and we have no changes to our policy on sick pay. We do not want staff to feel they have to come in if they are sick. We pay 80% of pay for absence or isolation, and not the rate of statutory sick pay,” she said.
That 80% rate is higher than statutory sick pay in most cases, with the current government statutory sick pay being 96.35 pounds sterling ($131.06) per week for up to 28 weeks.
Germany
Whitbread is also looking to scale its hotel portfolio in Germany. Its latest hotel opening in the country is in Passau, the 108-room Passau Weisser Hase, which opened in a building dating to 1512.
“There are another 43 [hotels] in the pipeline,” Brittain said.
She said that current government COVID-19 regulations in Germany have dampened demand, but demand is creating “compelling” value in the market.
Whitbread's 32 operating hotels in Germany achieved occupancy levels of 59.9% in the third quarter of 2021.
“Omicron is not an unexpected bump in the road, but Premier Inn remains on track, growth strategy remains on target throughout this pandemic and our advantages are enormous,” she said, listing those advantages as scale, a focus on the budget sector, being the top brand in the U.K. and having a diverse customer base and high degree of direct booking.
Cadbury said Whitbread executives are confident they can deliver to stakeholders in the short, medium and long terms.
“We are very well hedged, 65% for next year, a relatively good position,” he added.
As of press time, Whitbread’s stock was trading on the London Stock Exchange at 32 pounds sterling ($43.79) per share, an increase of 5.4% in the past six months.