Premier Inn owner Whitbread has swung to a first-half profit but warned that inflation has added £60 million to its cost base.
The company said that despite macroeconomic uncertainty, market demand for its hotels remained robust and its strong trading performance had continued.
- In the six-month period to 1 September, Premier Inn’s UK division saw accommodation sales 25.9pp ahead of the midscale and economy market. Total UK accommodation sales were 101% ahead of the same period last year and 35% ahead of the pre-pandemic numbers.
- The firm’s nascent German business has continued to recover with its more established hotels being profitable for the first time in Q2 FY23.
- Across the whole of its business, Whitbread made a pre-tax profit of £307.4 million, compared with a loss of £19.3 million, in the same period last year.
Despite Whitbread’s strong current trading, inflationary pressures are starting to bite.
- Extra costs in areas such as labour, utilities and F&B, together with brought forward investments in IT and marketing, will result in increased costs of £60 million this financial year.
- UK margins in the second half of the year are expected to be lower than the first half due to normal seasonality and the phasing of investment and inflationary pressures.
Net room growth is perhaps the key metric that hotel brands are judged by and Whitbread has made progress in that area.
- After a period of contraction in the total supply in the UK and Ireland Whitbread has increased the size of its long-term target from 110,000 to 125,000 rooms.
- The company is course to add 1,500-2,000 rooms in the UK and 2,000-2,500 rooms in Germany in the current financial year.
Earlier this year Whitbread CEO Alison Brittain announced she was stepping down from the role and retiring from full-time executive life. She is being replaced by Dominic Paul, who most recently served as CEO of Domino's Pizza Group.
What they said
Alison Brittain, Whitbread CEO said: "We remain focused on maintaining our position as the UK's number one hotel chain and are well on the way to replicating that success in the German market.
"We delivered an outstanding trading performance in the first half of the year, with revenues and profit before tax above pre-pandemic levels. Our UK hotels traded well-ahead of the market, benefiting from our 'investing to win' commercial and operational initiatives that are continuing to drive growth.
"We are making good progress in Germany and remain focused on realising our full potential in this large and exciting market. I am incredibly proud of the dedication of our team members who continue to deliver a fantastic service for our guests.
"The strength of our balance sheet underpins our success and has given us the confidence to continue to invest, even through the periods of great uncertainty that we have seen over the past few years. Our investment in growing our estate, our customer proposition, commercial initiatives, IT systems and Force for Good sustainability programme has meant we have been able to take advantage of improved market conditions and extend our market leading position.
"Despite macroeconomic uncertainties, our current trading performance is strong and our business has proven its resilience in previous downturns. With a robust balance sheet and significant growth potential in both the UK and Germany, we remain confident in the full year outlook and our ability to deliver long-term value for all our stakeholders."