A Brexit driven drop in business travel within the United Kingdom dented profits at budget hotel company Whitbread Plc in the first half of its financial year and left it deeply uncertain about demand in the coming months.
The hotel industry, like the UK economy generally, has suffered from the uncertainty surrounding Britain's split from the European Union, with firms reining in business trips.
"Shorter-term trading conditions in the UK regional market have been difficult, particularly in the business segment where we have a higher proportion of our revenue," Whitbread CEO Alison Brittain said.
Get a FREE Digital Subscription!Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
With less than a week before the latest deadline of October 31, Brexit is still in disarray as the government tries to push a last-minute deal with the EU through a fractious parliament.
Whitbread's Brittain said that it is difficult to predict business confidence and its impact on demand for domestic travel if the uncertainty was to drag on, or if Brexit was to end without a negotiated withdrawal process.
Profit, Revenue And Accommodation Sales
The company's adjusted pre-tax profit fell 4.1% to £236 million in the six months that ended August 29, with adjusted revenues dipping to £1.08 billion.
The sale of Costa Coffee to Coca-Cola Co earlier this year has left Whitbread without an alternate source of revenue to cushion a 3.6% decline in first-half total UK like-for-like accommodation sales.
The company took the biggest hit in regional markets outside London, where 80% of the Premier Inn hotels are located.
However, Whitbread, which runs 810 Premier Inn hotels in the United Kingdom, said accommodation sales in London rose as a weaker pound enticed more foreign tourists.
"The company is struggling to make headway after selling Costa as it focuses squarely on an increasingly tough hotels market," said Neil Wilson, chief market analyst for Markets.com. "Whitbread is one of those firms that for sure is hopeful that Brexit uncertainty lifts sooner rather than later."
The company's profit also took a hit from a ramp up in new hotel openings in Germany, a fast-growing market which Whitbread says is a third bigger than the UK market.
Taking Advantage Of Long-Term Opportunities
Even with Europe's largest economy teetering on the brink of a recession, Brittain said that Whitbread is investing to take advantage of long-term opportunities.
"The [German] market for domestic travel is significantly higher than it is in the UK and, comparatively, there is a very small supply of branded budget hotels," she said.
Whitbread expects to spend £300 million to £350 million opening new rooms in Germany this fiscal year.