Slowing Business Demand Hits Whitbread's Premier Inn Business
Britain's Whitbread Plc has reported lower room revenue over the past three months as companies cut back on business travel.
The sale of Whitbread's Costa Coffee chain has left it more exposed to increased competition from budget hotel groups and Airbnb as subdued economic activity and political turmoil force Britons to rein in spending.
"We have a higher business than leisure mix than most of the other hotels and the ongoing political and economic uncertainty is continuing to impact the hotel industry [in the UK] and is leading to a decline in short lead bookings from business customers," CEO Alison Brittain said on Wednesday June 19.
Short lead bookings refer to rooms booked only a week or so in advance, usually by business travellers, who contribute significantly to Whitbread's revenue.
"We do expect subdued trends to continue throughout the year," Brittain added, after the company reported like-for-like revenue per available room (RevPAR) in the UK fell 6% in the quarter to the end of May.
Originally a brewer, Whitbread is expanding its hotel business after selling Costa to Coca-Cola Co for £3.9 billion in a cash deal in January.
Whitbread's shares fell 1.3% to 4,539 pence, making them the biggest decliners on London's bluechip index before recovering some of that ground.
"Without the diversification and success that Costa brought, the company is now mostly hostage to the cyclical hotels market," said Richard Hunter, head of markets at Interactive Investor.
"With business confidence under threat from an uncertain economic outlook in the UK, accommodation sales have been weak," he added.
To counter weakness in its home market, Whitbread is expanding in Germany, where it plans to grow its Premier Inn portfolio to 38 hotels through acquisitions and new properties.
Whitbread, which will open two more hotels in Germany this year, said its Frankfurt hotel is performing well and its second German hotel in Hamburg, which has been open for three months, is doing better than expected.
The company also said it would complete the first tranche of the 19-hotel Foremost Hospitality acquisition, with 13 being rebranded to Premier Inn in the first half of next year.