Premier Inn owner Whitbread suffers 'challenging' UK market

Premier Inn's parent company's UK sales have plunged as the group faces a 'challenging' domestic market and undergoes an overhaul of its restaurants.

Whitbread, which also owns the Beefeater and Brewers Fayre brands, saw total turnover fall 4 per cent in the 13 weeks ending 29 May.

Revenues in the UK dropped by 5 per cent, with food and beverage sales slumping by 16 per cent as the group continued to convert several branded restaurants into hotels.

UK accommodation sales also dipped 2 per cent, although Whitbread said Premier Inn outperformed the wider midscale and economy (M&E) hotel market across both London and the regions.

In the former territory, accommodation revenues exceeded the M&E market by 3.9 percentage points, while revenue per available room (RevPAR) was 2.4 percentage points higher.

Meanwhile, Whitbread's German business, which represents a much smaller share of its trade, saw turnover climb by 16 per cent on a local currency basis.

The FTSE 100 firm expects its German division to become profitable this financial year.

Dominic Paul, chief executive of Whitbread, said: 'In the UK, we continue to outperform against a challenging market backdrop, with the strength of our brand and commercial programme continuing to drive total accommodation sales and RevPAR growth ahead of the market.

'Whilst the short-lead nature of our business means that our forward visibility remains limited, our forward booked position is ahead of last year, and we remain confident that we can continue to outperform the market.'

Under the company's 'Accelerating Growth Plan', it aims to construct about 3,500 additional hotel rooms on the way to having at least 97,000 open rooms in the UK by 2029.

To help achieve this, it intends to convert 112 restaurants and invest approximately £500million through its capital expenditure programme.

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Whitbread said the plan is on track to achieve a minimum £300million of incremental profits and more than £2billion of shareholder returns by 2030.

Whitbread shares were 2.3 per cent lower at £27.26 on Thursday morning, taking their losses to around 10 per cent over the past year.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: 'While forward bookings in the UK are ahead of last year, that doesn’t provide a huge cushion if conditions don’t improve.

'However, Whitbread is a quality operator that’s doing all it can to improve efficiency, and optimise its estate through initiatives such as converting low performing restaurants into additional room space.

'The current valuation reflects the challenging outlook. And Whitbread continues to build on the substantial operational improvements made in recent years so the shares could be attractive to investors who are prepared to sit out the cycle.'

Whitbread's latest trading update comes three weeks after it revealed that Christine Hodgson, the chairwoman of water giant Severn Trent, will replace Adam Crozier as its next chair.