Whitbread said it was “maybe, maybe” seeing signs of improvements in performance in the regions, as it updated the markets on trading.
The company has cut its openings target for Premier Inn this year, partially because of its focus on leases, but said that it remained on track to meet its targets for 2016 and 2018.
Whitbread opened 2,309 new rooms across 20 hotels and six joint site restaurants in the first 39 weeks of the year and for the full year plans to open around 3,500 new rooms, down from the previous target of 4,000.
CEO Andy Harrison said: “This is slightly less than originally anticipated including a short delay in the opening of a large central London Premier Inn, which will now open in early 2014/15.” The delay was attributed to the time taken to refurbish the site, a former office block.
In a call to analysts he added: “The most important thing is that these are short-term timing issues. We are on target for our 2016 and 2018 targets. As the pipeline is more towards London and big cities and more towards leases, we’re more in the hands of developers. Sometimes we’re part of quite complex schemes and sometimes there are financing issues that take time to resolve.”
The brand’s pipeline is currently around 10,500 rooms, with approximately 4,500 expected to be open in 2014/15. The pipeline includes 1,000 rooms for the group’s new brand, hub by Premier Inn, with the first hotel due to open in St Martin’s Lane in the second half of 2014. The group’s 2016 target is 65,000 rooms in operation, rising to 75,000 by 2018 (it is currently close to 54,000 in the UK and Ireland).
During the quarter to 28 November, total revpar grew by 6.5% at the brand, with like-for-like revpar up 5.6%, close to like-for-like sales growth of 5.4%.
In London, the group grew total sales by 16.3% in the quarter with a 10.1% increase in the number of rooms available, Harrison commenting: “Demand is growing nicely in London and supply will always work hard to catch up”. Total revpar grew by 7.6% and like-for-like revpar grew by 7.4% with occupancy at 90.0%. Revpar growth was beneath the midscale and economy London competitive set, according to STR Global, which grew total revpar by 10.6%.
Harrison responded that the group had seen rapid growth in London, adding: “We cap our prices, because we want to invest in our brand and reputation. We don’t do Ryanair-type pricing – we want our customers to come away with a good feeling after staying in a Premier Inn. We believe our strategy is the right thing for the long term.
“In terms of where we set the cap, that will move if we see a step-change in market pricing.”
Outside London, the group saw total sales grow by 13.5%, during the quarter, with a 6.9% increase in the number of rooms available. Total revpar was up 5.9% and like-for-like revpar grew by 5.2% with occupancy up 1.2 percentage points to 81.7%. The midscale and economy regional competitive set grew total revpar by 9.9%, benefitting from weaker comparatives last year.
Harrison said: “It’s a bit early to draw any definitive conclusions, the consumer is still under a lot of pressure. The comparatives are still weak, but 60% of sales are coming from business and we are maybe, maybe seeing signs of improvement.”
The brand has continued to grow overseas, adding two hotels during the period; at Abu Dhabi airport and Pune, in India. It is set to continue to expand, towards a target of around 50 overseas hotels by 2018; in Indonesia, the Middle East and India, with Harrison confirming the group had been considering Germany, but “hadn’t reached any conclusions”.
Looking at the resurgence of Travelodge, Harrison commented: “We haven’t seen any impact on our business from Travelodge yet.”
HA Perspective: It’s all racing ahead for Whitbread, but, as Harrison has acknowledged, there are some short-term issues with reaching the year’s target, now a full 500 rooms shy of the original number. With the company cutting down on the freeholds it has also cut down on what it can control and is at the whim of developers and those who fund them.
It must continue to do what it can to maintain its planned trajectory and, without taking an ownership position, it must do this with the power of its brand. Part of this is, it says, is its capped rates, although, without specifying this rate it is hard to make it part of a brand promise to the consumer (although better for competition). Rather like the energy companies, the rate is subject to change given the rest of the market.
A quick search by this correspondent reveals the lowest possible rate at the group’s London Euston Road site at £103 a week out, £181 on the day (Thursday), a jump that the consumer is, by and large, now educated enough to anticipate.
Outside London the group is looking to the business traveller, a sentiment which seems to have been shared by the Chancellor in his Autumn Statement, raising his GDP growth forecast for the this year to 1.4%, well above the 0.6% predicted by the Office for Budget Responsibility in March.Despite this apparent cheer, the gap between wages and inflation remains, keeping the leisure traveller and 40% of Premier Inn’s regional business at bay.