Following today’s (17 January 2019) announcement of Whitbread’s Q3 trading results, Nick Wyatt, Head of Tourism at GlobalData, offers his view on the company’s future:
“Superficially, Whitbread’s year-to-date numbers look very positive. Year-to-date, year-on-year accommodation revenue growth is an impressive 4.1%, but a deeper look suggests the situation is not quite as rosy as it seems and shows why the company itself is sounding a cautionary note.
“Like-for-like and total RevPAR both fell by 1.0% and 1.1% respectively, meaning that occupancy is either lower than anticipated or prices have had to be dropped. Occupancy at Premier Inns for the UK as a whole is down 1.4% to 80.9% year-to-date, while average room rate has actually grown 0.6% to £65.30.
“The equation is therefore simple: Premier Inn needs more people in its UK rooms as the fall in occupancy rate is driving the decrease in RevPAR.
“Management has done the right thing by confronting the issue head on in its results announcement, but Whitbread should be able to ride-out any post-Brexit storm as Premier Inn enjoys excellent brand recognition, and its value proposition is strong in what is a packed budget and midscale UK market.
“Though right to be cautious, if it can exploit the strength of the Premier Inn brand and effectively market its superbly located London properties to business and leisure travelers alike, it will maintain its position as a go-to brand for short-stay travelers, which should in turn create growth in RevPAR as pricing discipline is made easier.”