Premier Inn blames ‘heightened’ Brexit uncertainty for profit slump
Premier Inn-owner Whitbread (WTB.L) warned that continued Brexit-related uncertainty was denting its bottom line, as the company said on Tuesday that pre-tax profits in the first half of its financial year fell 7.1% to £220m.
The company, the UK’s largest hotel operator, said that weak confidence in the business and leisure sectors had coincided with “heightened political and economic uncertainty”.
This had impacted demand for hotel rooms in the UK, where 80% of Premier Inn hotels are located, the company said.
Noting that the weak demand and uncertainty had continued into the second half of its financial year, Whitbread said it was “difficult” to predict how the situation would evolve over the next year.
Revenue for the first half of the year, which ended in August, was “broadly flat” at around £1.08bn. The figures exclude contributions from Costa Coffee, which Whitbread sold to Coca-Cola in 2018 for £3.9bn.
While the company reported 7.6% growth in London, total UK accommodation sales fell by 0.6%. Like-for-like sales, meanwhile, fell by 3.6%.
Average hotel room occupancy in the first half of the year declined by 1.8 percentage points to 78.3%, while the average rate paid for hotel rooms fell by 3.2%. This dented the firms revenue per available hotel room by more than 5%.
“We have delivered a resilient first half profit performance despite challenging market conditions in the UK,” said Alison Brittain, the CEO of Whitbread.
“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, whilst trading in London remained strong.”
When its current financial year has concluded, Whitbread expects to have added 5,000 new hotel rooms, including around 3,000 rooms in the UK and about 2,000 in Germany.
The chain also has a number of strategies in place to build “brand strength”, Brittain said, including new higher-standard “Premier Plus” hotel rooms. It will have 500 of those rooms by the end of the year, and will add a further 1,500 next year.
Whitbread also owns restaurant chains Beefeater, Brewers Fayre, and Table Table.