Shares in the UK’s leading hospitality and hotel group Whitbread (WTB) were down over 2% to £33.09 despite reporting a positive set of first quarter results amid a difficult economic backdrop.

For the first quarter spanning the 13 weeks to 1 June 2023, the Premier Inn owner reported a 19% rise in total revenue versus 2023 (Whitbread has a 2 March year-end).

Whitbread said total UK accommodation sales were up 18% versus 2023 and UK life-for-like accommodation sales were up 16% versus 2023 due to strong demand ‘from business and leisure guests across the regions and London.’

UK food and beverage sales were 10% ahead versus 2023 benefiting from ‘several commercial initiatives put in place during the second half of 2023.’

The share price fall could be a sign that investors are worried about Whitbread’s plans for its pubs and restaurants portfolio which are currently up for sale, along with Travelodge with a rumoured £1.2 billion price tag.

Whitbread shares however are up 23% year-to-date.

PREMIER INN GERMANY MAKING GOOD PROGRESS

The company said that Premier Inn Germany ‘made good progress’ and the 18 or more established hotels were ‘continuing to mature in line with our expectations.’

RevPAR (revenue generated per room) increased to €63 compared to €44 in the first quarter of 2023 and total RevPAR for the entire German estate increased to €55 compared to €35 in the first quarter of 2023.

Whitbread said ‘trading momentum’ is strong and it remains positive about the full year. Its £300 million share buyback is ‘on track’ with 3.1 million shares purchased so far at a total cost of circa £103 million.

WHAT NEXT?

Positive news aside, the hospitality and hotel group will need to navigate a tricky economic environment going forward with runaway UK inflation – currently 8.7% in May, according to the latest data from the Office of National Statistics, an issue Danni Hewson, head of financial analysis at AJ Bell has commented upon.

Hewson said: ‘The big unknown for demand going forward is consumer confidence. With interest rates going higher, there will be a chunk of its customer base who might need to think twice about a weekend away.

‘However, plenty of people haven’t been impacted by higher rates such as those who have paid off their mortgage or are on fixed rates and don’t need to remortgage in the immediate future. It’s feasible to suggest they could keep spending merrily, with Whitbread a likely beneficiary.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The editor of the article (Martin Gamble) owns shares in AJ Bell.

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