More guests checking in with Premier as Whitbread cuts rate

The group, which has the Costa Coffee cafe network as well as the Beefeater and Brewers Fayre restaurant brands, cut room prices at its budget Premier Inn hotels to capture cash-strapped customers trading down.

Combined with cut-price meals, such as two main meals for 9 at its Brewers Fayre pub restaurants, the group grew total sales by 14 per cent in the 39 weeks to the start of December, with like-for-like sales up 7.5 per cent.

But sales growth in its third quarter – the 13 weeks to December 2 – slowed to 6.8 per cent as Whitbread hit stronger comparative figures.

"Despite tougher comparatives and an uncertain outlook for consumer spending, the outturn for the full year will be in line with market expectations for strong profit growth," said chief executive Andy Harrison, who took over from Alan Parker last month.

Analysts expect the group's full-year pre-tax profits to hit 279m, compared with 208m the year before.

The group, which has about 40 hotels in Yorkshire including Harrogate, York, Leeds, Sheffield, Hull and Doncaster, said sales at Premier Inn hotels open for more than a year grew 9.6 per cent in the first 39 weeks of its financial year. However, third quarter hotels growth slowed to 8.7 per cent.

Whitbread has slashed room prices to as low as 29 a night at its 590 hotels. Occupancy rose to 80 per cent in the year to date, up from 70 per cent last year. It expects its occupancy rate to be 77 per cent for the year.

Revenue per available room (RevPAR), a key industry measure, grew 9.2 per cent to 43.70, outperforming the wider budget hotel sector by 4.6 percentage points. Total room nights sold in the 39 weeks have risen by 14.8 per cent to 8.9 million.

Whitbread plans to have opened 26 new hotels by the end of its financial year, adding 2,519 rooms and nine new restaurants. The group said it remains on target to have 55,000 rooms by March 2014, compared with its current 43,730 rooms.

"It's always hard to see what the new year has got in store but Whitbread has traded very well throughout the recession and I believe we'll do well whatever the economy throws at us," said Mr Harrison.

Whitbread said sales at Costa Coffee rose 9.4 per cent over the 39-week period, with third quarter growth accelerating to 11 per cent. It has been boosted by a surge in demand for mince pies as the festive season approaches, with over 200,000 sold already this year.

There are now 1,791 Costa branches, including 800 owned by Whitbread in the UK and abroad and another 884 franchises.

It aims to have opened around 300 new stores by the end of February. It has a target of 3,000 stores by March 2015. At its restaurant business the group lifted sales at outlets open more than a year by 3.3 per cent in the 39 weeks. However, restaurant sales growth slowed in the fourth quarter to 1.5 per cent and has also been hit by recent heavy snowfall.

Shares in Whitbread closed down 2.8 per cent at 1,740p.

However, brokerage Evolution Securities lifted its target price to 2050p from 1850p. Analyst Nigel Parson said the group's future "remains bright".

"It would be tempting to take profits if one looked at the share price chart but to do so would be to miss the next leg of the story," he said. "Whitbread is performing very well: its hotels are essentially full and Costa has now reported 35 consecutive quarters of like-for-like sales growth.

"This is the perfect platform to accelerate the brand roll-outs. The stock has more than doubled in the last 12 months but the future remains bright."

Analyst Sam Hart at stockbrokers Charles Stanley said: "Going forward, we expect the pace of RevPAR growth at Premier Inn to slow as comparatives become tougher, but the trend is expected to remain positive.

"The impressive new room pipeline means Premier Inn is well positioned to benefit from structural growth in the UK budget hotels sector. Costa is well placed to benefit from structural growth in the global branded coffee shop market."

Hugh-Guy Lorriman, retail analyst at Seymour Pierce stockbrokers, said Whitbread remained on course to meet his forecast for profits of 281m in the current financial year.

However, he added that recent harsh weather and the approaching VAT rise in January would make for a challenging final quarter of the financial year.

Hotels feel the squeeze

NEW figures show the recession continues to squeeze hotels in Leeds and Sheffield, with occupancy and room yields sliding in October.

Figures from PKF Hotel Consultancy Services show occupancy in Leeds fell 3.2 per cent to 76.3 per cent in October, compared with a year earlier. Room rates in the city were up 0.8 per cent to 64.

But Leeds fared better than Sheffield, where the room rate fell from 58.90 to 53.64, while occupancy was down three per cent to 74.2 per cent.