Bottom Line: Coffee goes cold but hotels pick up pace

Elizabeth Fournier

INVESTORS in Whitbread reacted to news that Costa’s sales growth was slowing yesterday like a bunch of hardened coffee addicts denied their hit – they got angry.

The resulting sell-off saw shares dip as low as 3,087p in early trading, but the reaction is overblown.
Though speculation that Whitbread could spin off Costa has been frothing up over the past couple of years, at the moment it is still part of a much bigger machine – and one whose hotel business is doing rather well.
Like-for-like sales growth at the firm’s hotels and resorts division – encompassing the flagship Premier Inns brand – rose from 1.7 per cent to 1.8 per cent in the second half, proving the slowdown was limited to Costa and the lagging hotel sector looks to be on the road to recovery.
The data from Premier’s regional sites is less impressive, but is more than offset by sales in London – where a room in a so-called budget hotel can set you back £150 a night – which grew by 16 per cent.
With hotels a noticeable weak spot in past updates, it’s surprising investors didn’t take yesterday’s upbeat news more positively – especially as Costa’s dip in growth is more than likely to correct itself as customers return to their daily hot drink now temperatures are dropping.
So far Whitbread’s two flagship brands have failed to perform in sync, but that can’t last much longer. And when they do, investors will be sorry they checked out so soon.