Premier Inn owner Whitbread reported this morning that like-for-like sales fell in the third quarter as business uncertainty impacted travel plans.
Shares dropped more than five per cent after the company said like-for-like sales dipped 1.3 per cent in the third quarter, dragged down by a 2.1 per cent drop in accommodation sales. Like-for-like food and beverage sales grew 0.4 per cent.
The hotel chain said it will take a cautious approach to hotel demand for next year as the “UK political and economic environment remains uncertain and the sustained industry inflation continues”.
In a trading update this morning, it said it expected to face net margin headwinds of around £60m in 2021, due to inflation and ongoing investment.
However, the company reported total sales growth of one per cent, and an increase of 0.3 per cent in the UK business during the third quarter. The UK business growth was driven by a 4.8 per cent uptick in London while Premier Inn’s regional accomodation sales declined two per cent.
Whitbread chief executive Alison Brittain said: “Our performance in the quarter reflects and good food and beverage performance and marginally declining total accommodation sales.
“Weak business and leisure confidence in the regions continued, which was partially offset by the strength of the central London market, where we out performed.”
The company announced this morning that growth in Germany – where it has opened three hotels in Frankfurt, Hamburg and Munich – is “firmly on target”.
Whitbread is planning to open around 20 hotels in the country over the course of this year.
Neil Wilson, chief market analyst at Markets.com, said: “The company has refocused its efforts on Germany but the payoff from this investment is still to come through. It should though – we know just how ripe the market is for Whitbread, with its immature branded hotel market ready for the taking.
“Management said losses from German operations will narrow to around £10m next year as the pipeline accelerates and around 20 hotels are opened. Whitbread has three hotels open in Germany now. These plus committed pipeline in Germany has grown to over 8,500 rooms across 48 hotels, with the company accelerating the German programme of growth and scaling back the UK.
“But the net margin headwind of about £60m seen in 2021 seems to be the spark for the shares to slide more than 6 per cent.”
Brittain added: “Despite the short term economic uncertainty, there remain significant long-term opportunities for Premier Inn in both the UK and Germany.
“We can access these due to our strong financial position, resilient model and ongoing investment to improve our market-leading proposition.
“Continuing to invest in growth and optimisation through our disciplined approach to capital allocation ensures we can create sustainable value for shareholders over the longer-term.”