Omicron spread takes heat out of Premier Inn but outlook brighter: reaction
Premier Inn owner Whitbread has revealed a knock to demand over the festive season from the spread of the Omicron variant and cautioned over rising costs.
The group saw total UK sales drop 4.4 per cent year-on-year in the six weeks to January 6, dragged lower by a 17.2 per cent slump in food and drink revenues due to fears over the variant and restrictions on eating-out in Scotland, Wales and Northern Ireland.
Lockdown measures in Germany have also taken their toll on its chain in the country, with hotel occupancy levels plunging 36 per cent over the six weeks.
Whitbread said it was too early to tell the impact of the Omicron hit to trade over the full year, with January and February already traditionally the quietest months for the group.
It said it still hopes Premier Inn hotel trading will recover to pre-Covid levels this year, despite the current woes.
The firm also revealed it had delayed about £20 million of investment and marketing project spend this year due to supply chain and trading challenges, while it warned the group’s cost inflation is set to hit up to 8 per cent on average.
Around £1.4 billion of its cost base is set to be affected by the price hikes, but the firm said it hopes to “largely” offset the pressures, including by existing cost saving measures.
Chief executive Alison Brittain revealed that about 10 per cent of the group’s 30,000 employees were off work as the Omicron variant takes its toll on workforces, causing high rates of self-isolation.
Brittain said: “UK accommodation sales remained resilient in December, albeit softening as we moved through the month and into the festive period as a result of the onset of the Omicron Covid-19 variant.
“Whilst our hotel performance was excellent, the value pub and restaurant sector in which we operate remains more challenging.
Figures also released for the third quarter to November 25 showed more resilient trading before Omicron struck, with total like-for-like UK sales down by just 1 per cent.
It said accommodation sales rose 5.5 per cent, while food and drink sales were down 13.4 per cent in the quarter.
Mark Crouch, an analyst at investment platform eToro, said: “Whitbread’s story at the moment is really a tale of two countries. While the Premier Inn owner’s UK business had a relatively strong third quarter, its German business is being hampered by local lockdown restrictions, which are expected to be in place for the rest of the winter.
“It’s been an exceptionally tough two years for the hotel industry, but Whitbread is showing real signs of recovery in the UK, its main market, where it has benefitted by recovering business demand.
“However, there has been a noticeable softening in demand within the industry over Christmas due to a spike in the number of Omicron infections.”
Mamta Valechha, equity research analyst at Quilter Cheviot, added: “The Premier Inn UK brand continues to trade ahead of the underlying midscale and economy hotels market, driven by strong leisure demand and improving business demand.
“More importantly, however, is that while UK accommodation sales through December and into January have slowed down due to Omicron, they are still up 5 per cent and Premier Inn is accelerating its outperformance.”