Premier Inn owner boosted by travel recovery but tight labour market takes toll: reaction

Premier Inn owner Whitbread has cautioned that its annual costs will rise by up to £30 million as it hikes pay to attract workers in a tough jobs market and as demand recovers.

By Scott Reid and Holly Williams
Wednesday, 15th June 2022, 9:25 am
Updated Wednesday, 15th June 2022, 9:25 am

The group said it was making targeted pay increases across the business, given the difficulties in hiring across the hospitality sector as it also sees a stronger-than-expected recovery in trade following the end of pandemic restrictions.

Whitbread, which also owns restaurant chains including Beefeater and Brewers Fayre, said its costs are set to rise by between £20m and £30m overall as it also brings forward refurbishments and maintenance projects, as well as some investment in IT.

It told investors: “Labour supply remains tight across the hospitality sector and assuming that consumer demand and occupancy remain strong, we expect some additional costs due to targeted pay increases.

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“We are also taking the opportunity to bring forward our investment in refurbishments and maintenance projects as well as accelerate some additional IT spend that will underpin our market-leading position and drive future earnings.”

Whitbread said UK demand was ahead of its expectations, with first-quarter accommodation sales 31 per cent ahead of the pre-pandemic levels two years ago, and 235.6 per cent ahead of a year earlier when restrictions impacted trading.

Like-for-like accommodation sales were 21.3 per cent higher on a two-year comparison. But total UK food and drink comparative sales were still 4.3 per cent below 2019-20, it added.

Its chain across Germany has also benefited from a strong rebound in demand across the market, with Premier Inn occupancy levels standing at 64.7 per cent in the last four weeks of the quarter and 40 hotels now open in the country.

Premier Inn has grown to become the UK's largest hotel chain with hundreds of sites across Scotland, England and Wales. Picture: Premier Inn/PA Wire

The group said it was around 40 per cent booked up for the second quarter over the peak summer season.

Chief executive Alison Brittain said: “The strength of Premier Inn’s recovery in the UK continues to be ahead of expectations with a particularly strong first-quarter performance that is well ahead of pre-pandemic levels and we continue to significantly outperform the market.

“This impressive first-quarter performance together with improved visibility into the second quarter gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year.”

Matt Britzman, equity analyst at investment platform Hargraves Lansdown, noted: “Premier Inn owner Whitbread is fully capitalising on a consumer that’s getting back out and about despite a cost-of-living crisis.

“UK accommodation sales remain well ahead of pre-pandemic levels and crucially performance is ahead of the broader market. That’s testament to the Premier Inn brand and a price point that’s accessible to consumers in tough conditions.

“Tight labour supply across the hospitality sector is throwing some mud in the mix.”

Richard Hunter, head of markets at Interactive Investor, added: “Whitbread has turned a corner following the return to normality, with growth now exceeding pre-pandemic levels for the most part. Whitbread’s hotel estate is for the most part freehold, which gives the company additional flexibility.”

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