Whitbread shares were up 3.3% to 2,651.7p in early morning trading on Wednesday following a total sales growth of 303.8% in Q1 2023 compared to Q1 2022.
The company reported a total growth in accommodation across the UK and Germany of 244.9% year-on-year, with a 588.9% surge in food and beverage in both regions over the financial term.
Whitbread highlighted a like-for-like total sales growth of 286% compared to the previous year, with a like-for-like rise of 227.4% in accommodation and 569.2% climb in food and beverage from the UK and German markets.
The firm mentioned continued market outperformance in the UK, with Premier Inn total accommodation sales at 27.2% beyond the market.
The group attributed its strong results to the strength of its commercial and operational initiatives, combined with the success of its brand, scale and direct distribution.
“The strength of Premier Inn’s recovery in the UK continues to be ahead of expectations with a particularly strong Q1 performance that is well ahead of pre-pandemic levels and we continue to significantly outperform the market,” said Whitbread CEO Alison Brittain.
“This outperformance is driven by a number of factors, including our commercial and operational focus as well as the strength of our brand and operating model, our direct distribution, national coverage and accelerated independent supply contraction.”
The property firm said the German hotel market recovered at a faster rate than expected, and boosted Premier Inn occupancy levels to 64.7% in the last four weeks of the quarter, with its estate standing at 40 hotels and an additional 38 in the works.
“In Germany, our open hotel estate now stands at 40 hotels, with a further 38 hotels in the pipeline,” said Brittain.
“The quality and prime location of our hotels are proving highly attractive and are driving high customer scores. The trading performance of our more mature hotels in the two months post the lifting of COVID restrictions only reinforces our positive view of the significant opportunity in Germany.”
Higher Costs
Whitbread confirmed that it would invest an extra £20 million to £30 million in labour, refurbishments and IT to stay on top of the tight labour market, and to maintain its market-leading position, however it said it expected high occupancy levels and continued sales outperformance to drive continued margin recovery across the UK.
“Tight labour supply across the hospitality sector is throwing some mud in the mix, Whitbread’s expecting a £20-£30m rise in costs as servicing the higher demand means attracting and retaining staff that have the bargaining power to push for better pay,” said Hargreaves Lansdown equity analyst Matt Britzman.
“Still, margins in the UK are expected to rise throughout the year as the group’s ongoing cost saving program and higher sales should help to ease some of the pressures coming from cost inflation.”
Credit Facility
The group also mentioned it was set to replace its existing debt facility with a new £775 million five-year revolving credit facility, with two one-year extension options.
The facility has been provided by a selection of seven banks led by Banco Santander, NatWest and Bank of China, and includes variable interest rates with GBP reportedly linked to SONIA and EUR linked to EURIBOR.
FY 2023 Guidance
Whitbread commented that its outlook was positive based on strong trading over the first three months of FY 2023, with the company currently 40% booked.
The firm said it was increasingly confident of delivering a positive HY1 2023 performance, and highlighted that it expected to remain ahead of the market for the rest of the financial year.
“This impressive Q1 performance together with improved visibility into Q2, gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year,” said Brittain.