Relegation haunting Premier Inn as sales take a dive

Published on Tuesday 16 June 2009 21:30

LEISURE group Whitbread wrongfooted the stock market yesterday when it reported a slump at its previously high-stepping main budget hotels division.

City analysts said the 7.9 per cent slide in like-for-like revenues at Premier Inn was particularly surprising as it had previously shone as customers traded down in the economic downturn.

Whitbread also said revenue per available room – a key hotels industry indicator – had fallen 9.6 per cent at Premier Inn in the 13 weeks to 28 May.

"This has definitely come out of left-field a bit, quite a disappointment," one leisure analyst said.

Total sales at Premier Inn, which has 576 hotels in Britain and contributes three-quarters of group profits, were flat.

Whitbread tried to play down the shock, saying the hotels division faced tough comparative sales following strong growth in the first quarter of last year.

Analysts said Premier Inn was also suffering from four and five-star hotel operators now cutting their prices as recession bites.

Alan Parker, Whitbread's chief executive, put a brave face on the figures. He commented: "We are trading in some very harsh economic conditions.

"There's a lot of discounting going on but nobody's better placed to come out of this recession in better shape than we are."

Last month, the more upmarket InterContinental Hotels posted a 44 per cent slump in Q1 profits, while Millennium & Copthorne's first-quarter profits halved.

About two-thirds of Premier Inn customers are currently business people, and the company said it had maintained sales in a declining market with its Business Account card. Total accounts rose 14 per cent year-on-year.

The company has said it now plans to lift its presence in the leisure market. As part of that plan, Whitbread recently launched a 29 per night offer in selected hotels.

Parker explained: "We see this as particularly fertile ground. In the first week we have been very pleased with the results.

"I think the school holiday period, where the offer is initially launched, is going to see quite an increase in bookings for us."

It was a more positive performance at Whitbread's coffee and pub restaurant chains.

Same-store sales at Costa Coffee rose 2.6 per cent. Excluding its airport coffee shops, the figure would have been 4.5 per cent higher, the group said.

Meanwhile, Whitbread said its pub restaurants saw like-for-like sales up 2 per cent on the back of new menus and a refurbishment programme.

Keith Bowman, equities analyst at broker Hargreaves Lansdown, said Whitbread's management was "understandably cautious" regarding the outlook.

But he added: " The cost-conscious ethos underwriting the group's offering is continuing to support a cautiously optimistic market consensus opinion."

Whitbread's shares closed down 3p at 847.5p.