Ad campaigns pay off for Whitbread as profits climb

AN ADVERTISING campaign fronted by comedian Lenny Henry is set to help the country's biggest hotel operator notch up strong profit growth this year.

Whitbread said sales at its Premier Inn hotels open for more than a year grew 8.7 per cent in the third quarter to 2 December.

Occupancy rose to 80 per cent in the year to date, up from 70 per cent last year, while revenue per available room - a key industry measure - grew 9.2 per cent to 43.70, outperforming the wider budget hotel sector by 4.6 percentage points.

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The company, which also owns Costa Coffee and the Beefeater and Brewers Fayre restaurant chains, attributed the solid performance to cut-price rooms being a hit with cash-strapped consumers. It has cut room prices at Premier Inn to as little as 29 a night to woo leisure and business travellers trading down from four- and five-star hotels.

Andy Harrison, the former EasyJet chief executive who succeeded Alan Parker as Whitbread boss last month, said: "Despite tougher comparatives and an uncertain outlook for consumer spending, the out-turn for the full year will be in line with market expectations for strong profit growth."

The average forecast for full-year pre-tax profit stands at 279 million, compared with 208m the year before.

Whitbread has been a consistently strong performer throughout the economic downturn because of the value-for-money focus of Premier Inn and its pub restaurants, and Costa Coffee being viewed as an affordable luxury by consumers.

Whitbread said sales at Costa, which launched its first TV ad campaign in October, rose 11 per cent over the period, benefiting from a surge in demand for mince pies as the festive season approaches, with more than 200,000 sold already this year.

In its restaurant business, offers such as two meals for 10 at Brewers Fayre helped the group lift sales at outlets open more than a year by 1.5 per cent while rivals have seen sales drop.

Whitbread was optimistic its strong run would continue. It said it remained on target to have 55,000 Premier Inn rooms in the UK by the end of its 2013-14 financial year.

"It's always hard to see what the new year has got in store but Whitbread has traded very well throughout the recession and I believe we'll do well whatever the economy throws at us," Harrison said.

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Hugh-Guy Lorriman, a retail analyst at broker Seymour Pierce, said Whitbread remained on track to meet his profit forecast of 281m in the current financial year. But he added that recent harsh weather and the approaching VAT rise in January would make for a challenging final quarter.

Evolution Securities was also bullish about the outlook, rating the stock a "buy".

Evo said: "It would be tempting to take profits if one looked at the share price chart but to do so would be to miss the next leg of the story."