Whitbread PLC on Wednesday said its sales remain ahead of their pre-Covid level, boosted by strong trading in the UK, though the Premier Inn owner warned it faces higher costs stemming from a tight labour market.

Whitbread shares were 4.6% higher at 2,6847.00 pence each in London on Wednesday morning.

The hotel company plans to invest additional spending of £20 million to £30 million in the current financial year. It is still confident on margins, however, given its ‘strong sales performance’.

In the first quarter ended June 2, Whitbread said sales were up more than four-fold year-on-year. Compared to pre-virus times, they were 22% higher.

On a like-for-like basis, sales were up by just under four-fold yearly and were 11% higher from pre-Covid levels.

UK total sales alone were 18% above pre-pandemic times.

‘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. 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,’ Chief Executive Alison Brittain said.

‘In Germany, our open hotel estate now stands at 40 hotels, with a further 38 hotels in the pipeline. 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.’

Its fortunes in Germany have improved faster than expected following the easing of virus curbs, Whitbread said. Premier Inn occupancy levels there were 65% in the final four weeks of the first quarter.

Whitbread also said it plans to invest around £20 million to £30 million in labour, refurbishments and information technology in its current financial year given a ‘tight’ jobs market and its focus on maintaining a market leading position.

‘However, our high levels of occupancy and continued strong sales performance mean we remain confident in our continued margin recovery in the UK,’ it added.

Whitbread explained it expects to implement ‘targeted pay increases’ as labour supply in the hospitality sector is tight.

‘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 added.

The company has signed a new revolving credit facility. A £775 million pact replaces a previous £850 million facility that was due to expire in September 2023.

The new five-year loan has two one-year extension options and is provided by a syndicate of seven banks, led by Banco Santander SA, Barclays PLC, NatWest PLC and Bank of China.

The multi-currency facility has variable interest rates, with a sterling portion linked to Sonia and the euro denominated borrowings linked to Euribor.

‘Premier Inn-owner Whitbread is fully capitalising on a consumer that’s getting back out and about despite a cost-of-living crisis,’ commented Matt Britzman at Hargreaves Lansdown.

‘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.’

Copyright 2022 Alliance News Limited. All Rights Reserved.