Shares in Premier Inn owner Whitbread (WTB) gained 2.8% to £33.81 as occupancy levels surged nearly 50% in the first two weeks following the easing of travel restrictions and limits on overnight stays.

In a first quarter trading update, Whitbread said that up until May 17, only essential business travel stays were permitted, with occupancy levels steady at around 35%.

But it added that post 17 May trading has been strong, with high levels of demand in tourist locations in particular, driven by the anticipated bounce in leisure demand post reopening, and the period including May half-term school holidays.

Demand has also improved markedly across the rest of the estate, the company said, with the exception of central London and airport locations.

As has become the norm among many company updates of late, Whitbread also gave an update on first quarter performance compared to two years prior, in the pre-pandemic world, to give more meaningful comparisons.

The numbers are understandably stark for Whitbread, with accommodation sales down 61% and food and beverage sales dropping 86%.

DRIVING BUSINESS DEMAND

Meanwhile according to the firm, actions to drive business demand are well underway, including improved business account management, a relaunched business booker tool and a broadened Travel Management Company distribution platform.

Whilst these actions are helping drive a continued increase in business bookings, the company said a sustained recovery in office-based business demand is not anticipated until the autumn.

During the quarter, 10 new hotels were opened, totaling 1,189 rooms and five hotels were disposed, totaling 169 rooms, as the group continues to take the opportunity to optimise the estate as and when opportunities arise.

EXPERT VIEW

AJ Bell financial analyst Danni Hewson said business could be ‘booming’ for Whitbread this summer as theoretically the greater the demand, the higher the prices it can charge, with a ‘good chunk’ of the public ‘opting for its clean sheets rather than risk staying in run-down bed and breakfast establishments along the coast.’

She said: ‘The only thorn in its side is the lack of demand growth in central London and airport locations, historically key territories for the company. London establishments have tended to be filled by foreign tourists, UK residents on sightseeing trips to the capital, or business travelers.

‘Air travel restrictions have cut off the natural flow of overseas guests and people staying in airport locations ready for early flights the next day. Business travel looks unlikely to pick up in large volumes this year, but there could be an increase in trips to London over the coming months as people look for things to do.’

Hewson added that Whitbread will ‘have to be careful’ with pricing in all but its prime seaside locations, keeping room rates attractive enough to fill less popular destinations, and said: ‘It is better to fill a hotel at lower rates and then be overly aggressive with pricing just becomes some territories are doing well.

‘It certainly looks like a summer of fun for Whitbread’s earnings recovery, but challenges remain from autumn onwards. The company will have to come up with some clever marketing to encourage people to travel and fill its rooms.’

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Issue Date: 17 Jun 2021