Shares in Premier Inn owner Whitbread (WTB) gained 2.6% to £32.36 on Tuesday after the company said the first half recovery to 26 August was ahead of expectations.

Recovery in UK demand was stronger than expected resulting in ‘significant’ outperformance, with Premier Inn accommodation sales 12.3% ahead of the mid-scale and economy market in the first half and 13.9% ahead in the second quarter.

Expansion in Germany continued ‘at pace’ with the total open and committed pipeline now at 73 hotels, resulting in reported revenues 197.3% ahead of the six months to 29 August 2019, the last comparable pre-pandemic period.

CONTINUED STRENGTH

Looking to the second half the company said leisure demand remained strong in the UK with September accommodation sales up 9.7% compared with 2020, while in Germany occupancy shot up to 60% compared with 40% in the second quarter.

The company insisted it was better placed than many to cope with higher wage and utility costs as it continued to invest in people, marketing, and refurbishments to capitalise on the recovery and reduction in market capacity.

FULL RECOVERY

Management are confident the business can make a full recovery and achieve a pre-pandemic rate of RevPar (revenues per available room), a key measure of hotel performance, this year financial year.

Consequently, the company believes it can return to pre-pandemic profit margins in the UK subject to ‘longer-term inflation and supply chain issues.’

AJ Bell investment director Russ Mould commented: ‘Wage inflation is definitely going to be a factor at Premier Inn owner Whitbread.

‘The company is a victim of the mounting labour shortage in the UK hospitality sector which means it is going to have bump up pay significantly and pay out bonuses to attract enough staff to keep things ticking over.’

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Issue Date: 26 Oct 2021