Whitbread warns on weaker hotel demand as profit edges up
Whitbread warned that political and economic uncertainty had reduced demand for its hotels in the UK even as cost control helped its annual profits.
Underlying pre-tax profit for the year to the end of February rose 1.2% to £438m as revenue rose to £2.05bn from £2.01bn.
Statutory pre-tax profit on the other hand fell to £260m from £426.5m driven by £178m of one-off items including £108m for the sale of the Costa coffee chain in January.
Whitbread, which operates the Premier Inn budget hotel chain, said business and consumer confidence fell in the fourth quarter and that weakness had increased in March and April. Whitbread was affected more than the wider market because it has more hotels outside London where weakness was worst, it said.
UK accommodation sales rose 3.5% as Whitbread added more rooms but underlying sales fell 0.6%, affected by soft demand, especially in the fourth quarter. Uncertainty over Brexit and related worries about the economy have prompted UK businesses to hold back on investment and reduce spending, surveys show.
Alison Brittain, Whitbread’s chief executive, said: “We saw a decline in business and leisure confidence, leading to weaker domestic hotel demand. This weakness has increased into March and April particularly in the regional business market, coinciding with an acute period of political and economic uncertainty in the UK.”
Brittain said it was too early in the year to know how business confidence would affect the market but that Whitbread was strong enough to weather tough conditions. Whitbread shares fell 3.8% to £45.75 at 10:38 BST.
Whitbread sold Costa in January, leaving it as a hotel chain with a smaller pub and restaurant business. The company plans to return up to £2.5bn of cash to investors from the sale and is expanding in Germany.
Russ Mould, investment director at AJ Bell, said: “A weak fourth quarter, a gloomy start to the new financial year and a cautious outlook isn’t a great situation to be in. It is understandable that Whitbread’s investors might be disappointed with the situation yet it isn’t reason to start panicking about the business.
“Whitbread needs to stay focused and find ways to cope with a weaker demand otherwise it could become a takeover target with a larger rival potentially waiting to pounce during moments of weakness.”