Whitbread puts brakes on hotel chain expansion

PREMIER INN and Costa owner Whitbread put the brakes on the expansion of the hotel chain as it announced it would open 500 fewer rooms than expected in the current financial year.

Like-for-like sales at Premier grew by 5.4% in the third quarter to November 28, while Whitbread’s performance also continued to be boosted by the success of its Costa coffee chain, where sales rose 4.9%.

But shares fell as analysts said revenues per room growth continued to trail behind competitors in London and the UK regions.

Revenues at Costa were more sluggish than in recent quarters, with growth remaining significantly behind more typical 7%-8% quarterly increases.

Whitbread now plans to open 3,500 new hotel rooms in the current financial year, down from 4,000 — a reduction partly attributed to a delay in opening a central London Premier Inn. But its guidance for the following year has not been increased.

Meanwhile, its Beefeater and Brewers Fayre restaurants improved like-for-like sales by 1.8%. However, the group warned the sector continued to be challenging, especially outside London.

Chief executive Andy Harrison said it was “another strong quarter” for Whitbread and the group remained on track to deliver full-year results in line with expectations.

Premier Inn has opened 22 new hotels so far in the year, including two abroad.

Costa has added a net 246 new stores, including 133 in the UK and 54 in China, bringing the total to 2,773. It is expected to have grown by around 300 for the full year.

Total sales at the coffee chain for the first three quarters were £882 million, up nearly a fifth on last year including the effect of new openings. However, trading in central and southern Europe remained tough.

Panmure Gordon analyst Simon French said Whitbread shares looked too expensive given the challenges faced by the group.

l Whitbread non-exec Susan Hooper will step down from the firm to focus on her new role as managing director of British Gas’ service division from next month.

Following a review, Ian Cheshire will become Whitbread’s senior independent director, with incumbent Steve Williams taking on Mr Cheshire’s role as chairman of the group’s remuneration committee.

Despite strong sales figures Whitbread shares — which have climbed about 50% in the last year — closed the day down 50p at 3,475p.