Premier Inn expansion ‘helped by fast decline of smaller hotels’

The rapid expansion of budget hospitality chain Premier Inn is being helped by the “accelerating decline” of the UK’s smaller independent hotels, its owner Whitbread said today.

The company said the independents’ struggle for survival created a “favourable market backdrop” that provided  “increased opportunity for Premier Inn to grow market share”.

It has upgraded its target for the total number of Premier Inn rooms to 125,000 from 110,000, with about 2,000 new rooms being added to its portfolio before the end of the financial year.

Whitbread said: “The decline of the independent hotel sector is accelerating… we believe that the total volume of room supply is currently some 4% lower than it was pre-pandemic.”

The firm posted pre-tax profits of £307 million in the six months to September, after a loss the previous year. Sales more than doubled to £1.4 billion.

The company said growth across London had been strong, while new pricing options and business customer discounts had helped demand stay robust.

Whitbread CEO Alison Brittain said the business “has proven its resilience in previous downturns”. However, the company warned profits could dip in the second half of the year as inflationary pressure takes its toll on margins.

Whitbread shares dropped 2% to 2,557p in early trading.

Derren Nathan, Head of Equity Research at Hargreaves Lansdown, said:“It’s no surprise that costs are going up, but Whitbread’s strong balance sheet is providing some mitigation, with interest income on its cash assets providing something of a buffer.

“Strong momentum in UK hotel bookings has continued into the third quarter and Whitbread is better placed than many of its peers. It won’t be immune to a prolonged downturn but we think it has the resilience to come out the other side.”