Premier Inn owner plans German expansion despite £725m loss

Hannah Uttley
·2 min read
Premier Inn
Premier Inn

Premier Inn owner Whitbread is pressing ahead with plans to become Germany's top budget hotel operator despite plunging £725m into the red.

The FTSE 100 company posted the pre-tax loss for the six months to August 27, which is a marked swing from the £220m profit for the same period last year. Revenues fell by 77pc to £251m.

The grim figures come after last month revealing plans to axe up to 6,000 jobs in a move the group said was vital to protect its long-term future.

Whitbread said demand for hotel rooms in the UK rose gradually in August and September, with occupancy levels at 51pc and 58pc respectively.

Meanwhile, its share of the UK hotel market grew 3.5 percentage points to about 10.5pc as the crisis caused “constraint and distress” among its rivals.

However, trade had slowed in recent weeks after the Government implemented regional lockdowns and told Britons to work from home if possible.

“September and October are traditionally a period when business bookings pick up, however the latest government restrictions have negated any increase in demand,” analysts at Liberum said.

Poor performances from hotels amid fresh restrictions around the country pulled down inflation in September.

Despite the uncertain outlook, Whitbread said it was continuing to focus on its expansion in Germany and has signed a £40m deal for a further 15 hotels, tripling the size of its estate.

That was despite a charge of almost £340m on goodwill and assets in Germany due to Covid.

Chief executive Alison Brittain said the deal was evidence of “meaningful progress” in Whitbread’s drive to become top budget hotel operator in the German market.

"We enter this second-wave period in a position of strength, with ... our market share growing in the UK and extending a meaningful network of hotels in Germany, giving us the opportunity to achieve national brand awareness and operate at scale,” she added.

The company follows Holiday Inn owner Intercontinental Hotels Group in forging ahead with new hotels despite short-term demand being hit by the second wave of coronavirus sweeping the continent. 

Whitbread said it could meet its funding needs and temporary covenants for the next 12 months after tapping investors for £1bn in June to shore up its balance sheet.

Analysts at Peel Hunt said: "Whitbread is a company which invests its own capital in growth and, as such, is in charge of its own destiny at a time of structural change in the industry."

Shares fell 0.4pc to £22.35 in afternoon trading.