Hospitality giant Whitbread has seen its shares surge after the company underlined its growth prospects and unveiled plans for bumper pay outs to investors.
Whitbread, which operates Premier Inn hotels and restaurants under other brands, said it expects to increase annual profits by at least £300 million within the next five years as it expands in the UK and Germany.
The group expects to have almost 100,000 UK rooms available in 2030, compared with around 90,000 currently.
It has around 800 Premier Inn hotels in the UK including 76 in Scotland.
Directors believe Premier Inn is strongly positioned to capitalise on what they describe as “the significant and structural decline in the independent sector following the pandemic”.
This accelerated amid the surge in inflation fuelled by the recovery from the pandemic, which put pressure on “distressed” operators.
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Whitbread reckons the supply of hotel bedrooms is 4% lower that it was before the pandemic.
Premier Inn has not been immune to pressures on consumer spending.
It said accommodation sales in the UK were flat in the 26 weeks to August 29, reflecting a slightly softer UK demand environment.
However, Whitbread claims Premier Inn consolidated its position as the UK’s leading hotel brand during the period by outperforming the midscale and economy market.
The group said: “We have seen an improvement in recent weeks with a good pick-up in bookings across October and into November.”
Whitbread expects to be able to use the cash it generates from operations to fund rapid expansion in the UK.
This will involve developing new hotels and expanding existing sites. The group should be able to use the resulting increase in scale to boost margins.
It is targeting £50 million annual efficiency savings and plans to harness digital capabilities to develop further revenue-generating services.
Whitbread has committed to developments which will provide an additional 6,000 rooms in the UK and is eyeing further opportunities.
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The group signalled confidence in the outlook for the Scottish market in 2022 when it appointed Jill Anderson as acquisition manager to grow its pipeline of sites in the country.
Ms Anderson joined as Whitbread completed a £70m investment programme in Scotland which was interrupted by the pandemic. This involved opening five new hotels, including one in Glasgow’s St Enoch Square and one in Thurso on the Caithness coast.
The group said the new Scottish hotels continued its strategy of expanding in prime city centre locations, well-connected towns and in popular tourist locations where it lacked a presence.
Whitbread expects to create 3,500 rooms in space currently occupied by “lower returning branded restaurants”.
The group operates restaurants under brands ranging from Brewers Fayre to Bar + Block. Many are in its hotels or adjacent premises.
Directors see significant potential to increase the profitability of the food and beverage operations.
The group plans to sell off 126 branded restaurants.
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Chief executive Dominic Paul said: " Whilst the market has been slightly softer than last year, we remain on course to grow our UK returns substantially over the medium-term.”
He added: " Our longer-term plans to become [Germany’s] number one hotel brand are also on track.”
Whitbread said the German hotel market is 40% larger than the UK, highly fragmented with a large, declining independent sector.
The group has 59 hotels in Germany with over 10,000 rooms and 7,500 in the pipeline.
Accommodation sales in the country increased by 22% in the first half, helped by events such as the European Football Championship.
Whitbread saw underlying profits before tax fall by 13% in the first half to £340m, from £391m last time. Revenues were flat at £1.57 billion.
Signalling confidence, directors increased the interim dividend by 7%, to 36.4p per share, from 34.1p. They announced plans for the group to buy back a further £100m shares by May 1.
The group said it expects to generate more than £2bn for dividends, buy backs and potential investments over the next five years.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “The long-term story for the company is about growth – even if there are some short-term challenges.”
Whitbread sold Costa Coffee to Coca Cola for £4bn in 2018.
The group made £561m pre tax profit in the 52 weeks to February 29.
Shares in Whitbread closed up 6%, 186p, at 3258p.
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