Premier Inn to offset inflation through higher room rate

Premier Inn owner Whitbread has said it expects to be able to offset inflation through growth and higher room rates in its third quarter trading update.

The group said the expected sector inflation rate in the 2023 financial year was of an average rate of around 7%-8%, which could impact approximately £1.4b of its cost base.

For the third quarter of its 2022 financial year, Premier Inn's total accommodation sales were 10.6% ahead of the 2020 financial year and like-for-like UK accommodation sales 5.5% ahead. Total UK sales were 3.1% ahead, with total food and beverage sales down 11.1%

The group was operating cashflow positive in the period to the end of December, with net cash of £120.5m.

Chief executive Alison Brittain said: "Q3 represented another strong performance in the UK with Premier Inn continuing to trade significantly ahead of the market. High levels of leisure demand and improving business demand helped maintain like-for-like accommodation sales ahead of pre Covid-19 levels.

"UK accommodation sales remained resilient in December, albeit softening as we moved through the month and into the festive period as a result of the onset of the Omicron Covid-19 variant. While our hotel performance was excellent, the value pub and restaurant sector in which we operate remains more challenging.

"In the UK, we will grow through the competitive advantages of having by far the largest network of hotels and operating the number one hotel brand, combined with our direct distribution, best-in-class operating model, broad customer reach and underpinned by our market-leading sustainability programme. These unique attributes, combined with our yield management, estate growth, and cost efficiency programme, ensure we are in a far stronger position than others to offset inflationary headwinds and return to our pre Covid-19 margins."

In the six weeks to 6 January 2022, the emergence of the Omicron Covid-19 variant did dampen demand, however Premier Inn UK total accommodation sales were 5.1% ahead of the 2020 financial year and with occupancy levels of 65.7%. Total UK sales were 4.4% behind the same period in 2020 with total food and beverage sales 17.2% down, after recent weeks were adversely impacted by the Omicron concerns and increased government restrictions on eating out in Scotland, Wales and Northern Ireland.

While the group said the impact of Omicron concerns had resulted in a softening of hotel bookings in recent weeks, it remained too early to assess what the impact on sales will be for the rest of this financial year. However, in the absence of any further significant restrictions, the business predicted that Premier Inn UK like-for-like revenue per available room (revpar) run rates will recover to pre Covid-19 levels this year.

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