Premier Inn goes to the mattresses 

January can take a bit of choking down at the best of times and these times don’t even rate. They are barely times any more. It’s all pre-or-not pandemic. Lockdowns rather than specific months. 

But before you throw all your Dry January hopes out of the window, it’s also the start of results season, and, in an era where wild and lavish speculation is rife, it does a soul good to get a look at some numbers. In this case it is, of course, Whitbread kicking it off.

Known as Boring, Boring Whitbread in this household for its ability to raise huge volumes of cash and then not spend them, preferring instead phrases like ‘organic growth’, which titillate no-one, the group has been somewhat vindicated during the pandemic because it has been able to relax over its war chest and pay most of its rent. 

So we gathered with interest. The budget sector – and let’s not get into the is-Premier-Inn budget debate right now – was supposed to be the big winner in the pandemic, with business and leisure pockets stretched and bargains sought.

A report this week from KPMG and the British Retail Consortium had a closer look at those pockets and found them wanting. Remember back in Lockdown 1.0 – or March 2020 for those sticking to the traditional calendar – there was lots of chat around all those savings which would be deployed? It may be that other homes are being found for any doubloons left.

Helen Dickinson, CEO, BRC, said: “Retail faces significant headwinds in 2022, as consumer spending is held back by rising inflation, increasing energy bills, and April’s national insurance hike.

“It will take continued agility and resilience if they are to battle the storm ahead, while also tackling issues from labour shortages to rising transport and logistics costs.”

Whitbread was looking at its own agility in these matters, with Alison Brittain, CEO, telling analysts that labour costs, expected to rise again in the Spring, having already gone up 5% recently, were “quite a large part of inflation for us, so are energy bills which are highly inflationary. Construction costs are higher, and so that impacts our building of hotels where we are not contracted, where we are looking at new hotel builds.”

The defence? “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.”

Oh and raising ARR. Congratulations, consumer. 

Lest we not forget Whitbread’s expansion model is largely built around picking off the independents which just can’t take it any more and the word this chilly January is that the Quarter of Reckoning is well and truly stuck in, with occupancies struggling to get to double figures as restrictions confuse, there is working from home and general pandemic fatigue. Put it as Brittain might: if it sucks for us, what’s it doing to everyone else?

One’s thoughts turn, of course, to that other budget player in the UK, Travelodge. We understand that it was due to start paying its post-discount rent towards the end of the year and would just love to know how that’s working out. We usually turn to Secure Income Reit for its thoughts on the matter, but the group is, as the moment, silent. Call back in March.

Regular viewers will remember that Premier Inn and Travelodge went right to the mattresses during their war over London, seeing who could dominate in the capital. That’s not looking like such a great strategy at the moment, what with all the working from home and staying out of the city. Speculation on where all that will end up remains popular, and worth noting that London is a special case, having as it does few residents in the centre to provide that revitalisation.

Whitbread does have one ace up its sleeve. It’s looking to rent out umbrellas and make a little ancillary revenue. James Latham, senior manager partnerships & ancillaries, Premier Inn, said:  “Umbrellas are one of the most commonly requested items from our reception teams. We decided to team up with DripDrop to introduce their brolly rental service into some of our hotels, to help our guests avoid turning up soaked to everything from job interviews to weddings.”

Insert your joke about rainy days here. 

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