Regular readers will recall I cheered Coca-Cola's largesse in splurging on the Costa Coffee chain from Whitbread (WTB) and hence when the company wanted some of those distributed returns back a month or two ago to invest into its Premier Inn hotel range, I was supportive – observing that 'a crisis is an opportunity and with many hotels struggling to survive, Whitbread pounds (or in Germany euros) can go a long way in terms of locations'. And it certainly is a general crisis...
The company's first quarter numbers to the end of May show like-for-like sales fell by basically 80% compared to the first quarter last year, which is a tad better than broader industry trends which are down more like 90%. Naturally, you may ask how come it generated any revenue? Well 39 hotels were operating to support key workers and the like. Today more than 270 UK hotels and 24 restaurants have now reopened, as have Whitbread's 19 hotels in Germany, with more to follow in July. If you look a bit more deeply there are some unsurprising tentative trends in terms of forward bookings, with the company noting that 'in traditional regional tourist destinations, we are seeing good demand for the summer months, whilst the rest of the regions and metropolitan areas, including London, remain subdued'. Absolutely. This follows the observation of other consumer-facing names such as Pret in recent days, noting how quiet city centres are. This will hinder Whitbread's recovery, given its nationwide focus, but it remains fully set to take a big market share step forward.
Back in the days before the pandemic, Whitbread was often mocked for offering such an akin operational/room experience in any of its hotels. Personally, I quite liked the reality that you would know what you were going to get when you booked a room. Today this equates to high clarity over cleaning standards and related. In a choice between such uniformity and the natural randomness of an independent operator...I know which I would choose. The second structural positive is its freehold ownership. Yes, property is not what it used to be but it is night and day versus some of the commercial property names we have talked about. And you only need to look at the angst over at its big peer Travelodge with its landlords.
The rights issue monies will get Whitbread into 2022 with negligible revenues but frankly I think underlying conditions will be a lot better than that. Almost none of its peers have equivalent resilience. Therefore, I retain my decent sized position and ceteris paribus would add more at around twenty quid.
Filed under: Whitbread, Boohoo, Finablr, Chariot Oil & Gas, Windar Photonics, FirstGroup
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