Whitbread might not be too good at telling pigs from cows, but it does have pedigree when it comes to filling hotel rooms and selling coffee.
Fresh from dealing with a scandal over selling pork in beef lasagne at its restaurants, the FTSE 100 owner of the Premier Inn and Costa Coffee chain is trying to negotiate its way through the minefield of spiking inflation and higher labour costs.
Analysts say it has long trailed peers when it comes to the efficiency of its workforce, employing more staff per hotel room. With about 50,000 staff, it is deeply exposed to swings in costs such as the new living wage.
While its boss may not have the makings of a barista, as our columnist Luke Johnson pointed out last week, she is good at cutting costs. In November Alison Brittain unveiled a strategy to cut £150m of costs, though “labour management”, logistics and buying. As the former retail boss of Lloyds, she cut the bank’s workforce significantly and ran a lean operation. At the very least, staff at Whitbread’s hotels, coffee shops and pubs can expect Brittain to drive them much harder.
Then there’s Brexit. While the slump in sterling has pushed up many of its costs, from coffee beans to burger buns, it has also made Britain a cheaper place to come on holiday, as well as encouraging more Brits to holiday in the UK.
Whitbread’s share price gains in recent months reflect this, as the chart shows. Industry data points to strong demand and fuller hotels in London, where Premier Inn has a big presence, with revenue-per-available room surging in December.
I expect more of the same when it updates on September-to-December trading on Thursday.
Consumer confidence is holding up as fears of a Brexit Armageddon recede — at least for the moment.
Meanwhile, the weaker pound and the air fares war between easyJet and Ryanair will help to keep its hotel rooms full, even though the likes of Airbnb are nipping at hoteliers’ heels. While Whitbread’s board could do with a spell on reception, its shares look cheap. Buy.
