What Premier Inn’s results tell us about budget travelers and rising costs.
Whitbread, the owner of the budget hotel chain Premier InnThe third quarter saw a mixed but generally steady performance – notably strong growth in Germany offset some weakness in the UK market.
NumbersTotal revenue per unit fell by 2.5% year-on-year, pushing London’s occupancy rate to 83%, but UK bookings remained 51% above pre-pandemic levels.
Strong German growthPremier Inn’s fledgling German business, which has about 60 hotels, saw sales rise 23 percent in the quarter, up from 37 percent in December and early January. The gains were made by increasing the brand awareness of online travel agencies in the market, managers said.
Why is it important?Premier Inn’s performance shows the budget hotel segment continues to outperform mid-market hotels, suggesting economic pressures are pushing travelers toward value options.
Rising costsAnalysts at Barclays have warned in a report of a possible headwind in 2025-26 as interest costs rise. However, these same high prices may benefit Premier Inn by limiting new hotel development and reducing competition.
Efficiency pressure“Obviously labor costs are slightly more expensive,” Whitbread chief executive Dominic Paul said. Cutting staff and embracing automation can help, he said. Paul, the company He felt confident he could achieve hundreds of millions of dollars in cost savings by 2030, in part by converting underperforming restaurants to hotel rooms.
What’s next? In the UK: The company continues to focus on its UK restaurant-to-hotel conversion strategy, with initial results showing improved guest satisfaction at converted locations.
What’s next in Germany?Premier Inn’s business in Germany should also be profitable soon. Whitbread CFO Hemant Patel said: “We expect to be profitable in Germany in the second half of this financial year and the first half of the next financial year, so within a 12-month period.
Product strengthPaul said he likes Premier Inn’s positioning in the market. “Customers love knowing they’re getting a consistent, consistent experience from us. They know they’ll get a good night’s sleep, the best beds in the business, great breakfasts, warm and friendly service, all at a solid value proposition.”
What am I looking at? Stocks in the hotels and short-term rental sector have underperformed ST200. The index includes publicly traded companies on international markets, international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodation and timeshares. It includes
