Whitbread H1 Earnings Call Highlights

Key Points

• Strong trading continued: UK first-half accommodation sales rose 3% and EBITDAR increased 1%, while Germany delivered double-digit accommodation growth and a 10% EBITDAR increase. Early second-half trading remained ahead of market, with UK accommodation sales up 4.5% and Germany up 31%.
• Cost savings and disposals remain central: Whitbread generated about two-thirds of its £60 million annual efficiency target in the first half and maintained its £450 million–£500 million disposal-proceeds goal. Management plans to recycle lower-returning assets into investments targeting returns of at least 15%.
• Growth strategy prioritizes hotels and Germany: The five-year plan targets 96,000 UK rooms and 18,000 German rooms by fiscal 2031, with selective UK expansion, hotel extensions replacing weaker restaurant sites, and Germany expected to reach profitability this year.

Whitbread LON: WTB said strong UK trading and cost-control measures supported first-half performance, while its German business continued to expand and remained on track for profitability this year.

Chief Executive Officer Dominic Paul said UK accommodation sales increased 3% from a year earlier in the first half, with the company increasing its outperformance of the wider market. UK operating costs were flat despite inflation and higher business rates, helped by £39 million of efficiencies and cost reductions linked to its Accelerating Growth Plan. UK EBITDAR increased 1%.

In Germany, Whitbread opened 1,800 rooms, reported double-digit accommodation sales growth and said it outperformed a broader market that declined year over year. Germany EBITDAR rose 10%, despite most of the previously forecast growth-related impact falling in the first half.

Current trading remains ahead of market

During the first five weeks of the second half, UK total accommodation sales rose 4.5% and revenue per available room, or RevPAR, increased 3.2%, according to Paul. Food-and-beverage sales fell 37%, in line with expectations following the September closure of the remaining branded restaurants.

Germany recorded 31% growth in total accommodation sales and 10% RevPAR growth during the same period. Paul said the company was confident it could deliver a positive second-half performance in Germany and achieve profitability there this year.

Paul attributed UK RevPAR outperformance partly to Whitbread’s brand, revenue-management capabilities, pricing power and focus on ancillary revenues. He also said the industry’s cost pressures were creating market disruption, particularly for independent operators.

In London, Chief Financial Officer Hemant Patel said the company’s outperformance was rate-led, with Whitbread taking “significantly more rate” than competitors. Paul noted that Whitbread is underrepresented in London relative to its national network, and said new sites in prime locations were expected to generate returns above the company’s 15% threshold.

Efficiency program and disposals

Whitbread reiterated its target to deliver £60 million of efficiencies this year after generating about two-thirds of that amount in the first half. Patel said benefits reflected initiatives begun last year, including changes to the food-and-beverage supply chain, labor forecasting and customer contact-center support. Further initiatives include changes to check-in, front-desk operations and the digital guest journey.

“It isn’t easy,” Patel said of the full-year target, adding that the company was working to achieve it and was not yet providing guidance for the following year. Whitbread is fully hedged for energy this year and “well hedged” for the next year, he said, with further detail expected at third-quarter results in January.

The company maintained its full-year target for £450 million to £500 million of disposal proceeds. It delivered £21 million in the first half and a further £30 million since the balance-sheet date, including the sale of 57 restaurants and another hotel.

Patel said Whitbread would not pursue transactions that did not provide an appropriate balance of shareholder value, describing the aim as recycling capital from assets at 4% to 5% cap rates into programs targeting 15% returns, including the Accelerating Growth Plan.

Growth plans focus on higher-returning assets

Paul said Whitbread’s five-year plan is designed to produce higher margins, cash flow and returns, with £2 billion of cash flow available for shareholders by the end of fiscal 2031. The company is targeting returns of at least 15% on growth investments.

The plan centers on converting or exiting lower-returning branded restaurants, adding hotel extension rooms where returns warrant the investment, expanding the UK hotel network selectively and continuing measured growth in Germany.

Whitbread has guided to 18,000 rooms in Germany by the end of fiscal 2031. Paul said the company currently has 75 hotels open in the country and views this as a business of scale. Of £500 million of German growth capital in the five-year plan, about £100 million is expected to be spent this year and only about £100 million over the following four years.

For the UK, Patel said Whitbread expects to reach 96,000 rooms by the end of the plan. The company is targeting 1,000 underlying room additions this year, plus 15 rooms through the Accelerating Growth Plan, while anticipating around 1,500 room exits over the broader planning period. Exits are generally smaller or lower-returning sites where the company can migrate much of the demand elsewhere, he said.

Restaurant program and shareholder dispute

Paul said the Accelerating Growth Plan has examined each branded restaurant site individually. Where hotel occupancy and local demand support it, Whitbread is replacing restaurants with hotel extensions and integrated food-and-beverage areas focused on breakfast and dinner for guests. The company has more than 50 such sites open, Paul said.

At other locations, where an extension would not generate adequate returns, Whitbread may sell the restaurant to a third-party operator while retaining a smaller breakfast facility within the hotel. Paul said this structure preserves breakfast provision for hotel guests while removing the financial drag of operating an on-site branded restaurant.

Whitbread also urged shareholders to vote against the election of a board nominee proposed by activist investor Corvex. Paul said the board believed Corvex’s agenda, including calls for a strategic review, would distract the company from executing its existing plan. He said Whitbread had already completed a detailed review after last year’s UK budget and had developed its current five-year strategy with support from its board and three global investment banks.

Paul said the company’s forward-booked position was ahead of the prior year and that management remained confident in the full-year outlook.

About Whitbread (LON:WTB)

Whitbread is the owner of Premier Inn, the UK's biggest hotel brand, with 86,000 rooms in over 850 hotels and a growing presence in Germany with 10,500 rooms in 59 hotels, offering quality accommodation at affordable prices in great locations. People are at the heart of our business. We employ over 38,000 team members in over 900 Premier Inn hotels across the UK and Germany.

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