Whitbread gains market share but won’t fully recover until 2024 at best, City brokers say


Whitbread PLC (LON:WTB) is gaining market share from the demise of its competitors but won’t reach pre-pandemic levels until 2025, according to City brokers.

The hotelier is pinning its hopes on strong demand for UK ‘staycations’, especially in the 15% of the estate in tourist locations, with business and event-led demand to gradually recover thereafter.

READ: Whitbread slumps to GBP1bn loss on COVID-19 disruption but says most hotels now open

The FTSE 100 group has 92% of its UK estate open currently and leisure customers will be allowed to check-in from 17 May.

According to analysts at Shore Capital, revenue per available room (RevPAR) will be 10% below pre-pandemic levels in the financial year ending in February 2023, recovering fully in the following period.

“The pace of economic recovery current expected and potential market share gains would suggest this could prove conservative, with management target financial year 2023, although the timing remains uncertain,” they commented.

Nonetheless, the Premier Inn owner is estimated to reach cash flow breakeven levels by the end of the first half this year and moving into profitability during the second half.

Fellow broker Liberum had a more bearish view as it envisions a recovery to pre-covid performance no earlier than the year ending in February 2025, due to the firm’s business customer exposure.

Whitbread has targeted an extra GBP100mln in cost savings but they will be largely offset by inflationary pressures, COVID-19 costs and a step up in marketing, Liberum added.

In terms of market share, the company said that the pandemic is expected to accelerate the decline in independent operators’ share of the market, which currently accounts for 48% in the UK, as demand significantly weakens and structural cost pressures persist.

Whitbread currently holds 11% of the market share in the UK and 1% in Germany, where it is targeting 6%.

“Adaptation of outdoor space as al fresco dining becomes the theme of spring and summer will be key for Whitbread’s hospitality venues, but it will also be looking to benefit from a summer of staycations as holidaymakers show a reluctance to travel abroad,” said Whitbread Julie Palmer, partner and restructuring expert at business rescue specialist Begbies Traynor.

“It will have to promote the safety of its Premier Inn venues while the weather is good and restrictions are eased. This could be key to recouping some of its losses and the cash reserves it has burned through in the last 12 months.”

“It can get back on its feet again, but the Whitbread we saw before the pandemic could be different to the one we see after it. Even after all restrictions are removed change is coming,” Palmer concluded.

Shares dipped 3% to 3,297p on Tuesday at noon.


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