Travelodge said trading between the start of July and 11 August was down just 5% compared to 2019, which is notably ahead of market data, says the broker.
That outperformance has increased recently. notes UBS, something that is encouraging not only for the branded budget economy segment overall but especially Whitbread’s Premier Inns arm, which has already been outperforming the sector by around 11%.
Average rental rates (ADR) are picking up, said Travelodge, and are expected to remain strong over the summer helped by the 5% VAT rate.
As a guide to the future, refurbishment capex is a good proxy for market share, says UBS, and Whitbread has guided for this to be in line with 2019, which is a good sign, added the broker.
By re-fitting its estate through the recovery, Whitbread can capitalise on weaker independents.
UBS has a target price of GBP39 for Whitbread (30% upside), which is its top pick in the sector with the expectation it will be the first to see sales recover to pre-pandemic levels (by 2023) and the prospect it will take market share away from smaller players.
‘Buy’, recommends the broker, though the shares eased 1.2% to 3.003p on a bad day for FTSE 100 generally.