Premier Inn owner warns of costs soaring by £60m because of inflation

Hotel chain reports profits of more than £300m in first half of financial year

Whitbread has benefitted from the declining independent sector and increased travel demand (Reuters)

Premier Inn owner Whitbread has warned its costs have risen by £60m due to inflation, as the business recorded a first-half profit above pre-pandemic levels.

The hotel operator reported pre-tax profits of £307m in the six months to the end of September. This compares to profits of £19.3m in the same period last year, and £220m before the pandemic.

Whitbread also said it was raising its long-term target of rooms from 110,000 to 125,000, with plans “on course” to add 1,500 to 2,000 rooms in the UK this financial year.

The hotel chain is benefitting from the declining independent sector, as well as increased travel demand since the start of the pandemic saw lockdowns and travel restrictions imposed. But part of the business still has some way to go.

A spokesperson for Whitbread, which also runs pubs and restaurants across the UK, said on Tuesday: “The UK value pub restaurant sector remains challenging and food and beverage sales continue to lag pre-pandemic levels.

“We have launched a series of initiatives to return sales to pre-pandemic levels, although this is unlikely to be achieved in the current financial year.”

Inflation, particularly in labour and utility bills, as well as increased investment in IT and marketing, is expected to increase costs by £60m for the current financial year.

While in the UK Premier Inn hotels have traded “well ahead of the market”, in Germany the business expects a pre-tax loss of between £40m and £50m during the financial year, which is less than the previous forecast of £60m and £70m.

“Despite macroeconomic uncertainties, our current trading performance is strong and our business has proven its resilience in previous downturns,” said chief executive Alison Brittain.

“With a robust balance sheet and significant growth potential in both the UK and Germany, we remain confident in the full-year outlook and our ability to deliver long-term value for all our stakeholders.”