Leading analysts have given a mixed reaction to news that Whitbread plans to rollout a smaller, cheaper version of Premier Inn aimed at major cities.
Whitbread plans to have 40 of the “hub by Premier Inn” brands in place or in the pipeline by 2018, with the first to open on St Martin’s Lane in London next summer.
Room costs will be 25% cheaper than standard Premier Inn and measure 11.4 sq metres. Half of the expected openings by 2018 are to be in London and development costs are expected to be 25% lower than existing rooms.
Wyn Ellis at Numis said: “We await further financial details but our initial reaction to this development is positive, allowing Whitbread to extend the envelope of a very successful brand.”
Simon French at Panmure Gordon reiterated his Hold recommendation and 2688p Target Price.
“To us it sounds strikingly similar to the highly regarded Z Hotels,” he said.
“Disappointingly, in our view, the 40 hotel/6,000 room target by 2018 (opened or in the pipeline) is not incremental to the existing 75,000 room Premier Inn target by the same date; it will instead ‘reinforce the achievement’ of this growth milestone.
“We make no change to our forecasts on the back of this statement. We forecast £383m PBT (162.3p EPS) in FY 2014E slightly below consensus expectations of £388m PBT (164.4p EPS). Whilst the Q1 update was reassuring with impressive Costa LFL sales growth we think Q2 trading will be tougher, particularly at Premier Inn as it laps last year’s Olympic games.”
A note from Credit Suisse said: “Give our expectation of no change to average room profitability or the overall shape of the growth in rooms to 2018, we don’t expect any change to forecasts.” Credit Suisse doesn’t expect to see any reduction in room profitability in the new concept and has set a 3000p Target Price for the company.
Whitbread is due to hold an investor day today (Wednesday).
