Premier Inn room rates soar as budget hotel era ‘evaporates’ | Whitbread

The cost of a room at Premier Inn’s hotels in London rose sharply over the last three months, with tourists visiting for the coronation of King Charles and strong demand for budget stays in the capital boosting the chain, its owner, Whitbread, has said.

Britain’s biggest hotel chain, which runs nearly 900 hotels in the UK and Germany, said it had benefited from an influx of visitors to London for the royal event.

In the capital, the average room rate rose from £97 to nearly £112 a night, while outside London rates went up by 12% to £71, the company said as it posted a trading update for the first quarter of its financial year.

Analysts said the prices indicated that the idea of budget accommodation in Britain had “all but evaporated”.

The travel industry has bounced back from the worst of the pandemic, and Premier Inn said earlier this year that its profits had surpassed pre-pandemic levels.

However, higher household bills are forcing many to cut back their spending, boosting demand for budget hotels. Whitbread has also raised its prices to manage higher energy and wage bills.

It said UK comparable accommodation sales rose 16% in the 13 weeks to 1 June against the same period last year. Food and drink sales at the group’s Beefeater, Bar + Block and Brewers Fayre restaurant chains rose 10%.

Revenue per available room continued to outperform the wider market and is now 40% higher than pre-pandemic levels. Room occupancy levels in London fell slightly but edged higher elsewhere.

Premier Inn opened 348 new rooms across the UK and Ireland over the quarter and is on track to open between 1,500 and 2,000 rooms this year.

It has benefited from the demise of smaller independent hotel operators, which are struggling to cope with higher costs and labour shortages. The chain’s customers are evenly split between business travellers and holidaymakers.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Whitbread’s management certainly aren’t sleeping on the job if today’s first-quarter update is anything to go by. Guests are stomaching some pretty hefty tariff rises in the UK. At nearly £112 per night, it seems that the concept of budget accommodation in the UK has all but evaporated.

“Whitbread continues to grab market share in its home market, but with occupancy on the wane we wonder if it will slow its room-opening programme in the UK. It was also encouraging to see a recovery in food and beverages, which was the fly in Whitbread’s ointment last year.”

Premier Inn is expanding in Germany, where its division remains loss-making but is expected to break even this year as demand recovers from the pandemic. It has 56 hotels with 10,000 rooms, and a further 32 hotels and 6,000 rooms in the pipeline.

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