MIDAS SHARING TIPS: Premier Inn owner has plenty of room to grow

Unhealthy, unhealthy and positively dangerous. This is how many 19th century doctors viewed the use of double beds for couples, married or not. Ideas had changed dramatically by the 1950s and sleeping apart was considered a sign of marital failure.

Now, one in six UK couples admit to sleeping apart – often blaming their squirming, restless partners for their decision. Practically minded Germans follow a different path: they share a bed but no duvet.

Premier Inn Owner white bread He moved to Germany in 2014. Today there are 59 hotels and the business is growing rapidly. The hotels are similar in many ways to their UK counterparts, but there is one important difference. Two individual duvets are included in each double room, one for each guest, because that’s how Germans like to sleep.

Whitbread shares cost £28.97 and its price should rise materially over the next five years. Long associated with beer, the company’s roots date back to the mid-18th century, when Samuel Whitbread set up the UK’s first mass-production brewery in Chiswell Street, London.

By the 1970s, Whitbread was moving into pubs and restaurants, including the well-known Beefeater and Brewers Fayre chains. However, after a few years, some smart soul realized that restaurants with ample parking could easily house a hotel.

Hotels proved to be much more profitable than pubs and restaurants, and today Whitbread is the UK’s largest budget hotel company with 850 venues from Elgin in the north of Scotland to Helston on the western edge of Cornwall. Brewing disappeared, many restaurants disappeared and so did Costa Coffee, acquired as a family business in 1995 but sold to Coca-Cola for almost £4 billion in 2018.

Beefeater or Brewers Fayre venues can still be found next to around half of the hotels, but that too is changing under an ambitious growth plan unveiled by boss Dominic Paul earlier this year.

Paul, chief executive of Costa Coffee since 2016, left the business following the Coca-Cola deal, spent time at Domino’s Pizza and returned to run Whitbread in 2023. His absence from the group coincided with the pandemic, which left hotels in knees and saw Whitbread shares fall to £21.

However, even in the worst of times, Whitbread maintained an advantage over its competitors, many of which have been forced to close or reduce spending in recent years.

That puts Paul in an enviable position. Supply has decreased, demand has increased, and few operators have the financial capacity to benefit. Paul is determined to seize the day, with a plan to expand the UK portfolio from around 86,000 to 100,000 rooms by 2030 and double the German stock to 20,000 rooms, becoming the number one operator there within five years.

Progress is already underway. In Britain, more than 100 Beefeaters and Brewers Fayre will be converted into 3,500 new rooms, while another 125 will be replaced by more modern restaurants incorporated into hotels. The trend has been trialled in hundreds of Premier Inns and most guests seem to like it.

The restaurant renovations will be complemented by an aggressive opening program here and in Germany. Many new sites are already in the pipeline, others are under discussion and Paul is very confident of achieving his 2030 target.

Digital upgrades will also boost revenue, from offering rooms with online views, for a little extra money, to early check-ins and late check-outs, also for a few pounds more. An efficiency drive is part of Paul’s plans and, in last month’s interim results, he said the group expected to boost profits from around £500m to at least £800m by 2030 and generate more than £2bn million for dividends and share buybacks. a process that tends to increase investors’ returns over time.

Whitbread owns about half of its assets and rents the rest to property groups. This makes the group more financially sound than most of its rivals and instils a sense of confidence among investors and owners. Consumers also trust Whitbread brands, particularly Premier Inn, with their promise of comfortable bedding, powerful showers, spotless rooms and free breakfasts.

Rachel Reeves’ ill-considered decision to increase employers’ contributions to National Insurance does not help Whitbread and Paul has made his feelings known to the Chancellor. But brokers still expect sales and profits to rise at a decent pace over the next three years and have forecast a 5 per cent dividend rise to £1.02 for this year, rising to almost £1.07 after that.

Midas Verdict: Whitbread’s revenue is 50 per cent higher than in 2019, profits are 20 per cent ahead and boss Dominic Paul is determined to build momentum from here. But Whitbread shares still languish below pre-pandemic levels and have fallen since Rachel Reeves’ budget. They should recover from here. Buy it for £28.97 and keep it.

Traded in: Main market Heart: WTB Contact: whitbread.co.uk