Following sale of Costa Coffee to Coca-Cola, Whitbread becomes focused hotel business through its chain, Premier Inn
Following the sale of Costa Coffee to Coca-Cola, Whitbread has become a focused hotel business through its chain, Premier Inn.
Though it’s made great strides, Premier Inn still only has a 10 per cent market share, so there’s plenty more growth potential, which is why Whitbread is looking to expand its UK hotel network.
Around half the market is still in the hands of independent hoteliers. Premier Inn can continue to put pressure on them because it can offer keen prices thanks to the economies of scale it enjoys through being a national chain.
Consistently good service is also an important selling point for its key target market of UK business travellers.
New hotel formats such as Hub and Zip will target different price categories and consumers.
Premier Inn has also launched in Germany, where a fragmented hotel market and lots of different centres of business activity make for an exciting opportunity to expand.
The group will soon return £2.5 billion from the Costa sale to shareholders, and good cashflows underpin the regular dividend.
Whitbread deals directly with consumers, so it’s sensitive to the UK economy, and the shares already have some high expectations baked in. Nonetheless it’s a solid, well-run business. It’s more of a Mondeo than a Maserati, but some stocks are built for comfort, not speed.