Premier Inn’s dip sends worrying signals to UK economy
 
Premier Inn’s dip sends worrying signals to UK economy
06 MAY 2019 8:30 AM

Premier Inn’s circa 40% dip in profits one hopes does not mirror the Brexit-era state of the United Kingdom. Germany might be one answer for the firm’s future, but I’ll still prefer to find hidden gems in Spain, notably a dully named hotel in Mallorca with a very pleasant surprise.

U.S. presidents and U.K. prime ministers at the end of their administrations—in the U.S. due to mandated terms, in the U.K. due to voter weariness of their records—tend to organize a great deal of foreign travel.

A sign of a lame-duck leader is the number of new countries they reach all of a sudden on inexplicable beanos.

This came to mind when Whitbread PLC released its full-year 2018 earnings on the last day of last month, the number that shot out of its PDF documents being a 38.7% drop in year-over-year profit to £211 million ($274.8 million).

That is still profit to take to the bank, but obviously financial analysts tend to get nervous when such sums are presented to them and begin to hurriedly jot down a fourth question for the CEO to answer in addition to the standard three.

Germany is where Whitbread/Premier Inn executives are looking to visit more and more, and they were right in saying that the longer-term vision of the British hotel company is a sound one, flush with $5.4 billion of cash from Coca-Cola from its recent sale of its Costa Coffee division and a continued push for rooms growth and unit growth, most likely from the struggling independent sector.

The push is to scale quickly in Germany, not—at least yet—to in any way eclipse its U.K. portfolio, where it is has moved above having 75,000 rooms.

This is not the answer a politician would use, not a tactic to divert attention from problems at home.

That dip in profits does, however, equate directly to a loss of confidence in U.K. consumers. It cannot be for any other reason, I would argue.

Brexit, Brexit, Brexit, and still the politicians argue, or they would if the ruling party’s defense minister had not been sacked for allegedly leaking sensitive information.

Premier Inn, and its peer, privately held Travelodge (U.K.), essentially has a domestic audience, an audience that not too long ago might have thought a hotel for them was only for special occasions such as weddings.

That is not the case anymore, not for a good few years, but with Premier Inn execs stating that occupancy is of the most importance to them, what will suffer is rate, and thus profit.

With the Bank of England on 2 May saying the U.K. economy is still in relatively good shape due to a good global economy, the hope is that Whitbread’s jitters are just that and not a profound statement that our politicians are not up to what is needed for the economy and those whose lives are wrapped up in it.

A gem discovered
I booked a stay in the Mallorcan town of Algaida (population: 2,400) a couple of weeks ago.

Where? Yes, I asked the same, but it was on the right side of the bustling capital of Palma de Mallorca and on the way to the Albufera marsh on the west coast where I hoped to find the very rare Red-knobbed coot.

I booked the only hotel I could find there that I could pay for online and get an immediate confirmation.

That hotel was the Algaida Suites by Eurotels, a name that did not give me any warmth of expectation. I was to arrive there close to 11 p.m. after flying from London.

What a wonderful surprise. A texted code unlocked the front and guestroom doors, and the public spaces, although not large, revealed a traditional Mallorcan house with a tile floor, antique cabinets, a decent breakfast in a standalone room of white arches and bare wooden beams beyond a sunny courtyard and a small swimming pool.

The owner presumably decided it would be better to list the property on a platform, and while it would never win a design contest against more flush opposition, it showed me one must never judge the hotel by the cover.

Email Terence Baker or find him on Twitter.

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