Whitbread PLC to lead hospitality takeover, says UBS

By redeveloping his estate through takeover, Whitbread can capitalize on weaker independents

Whitbread PLC (LSE: WTB) is in a privileged position to recover from the Covid-19 disruption, UBS said after assessing the latest quarterly results of rival hotel operator Travelodge.

Travelodge said trade between early July and August 11 was only down 5% from 2019, which is significantly ahead of market data, according to the broker.

This outperformance has increased recently. UBS notes, which is encouraging not only for the branded economy segment as a whole, but especially for Whitbread’s Premier Inns branch, which has already outperformed the industry by around 11%.

Average rental rates (ADR) are increasing, Travelodge said, and are expected to stay high over the summer thanks to the 5% VAT rate.

As a guide for the future, renovation investments are a good indicator of market share, according to UBS, and Whitbread has given guidance to keep this in line with 2019, which is a good sign, the broker added.

By redeveloping his estate through the takeover, Whitbread can capitalize on weaker independents.

UBS has a target price of £ 39 for Whitbread (30% up), which is its top pick in the industry with hopes it will be the first to see sales return to pre-pandemic levels (from here 2023) and the prospect of taking market share from small players.

“Buy,” the broker recommends, although stocks fell 1.2% to 3.003p on a bad day for the FTSE 100 in general.

Peter M. Doran