LONDON—Whitbread PLC, the United Kingdom operator of the Premier Inn and Hub by Premier brands, continues to go from strength to strength, despite having seen its MD of hotels and restaurants, Patrick Dempsey, leave at the end of February and today announcing the February 2016 exit of CEO Andy Harrison.
Harrison, who arrived as CEO in 2010 from the same position at U.K. low-fare air carrier EasyJet will begin as chairman of a home furnishing company Dunelm this July but stay at Whitbread during a transition phase. The company already has begun the search for his successor.
Before EasyJet, Harrison was also CEO at RAC (formerly the Royal Automobile Club), a motorist organization. His February 2016 decision ends 18 years of being a CEO.
“It is time for me to plan my retirement from full time executive life and to seek new challenges. In the meantime, it is business as usual, which means that the Whitbread team and myself remain fully focused on continuing to deliver profitable growth,” he said in a separate news release from the earnings announcement.
Harrison leaves at a good time for the company. For the financial year ending 26 February, the company’s hotel division enjoyed “(revenue per available room) growth of 8.7% with a 6.1% increase in rooms available. We also finished the year with record occupancy of 81.3%, up 3.2 (percentage points),” he said.
Other highlights included an overall 18.5% increase in underlying profit before tax to £488.1 million ($746.2 million), a 15.3% increase in hotel and restaurant underlying operating profit to £401.4 million ($613.6 million) and a full-year dividend increase of 19.4%.
Global footprint
In a webcast to analysts, Harrison said another major focus was the company’s hotel pipeline. The goal is to have a total of 65,000 keys existing across its brands by year-end 2016, 75,000 by year-end 2018 and 85,000 by year-end 2020. Currently its hotels have 59,138 keys in 697 hotels.
Whitbread’s pipeline increases would mostly focus on its core market of the U.K. but also see boosts in the Middle East, India and Southeast Asia. Germany is another region of interest.
In answer to an analyst question on new brand Hub by Premier, Harrison said “there are 10 Hubs in our committed pipeline for Central London and three for Edinburgh … in attractive freehold sites.”
In London, Whitbread has a pipeline of a further 3,500 rooms by 2020.
“As the economy recovers, we expect competition to grow, but London has been strong for a long time, and everyone is there. Growth and demand has increased, so we see no change there in our market share,” Harrison said.
Harrison added that in regional U.K., competitor Travelodge was slowly getting its act together, as were what he described as “moribund hotel chains, which are slightly less moribund than they used to be … (although) we are still the major (player).”
Nicholas Cadbury, Whitbread’s CFO, said internationally the company would focus its hotel offerings in high-growth emerging markets where there is no or little competition.
The pipeline internationally would be 10,000 rooms by 2020, with the first hotel in Germany to be in Frankfurt in 2016/2017.
“The roll out is for 12 to 15 hotels in six to eight cities in Germany by 2020, but it would be five to seven years before Germany becomes a material profit generator. The bulk of capital will still be focused on the U.K.,” Harrison added.
“In Germany, we need eight hotels to break even, and when we (have that number) those hotels will reach maturity and see margins similar to (those in) the U.K.,” Harrison said.
Business as usual
Other costs might slightly affect earnings before interest, taxes, depreciation and amortization going forward, hinted Cadbury.
“We’ve invested in free Wi-Fi this year and … in our internal systems,” he said.
“It’s important not to be target junkies. … We’ve laid out our goals, but take these aspirations in the spirit we have published them … (Overall) we see opportunity to increase market share.”
In reply to an analyst question as to what influence the new CEO, when chosen, would have, Richard Baker, Whitbread’s chairman, said all opinions would be heard but reiterated that “it is business as usual for Whitbread.”
Praising Harrison’s leadership, Baker said in an accompanying press release that “over the last five years our revenues have grown by 13% per annum, driving a 17% per annum growth in our earnings per share, which has increased the company’s market capitalization from £2.5 billion ($3.8 billion) to £9.7 billion ($14.8 billion).”