Whitbread PLC (LSE:WTB) profits will grow year-on-year as it gains new market share with the number of industry players continuing to shrink, a research note by Berenberg said.
The private bank thinks the Premier Inn owner can consolidate its position as the UK’s leading midscale and economy hotel operator because of its strong pipeline in Britain and Germany.
“Whitbread’s primary market, the UK, has experienced a contraction in supply, particularly as market conditions have accelerated the decline of the independent sector,” Berenberg said.
“We expect conditions to remain tough for independent operators and Whitbread to continue to grow its share of the market.”
As of March 2023, the number of hotel sites in the UK was 2.4% lower than in 2022, analysis from the CGA noted.
In Germany, where Whitbread has over 50 hotels, operations are still struggling to make a profit and are expected to turn a loss for the 2024 financial year.
However, the climate in mainland European is like the UK with independents being forced to close and therefore ending up being replaced by managed operators, like Whitbread.
If Whitbread can take advantage of this in Germany and as its European portfolio matures, Berenberg believes it can complete its turn a profit by 2026.
The London-listed business also has “ample liquidity to invest”, particularly for mergers and acquisitions in Germany.
“The cash position could be further enhanced if, as reported in the media, Whitbread decides to sell off some of the pub restaurants in its portfolio,” the Hamburg-based bank said.
Berenberg rates the stock a ‘buy’ and targets a 4,000p share price.
Whitbread opened around 10bps higher on Monday, trading at around 3,400p.