Whitbread PLC (LSE:WTB) is set to benefit from resilient hotel demand and slowing industry supply, according to Citi.
Earlier this week, the Premier Inn owner delivered a third-quarter update where it lifted its cost-savings target and said the impact of higher business rates is likely to be less severe than feared.
Citi's analysts expect rising business rates will hurt rival independent hotel operators more, leading to exits and project delays.
This would reduce overall market supply and support higher occupancy and room rates, making Whitbread well placed to capture the resulting uplift.
Every single percentage point increase in the group's revenue per available room (revpar) adds approximately £16.5 million to the group’s profit before tax, the analysts calculated.
This means a cumulative increase of six percentage points in revpar by the 2029 financial year could fully offset the expected impact of higher business rates.
There is also potential seen for Whitbread to exceed current guidance for 2027, excluding business rate and labour cost pressures, assuming around 6% cost inflation.
While uncertainty remains around the future of the group’s accelerated growth plan, partly due to the business rate review and the involvement of activist investor Corvex, Citi expects a reduction in near-term capital expenditure plans is likely.
However, it believes market dynamics could still mitigate the impact over time, favouring an extension of the investment timeline rather than a full pause.