In the news – Whitbread plan to spin off COSTA Coffee and Premier Inns by 2020, but expansion plans continue.

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Whitbread the UK’s largest operator of hotels, restaurants and coffee shops has moved to calm speculation regarding the future of the COSTA brand following investor pressures to demerge it from the rest of the group, which includes Premier Inns and the Beefeater, Brewer Fayre and Bar + Block restaurant chains.  This week Whitbread announced that demerger will be “pursued as fast as practically appropriate” to optimise the value to shareholders. The company which currently has over 2,400 COSTA coffee shops and over 7,000 COSTA Express self-service units in the UK, plus a further 1400 stores worldwide will be floated and listed separately by 2020.

Although of note in its own right, if only because of the seemingly ubiquitous nature of COSTA outlets, it may be of potential interest at a destination level in that Whitbread have indicated their intention to keep on expanding the number of outlets, adding value to the company whilst COSTA is still in their ownership.  Moreover, any new owner/investors will undoubtedly wish to try to follow suit for a good number of years after their acquisition.   Love them or loath them, there are some potential development opportunities here, especially in areas with a claim to a healthy visitor economy and currently no COSTA outlet, or perhaps room for just one or two more?

Whilst it is the demerger of the popular COSTA brand that seems to have grabbed much of the headline news, Whitbread actually announced that they were confident that both Premier Inns and COSTA would soon be businesses of sufficient scale and capability to enable them to thrive as independent companies.

Premier Inn with 785 hotels and 72,000 beds is the largest player in the UK’s budget hotel market could also soon be floated.  Again, of potential note for destinations are the CEO’s comments on their “ambition” to increase that to 85,000 beds by 2020.  Whilst it isn’t clear what percentage of that additional 13,000 ambition would be achieved through acquisitions, expansion of existing hotels or by new build, a quick back of the fag packet calculation suggests there is potential for say 100 to 130 new hotels of 100 to 130 beds and all possibly within the next two to three years?

Not unsurprisingly perhaps, when asked during a recent TV interview, Alison Brittain  the CEO suggested that they would be seeking to develop new hotels in areas where they didn’t have (much of?) a presence. Again, appreciating as I do that the prospect of a budget hotel appearing can stir very mixed emotions in the diverse, loose body of interests that form a typical destination, I simply wish to flag this up as a possible development avenue for those willing and able to be proactive.

Doubtless Whitbread will already know where they would want much of this expansion to go, nonetheless, there is always room for positive noises from destinations to influence development priorities and change minds. The decision and the indicative timeline given to float simply means that Whitbread may be that bit keener to progress agreement on development in the next couple of years than they might otherwise have been.

Given that the Premier Inn business model very often involves the colocation with one of the Whitbread restaurant brands it will be very interesting to see how they will structure the demerger of Premier Inns in relationship to the rest of the restaurant businesses.   I am sure that this must be addressed somewhere already but I’m just not aware of the detail yet.

The BBC’s coverage of the demerger can be accessed at:    http://www.bbc.co.uk/news/business-43891128

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