Broker snap: CS sees better hotel plays than Whitbread

Date: Wednesday 13 Jun 2012

With many reports suggesting that this year's Olympic Games in London will be a negative factor for hotels in the capital, Premier Inn owner's Whitbread's results next Tuesday are well timed.

With UK revenue per available room (revPAR) growth in the UK still subdued, Credit Suisse is not expecting the update to lead to earnings forecast upgrades for Whitbread.

RevPAR in Whitbread's fourth quarter was down year-on-year by 1% but the Swiss bank thinks that in the March to May quarter it will turn positive by a similar amount.

For the group's Costa Coffee chain, Credit Suisse has pencilled in like-for-like (LFL) sales growth of 4.0%, down from +5.2% in the preceding quarter.

The pubs & restaurants division is seen achieving LFL growth of 1.5%, little changed from the fourth quarter, "but the issue remains the recovery of cost inflation given growth has been volume not price driven," Credit Suisse says.

The Swiss outfit's current estimates assume margins will fall by one percentage point in fiscal 2013.

"It seems unlikely consensus numbers will change after the Q1 [first quarter] update and we see greater upgrade potential elsewhere in the sector," Credit Suisse said, citing sector peers Accor and InterContinental Hotels Group as better picks.

Credit Suisse is neutral on Whitbread and has a target price of 2,000p.

JH

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