Premier Inn owner Whitbread (WTB) plans to target people looking for ‘no-frills’ cheap accommodation by launching a new hotel concept called Zip.

Chief executive Alison Brittain says the market opportunity for ultra-budget consumers could be worth £1bn annually.

She believes the new Zip brand will target people that typically do not stay at Premier Inn as they may deem it too expensive.

Whitbread’s strategic move comes hot on the heels of its decision to sell coffee chain Costa Coffee to Coca-Cola for £3.9bn, plus the move may
threaten EasyHotel (EZH:AIM) by targeting its UK customer base.

WHAT NEXT FOR WHITBREAD?

The strategic initiative comes as weak consumer demand weighs on Premier Inn’s performance with like-for-like accommodation sales rising just 0.2% in the half year to 30 September.

With the sale of Costa progressing, and likely to result in a special dividend for shareholders, Whitbread is planning to innovate the Premier Inn brand in the UK and scale up internationally, particularly in Germany.

The company say investors will have to wait until February 2019 for more detail on how it will pursue these growth opportunities.

Davy Research analyst Joseph Quinn says Whitbread’s first-half results were in line with forecasts but warns the cautious outlook could cause consensus estimates to be trimmed.

Looking ahead, the company warns of inflationary pressures in the current volatile economic and political environment.

Whitbread also says a near-term profit growth ‘may be lower’ than previous years as it undergoes an investment programme in an effort to revive a subdued UK market.

WHITBREAD VS EASYHOTEL

In the year to 30 September 2017, EasyHotel derived the bulk of its sales from the UK at £7.2m.

The hotel operator generated approximately £1.1m of revenues from the EU and £0.1m from hotels around the world.

Whitbread’s Zip concept is essentially stepping into EasyHotel’s terrain and threatens its key driver of sales and profitability.

The first Zip hotel will open with 138 rooms in Cardiff in early 2019. It will offer rooms that are less than half the size of the size of a standard Premier Inn room at 8.5 square metres.

The ‘outskirts’ of major towns and cities are being targeted with prices from £19 a night and features including lightboxes, a TV, Wi-Fi and en-suite shower rooms.

EasyHotel provides a wide range of room sizes to accommodate families in convenient locations, including hotels within a 15-minute drive of London Heathrow and in walking distance from Paddington, Victoria and Old Street tube stations in the Capital. (LMJ)

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