Whitbread plc

Good morning, everybody, and thank you for joining us today. With me, I have Hemant Patel, our new CFO, in his first outing as CFO.

So welcome to Hemant. I've also got here with me Paul, Abby, and Sophie from the Investor Relations team.

I thought I'll just say a couple of words about the results before we kick off the Q&A, and then I will hand over to you guys to ask the questions that you want. Paul has asked me to comment that it would be really helpful, given we've got a lot of people on the line, if you could limit yourself to 2 questions initially and then we'll circle back if we've got time at the end to add additional questions.

So that's the key message. Let's just kick off.

Hopefully, you've seen the RNS and/or the listings to the presentation this morning. So you will have seen that Whitbread's performance in the year was very strong, and our revenues and profits recovered exceptionally well from the previous COVID low year.

Our hotels have been trading well ahead of the market, particularly in half 2 of last year where we really saw that strength coming through. And then going on into the start of the new financial year, we are continuing to trade significantly ahead of the mid-scale and economy market, which itself, as you know, trades ahead of the whole market.

And we're about 28% outperformance for Q1 to date. And my view is that good trading is driven by the actions that we've taken to manage commercial initiatives, but that is also helped by a strong appeal of our customer offer, our very large network, our strong brand, our direct distribution, and operating model.

We certainly have seen hotel trading in the U.K. remaining very strong as we've gone into the new financial year.

We had traded above pre-pandemic levels, and we are continuing to do so. We're about 29% ahead of prepandemic levels.

And we're seeing clear signs of recovery across all customer groups, so it's really quite broad ranging. Leisure has been very strong and continues to be so.

Tradespeople demand, as you know, was solid throughout COVID and has continued to trade well. But we've now started to see the return of office worker, white collar across the U.K.

and we're even seeing signs of inbound back certainly through website visits as a leading indicator. And in addition, London sales, which had previously lagged the regions, have now moved also ahead of pre-COVID levels and have come back up.

So overall, that's a pretty strong position from a trading perspective on the hotel side. And our forward book position is encouraging into quarter 2.

And then the final -- I guess, the final piece of good news is that our network planning exercise that we've recently done, we talked a little bit about the small sample for this last time we spoke, but we've now done a much bigger sample about 1/3 of the market we've now looked at. And that's showing clear evidence of an acceleration in the exit of independents from the market, which obviously gives us great opportunity to grow.

And it's been one of the reasons for our success in previous years. We've continued to invest and invest well through the cycle.

And so we should be very well placed to continue to gain market share as we move through the first half of this year and for the long term, given the structural change that is accelerating in our business.

And the only note of caution there, which we highlighted, we don't have a lot of visibility into forward-looking for half 2. People are still behaving in a short lead way.

And so it's like looking into fog for the second half. We just haven't got bookings on the books from September onwards that we would be able to point to.

Equally, we have no negative evidence either, but we have nothing to show in the second half. A couple of other points I'll make.

Our restaurant business has come back strongly from last year, but still behind pre-COVID levels during the year last year. And the trends have improved in the second half and continued to improve as we've gone into the new financial year.

And now food and beverage sales are about 5% below pre-COVID levels in the first 7 weeks of the year.

I'll talk -- mention very briefly Germany, because I'm sure there'll be a lot of questions about Germany. But the restrictions in Germany have been around for deeper and longer in Germany throughout the COVID crisis of 2 years.

And they have been a headwind in the hotel market. Now they're largely been removed this month in April.

I think there's still a few restrictions left in Hamburg, but most of the rest of the country is clear. But the market is still a bit behind pre-COVID levels and recovering more slowly than the U.K.

But notwithstanding that, as you would have seen in the presentation, if you've just been through that, hotels have traded in an encouraging way and have got absolutely stellar guest scores. And of course, in the last 2 years, during the COVID pandemic, we've transformed the German business [indiscernible] recognition.

We've built an estate of now 37 quality hotels in prime locations across multiple cities that have got these phenomenal guest scores. So I'm really confident about Germany.

I'm really pleased about where we've got to. And I'm looking forward to being able to trade that hotel estate without restrictions for the first time moving forward from now and then on into quarter 2 this year.

A couple of other points just to note to bring out the highlights. We issued increased guidance on cost inflation for the year.

Now it's about 1% higher than we previously guided at about 8% to 9%. You'll have seen lots of media attention this morning on inflation level because other companies have come out and announced significant inflation issues.

We are -- we'll continue to monitor what we've got closely, and we think that's about right for now. And we, as you know, work hard to offset the majority of that through a combination of the cost efficiency program.

The fact that we've added 30 hotels in the last year, and we'll add more this year, and our estate growth helps. And then we've got quite a lot of pricing flexibility and you will undoubtedly have questions about that as we go forward.

As we're moving into what I call the next phase of COVID recovery, and I think we'd have to accept that like-for-like RevPAR have in fact recovered rather than being something that's going to the cover. And as we've had a really good performance and a bounce back this year, and we're quite confident in the group's outlook going forward, particularly strategically in the medium term, we're able to restore the dividend and the Board is, therefore, proposing a dividend to be payable in July.

And I'll just finish by saying, although we are -- I have been talking about the short-term results from last year and into really the first half of this year, we must really always ground ourselves back with Whitbread into it having a long-term strategy and a clear one at that to create value. We are growing in the U.K.

We've got at least a runway of 1/3 again for growth, and we're innovating with new higher-yield products like Premier Plus. And we've got a great path for that growth.

And in Germany, we've built a platform that I think now is a very valuable platform for the future. And we're still developing our capability to support that growth in the long term.

And I will very briefly just say one of those capabilities is, of course, our people. And during the course of the last year, our people have really stepped up.

The operational environment has been challenging. The delivery has been exceptional and my gratitude and thanks goes to everybody in the business for the work that they've put in and the dedication they've had to make these results possible.

On that note, I'm going to hand over to Bailey, who is going to take us through Q&A. So please do ask questions.

I've got just 2. First, is there any [ steer ] at all you can give us on the shape of the year in terms of RevPAR?

I know you don't like talking about RevPAR too much. But the last couple weeks are clearly stellar, up around 20%, it looks like.

I saw the slide you showed on strong pricing for Q2. You talked about white collar inbound coming back, independent exit rate accelerating.

Is it implausible for RevPAR to be up double digits for PI this year? I appreciate not much visibility, but just thinking about the boundaries there.

And then on Germany, that loss of GBP 60 million to GBP 70 million, what RevPAR assumption is behind that? Because the last 2 weeks are a lot better.

I appreciate Easter's there. If you could help us understand the assumptions behind that, that would be very helpful.

Okay. Well, yes, shape of the year, we're pretty confident we're having a really good quarter 1.

And we're mostly through it. We're 2/3 through quarter 1, and people are short lead booking, but what we can see ahead, we've got about maybe 1/4 booked for quarter 2 and a bit less in the half 2, and that's where the opaqueness comes.

But in terms of RevPAR, we've got strong pricing going through and sticking and very strong demand. And I do think all of the demand drivers are now coming back or have come back and are in strong growth.

And your last of them really is inbound. And we're -- what we're seeing on that is a lot more website visits for inbound travelers, which is usually the lead indicator, and they're back to almost pre-COVID levels now.

So I think even that last piece, we will see some green shoots. It may not be fully back this year, but we'll see some of it.

But across the board, otherwise, it is a very broad recovery. I'm sure some of it, Jamie, is pent-up demand.

There'll be a lot of weddings this year. People have put things off.

There'll be a lot of people wanting to go to events. And there'll be, I suspect, some still good vacation activity this year, which again, if people have got questions on that we can talk about.

So I do think what we can see at the moment is strong. Our only caveat to it really is the fact that we just don't have the visibility in the second half.

And of course, there's lots of commentary out there about will the squeeze on the consumer, led by this inflation, lead to either them pulling in their horns because they don't have money and cash available or because their confidence level is lower, and therefore, they are saving for the proverbial rainy day. Historically, we've not done badly in those circumstances because people tend to trade down into Premier Inn.

But without the visibility of a forward booking profile into half 2, it is really hard to call. And so I guess what we are calling out here is that there are uncertainties, and everybody has to make their own judgments on those uncertainties.

But certainly, I can foresee a strong RevPAR shape for the year in the U.K.

So from a Germany perspective, Hemant, do you want to kick off with that? And then I wouldn't mind saying a little bit more about Germany.

And I know I have a highly confident tone, but I have just spent quite a bit of time out in Germany over the last few months in both the north and the south of the country, and it really is looking very impressive. So you kick off there.

Yes. So Jamie, the outlook at the moment for us is we've said that we think there's GBP 60 million to GBP 70 million loss in Germany, which is the same as the [indiscernible] position from the previous year into 2023.

The assumption on RevPAR in that, if you remember, pre -- as we were coming to COVID -- pre-COVID weeks, we talked about getting to a GBP 65 RevPAR in Germany. We're assuming about half of that at the moment.

And that's for 2 reasons. One, because the market is still recovering.

The restrictions in Germany have only just opened up. Alison can talk about our view in terms of our confidence in the German market.

But it is early days. The German market has been roughly 40% behind '19-'20 levels over the last few weeks, although it does look like it's picked up in this last week.

So we're making an assumption that would take some time to come through, but obviously, it could be a lot quicker than expected. It could match what's happened in the U.K.

And then we've got the other factors. Delayed maturity, we've got a very new estate, literally got sites that are very new, and so they're just starting maturity, but also the other -- a lot of the rest of our estate is only just started to trade.

We've had those sites open for the last couple of years, and so trading hasn't really happened yet. So that's going to be another kind of like half of that impact in terms of their maturity overall.

So roughly half of them is the answer to your question.

Yes. So we're being suitably prudent, as you would expect, because the market hasn't been really back and the recovery has been -- they've been in restrictions in Germany for a lot longer than we have, and each time, there's been an outbreak, it's lasted longer, it's [indiscernible], so the restrictions have been tougher.

And they're only just lifting now in April. And so clearly, that doesn't give you a lot -- a big line of sight.

And the market is -- have been 40% or so back in the last few weeks. And although that has started to bounce this week and now it's maybe 25% back up at the market level.

So you can see the market coming back. And I do think that Germany will experience the same sort of bounce and the same sort of levels of pent-up demand as we've experienced in the U.K.

over the course of the few months. It's just how fast will that come back and will it be as quick as the U.K.

was during the course of last year. So I'm pretty confident that certainly over time this year, the market will return in Germany to strong levels again.

And what I'm really also pretty confident about is that our German hotels are really very, very good indeed in the market. Our product is really excellent.

Anybody who wants to go and visit, I'm sure we'd be delighted to show you around because we're so proud of it. We've got 37 hotels that look and feel a significant step ahead of the market competitors, our direct competitors.

And they're in prime locations, they're across multiple cities now, so we have the opportunity to start really building the brand in Germany. And I think they'll do really well and then they're efficient to run and to manage.

And we've got a great team in Germany who are running them.

So overall, I'm confident that over time, we're going to see good performance in Germany. It's just the speed with which that might come back through the market and demand coming back this year.

That is our note of caution at this stage. Is that helpful, Jamie?

Quite a long answer.

Yes, very helpful. You did mention staycations earlier and just picking up on that.

Are you seeing any sign of weaker staycations this year due to more international travel? And just on Germany, as a follow-up, you've given us guidance to breakeven during next year.

When might you give us some profit targets, if that's not too premature?

Yes. We've got no issues with staycations this year.

Our business isn't predicated on bucket and spade holidays. As you know, relatively small percentage of our hotels are coastal.

So it is the broader leisure market that we are seeing is very buoyant. And obviously, because we're at the start of the warmer period now, I suspect we'll now be seeing the coastal areas or seaside towns booking.

I think there's a lot of demand to go around. I think we will see increases in people traveling overseas.

But as we know, there's a constraint on the capacity in overseas travel through the airlines, so the cost will probably be quite high. And people are possibly thinking about whether, A, they can afford that high-priced holiday and might stay at home instead; or they're also thinking about the disruption that there is and the Ukraine crisis and war being pretty close.

And all of those things, I think make for a buoyant staycation year as well as people returning to overseas travel at the same time. I think there's a lot of pent-up demand for both.

So yes, not seeing anything that's of concern at this stage. But equally, as I said, we're not even half booked for quarter 2.

So we've got a long way to go on bookings. But what we have seen is that pricing has stuck, and so the pricing that we put through -- which we put through for the year is sticking.

And I always think the best way to also think about that pricing for us is our average room rate in the U.K. is GBP 60, just a little bit over GBP 60.

Even with a 10% price range, that's a pretty good value offer. And certainly, less than GBP 70 a night is still a pretty good value offer for a quality Premier Inn room.

So on that basis, although the price increase might sound a high percentage, actually, in real terms, it isn't a huge amount out of somebody's pocket.

Okay. And just picking up on Germany breakeven.

Clearly, a lot of our more mature hotels are actually on a unit level, getting close to profitability, and we will do hopefully soon. We've also -- just a reminder, we've got a lot of expansion costs within the central cost base in Germany at the moment.

Looking at the fully-loaded P&L, it's difficult with the uncertainty that we've got in terms of how quickly that general market is going to come back and the inflation to give you a specific number. But we are talking about getting to a breakeven run rate in 2024.

So slightly lower than what we said before, but it does also pretty much depend on what happens with that recovery in the German market.

Yes. And what you'll have seen -- I'll just add to it just because I am quite upbeat about Germany.

And you'll see that we've had 12 more mature hotels, and it's quite -- been a quite strange market to trade in over the course of the last 12 months, but 12 hotels have been opened a bit longer. And you see that we did trade above the market level in those hotels.

There's a chart in the pack on that subject. So again, I'm quite confident about our ability to trade in Germany with a really high-quality product and to make inroads as the market recovers.

And to be honest with you, Jamie, we'll be reporting again in 6 or 7 weeks' time in June, which will be the quarter 1 results, and obviously, we'll have a line of sight both into the summer in the U.K. and through the summer.

And in Germany, we'll have had a lot of 6 weeks market trading and market rebound, so we can talk about it in a bit more detail then.

And just to [indiscernible], obviously, we're still very clear that in the longer term, we expect to get to the group returns of 10% to 13% ROCE and Germany. We're still very confident about that.

It did not take my attention that Jamie snuck in a third question there, by the way.

Fourth I think.

I've got about 10, but I'm going to restrict to just 2. Just firstly on the outperformance.

So I've picked up all your points in terms of broadly why you think you're outperforming the market. Just wanted to unpick though what happened there recently because that was quite a big jump up in terms of your outperformance versus the market just in the last 7 weeks or so and even to the back end of Q4.

What's driven that do you think and sustainability of that, I suppose, as you look out into the next quarter?

And then my second will just be around property. Hemant, obviously, you talked in the presentation about not a load of transactions out there, but the little that you have seen reflect back on the previous revaluation of 2018.

Just what are you thinking about in terms of doing another property revaluation, timing of that, and what form would that take? Same as last time in terms of sale and leasebacks or something else?

And just a reminder on your strategy with regard to property?

Right. Well, I'll kick off with the first question about outperformance.

And I think there's quite a lot of things going on. And we know that we're seeing supply leaves the market in the form of independents, for example, and that being at a higher level.

So undoubtedly, there will be some underpin there for that. But broadly speaking, our outperformance is both on occupancy and rate.

And if you think about what makes up our performance, we've got a higher occupancy level, we've got estate growth where we're filling new hotels, and we've got higher pricing. And those 3 things packaged together and have produced -- we've loaded -- I guess, got more confident as demand's returned, that our occupancies will be higher and that there is demand out there that is very strong, which is driving that higher occupancy.

We are -- we have had estate growth, and we are therefore filling our new hotels. And then we have loaded higher pricing because we need to pass some of that through, so the market pricing is higher.

So we're not alone in putting through that higher price. And that is sticking and still driving high occupancy.

So that's -- I think that's been the story of the first 7 weeks. And you say, is that going to be sustained?

I think our general level of strong performance, I'm very confident about. In terms of outperformance of the market, well, the market coming back a bit, that more hotels will trade better, I suspect, particularly when inbound comes back because I think inbound has really weakened, London, for example.

And we are going to cycle over periods where we already have high occupancy versus last year. So if in previous quarter 2, we've had occupancies of over 80%, 85% or even 90%, we can't be more occupied than that.

So it will then go to growth and filling new space that wasn't there before and pricing. So I think that will broadly give you a picture of the makeup and what may come next.

Okay. And then on your second question, Vicki, regarding property transactions.

Yes, clearly, we're 56% freehold approximate business. And the owner-operator model we run gives us many advantages in terms of full ownership of our customer -- all of our customer interactions.

And obviously, there were covenant [ advantages ] to owning our property as well. We're keeping an open mind in terms of property valuation.

As you said, there haven't been many transactions in the market really over the last couple of years. So it's probably not meaningful to do a full valuation right now.

The last time the estate was valued was in 2018. And we used an incremental sale and leaseback methodology, so kind of a careful sale and leaseback methodology, which is probably what we'd do again if we were to do so.

That results in a valuation range of GBP 4.9 billion to GBP 5.8 billion. As mentioned in the presentation, the transactions we've seen are generally in line where the tenants are, generally in line with the yields that we assumed in 2019 to kind of 4.5% to 5% overall of a range depending on location and quality of the asset.

So that on a like-for-like basis gives an indication that the valuation has held up pretty well despite what's happened through COVID. Obviously, we have grown the freeholder state in the meantime so that would make a difference to the overall valuation.

But right now, I think we'll wait and see, keep an open mind on it.

2 questions, obviously, I'll remember that. The first one just on CapEx.

One of your competitors has talked about a CapEx catch-up program having underinvested for the last couple years, but your envelope for this year seems to be a return to pre-COVID levels even though one would expect the sort of costs have gone up, there's still more hotels to open. So just some commentary around that CapEx envelope, what's included in that in terms of maintenance?

And is there any catch-up to come from the last couple of years?

And then the second question, I know you've commented a few times on pricing already. You say you've not got much visibility into the second half, but how are you pricing into the second half?

Are you starting prices off assuming that the strong pricing so far will carry on? And given the strong pricing you've seen so far, do you expect any kind of longer-term changes to your pricing strategy, you're going to move some of the caps that you've had in the past, for example?

Yes. So I'll answer that second question first because it's right in front of my mind, which is, yes, we're pricing strongly for the full year.

So yes, we are making the assumption that we will have strong demand and that the market strength -- recovery will be there for domestic business and leisure travel and then a little bit of inbound as well. And so we're pricing that accordingly.

So that -- so yes, whilst we haven't got many bookings on the books for the second half, and that's not -- even pre-pandemic that wasn't unusual. There was always -- there's always breath holding in the summer because people tend not to book for the second half until they go back to school and work in September.

Particularly business bookings cease in August, and then you have the bated breath the week after has the business demand recovered.

So it's not actually that untypical. It's a slightly more pronounced post-COVID that people book more short lead.

And of course, because you've got a market recovering, you yourselves are thinking much more hard about what that recovery will look like as opposed to a normal [ BAU terms ] when it is, broadly speaking, the same every year. So yes, our assumption is that the market is going to be strong and that we -- the recovery will be maintained in the second half and our pricing strategy reflects that in terms of the increased pricing through.

Okay. And Richard, regarding capital, yes, so over the last couple of years, we've spent -- in FY '22, we spent GBP 260 million on capital overall.

Around GBP 90 million of that was U.K. maintenance and product improvement.

Our intention is to take that back up to historical levels as you said GBP 350 million to GBP 400 million. We are going to be opening 1,500 to 2,000 rooms this year.

It's more just really a question of the [indiscernible] pipeline rather than any reason why that stepped down slightly. But we expect to get back to 2,000 to 3,000 rooms going forward in FY '24 and beyond.

We have had some supply chain issues that have delayed that slightly. But we have full intention of taking up our overall CapEx and refurb CapEx back to high levels.

We've always spent a significant amount of money on refurb CapEx. So there's no need for us necessarily to catch up.

But there will be a little bit -- some supply chain issues that will unwind over this year and take that level back up again.

Because we were able to do -- invest through the cycle and through the difficult period because of the strength of our cash flow, I'm sure we're not as far behind as others who've been off for 2 years and haven't spent a penny for 2 years. So we -- I'm sure there is a little bit of catch-up to do.

And you're right, there's certainly some inflation in cost that we have to account for. But not like some of our competitors who probably just haven't spent anything for 2 years because they've been very cash constrained.

Sorry, just to be clear then, the CapEx guidance for this year, you would expect that will probably go up again into the following year as you begin to open more rooms again.

Yes. The timing of the room openings versus the CapEx spend isn't necessarily [indiscernible] that, obviously.

As we're spending money to open rooms in the future as well, so it's not quite -- you can't make that -- quite that correlation. But as we said is we'll get back to that kind of GBP 350 million to GBP 400 million level going forward in the future.

And obviously, we'll continue to monitor that as the estate grows.

Just the first one. You clearly talked about an acceleration of 3x the market exits.

And I think you flagged that you expect that to continue over the next 12 to 18 months. So can you put that in the context of your market share aspirations now over the next 2 years, what do you think is a reasonable target and a return on that?

And then secondly, just thinking a bit further ahead and beyond this year, can you remind us on the hedging policy you have on the energy side, please, and how we should think about that just moving ahead?

Okay. Yes.

So we -- I think -- just to sort of recap a bit. When we last spoke, we had done a very small sample of regions in London and outside London to see whether we were starting to see a material churn in the independent market.

And we were seeing evidence that, that was the case. We then -- we undertake this network planning exercise, which is quite a big deal for us because [indiscernible] really, and we look at all the supply and demand that we expect to come into the market and go out of the market over the next few years, looking at planning commissions and public statements from competitors and what we think Airbnb will do, but also looking then at the independents, which are very hard to monitor because most of them are very small single-owned businesses, and they don't report through STR data in the way that the big companies do.

And that -- and in looking at whether or not they are leaving the market, it's slightly more complicated than just seeing that they're currently closed, which we could do off screen scraping from websites and phone calls to see. We also, of course, want to know that they're not going to reopen as something else later or that they're just closed for a refurbishment or they've been bought by another player and they're going to be refurbed and reopened and be a vibrant competitor.

So it does take quite a long time to do this exercise, and we're about 1/3 of the way through it with a relatively broad sample size within that 1/3, so we can see what's happening across the whole of the U.K. and into London.

And we think we are able, therefore, through that exercise to see that there is a decline in the independent sector that is significantly above the normal run rate. And I think for those of you who've followed us for a very long time, at the end of the last recession, we also saw an acceleration in the decline of the independents, which put us in a good space for growth.

But it happened quite a while after that recession. People hung on, and it was a couple of years later when that really accelerated.

I think we're seeing the acceleration now. I think we're seeing it has happened through COVID and it's happening now and will carry on probably for the next, as we said, 18, 24 months that we'll continue to see that.

So at the moment, the other picture is supply and there is some supply growth in London. We think about 2% supply growth in London.

There's not a lot in the region happening at the minute. So other supply and other entry into -- I'm talking about midscale and economy here rather than overall market.

And so that -- we're relatively relaxed about that. We are growing.

As you know, we put 30 new hotels in last year, and we've got 1,500, 2,000 rooms going in this year. So we've got our own growth to go.

And all of that combines to us being comfortable that we're going to have some market share growth. It's quite hard, however, to pinpoint it, and I'm not going to put a number on it, and equally, we will have been flattered in the last year or 2 in terms of really the gross market share position for us from a load of hotels being completely unoccupied or even closed during the COVID crisis.

So at this stage if not -- I don't think it's a stable number. It's certainly going to be an improvement on our pre-COVID market share but I don't think I'm ready to call it yet as a specific number.

Over to you, Hemant?

Yes. So Bilal, we hedge across electricity and gas in particular.

We're obviously very conscious of the utility inflation that's coming through and has particularly exacerbated since the beginning of the Ukraine crisis. We're 100% hedged for this financial year FY '23 and with 40% or just over 40% hedged for FY '24, but relatively evenly split across electricity and gas.

Clearly, we will continue to monitor that. We move our hedging position on season by season, and we'll continue to monitor the cost of futures and that will move on as time goes on.

A couple of questions, please. There was an interesting comment on the call -- the pre-recorded call about using TripAdvisor, and I know you already use it, but have you had any thought about your stance on transactional OTAs?

A few of the other hotels have talked about expanding their relationships with the OTAs during COVID. And I guess some of the tie that into some sort of mix shift between business to leisure.

So if you had a view on that.

Yes, just a minor correction there into nuance. We don't use OTAs in our hotels, including TripAdvisor.

The comment on TripAdvisor related to restaurants which was when we get TripAdvisor reviews of restaurants, you can then click through to book a table in the restaurant, and I think that's the innovation the restaurant teams have put in. So it's not -- we don't use OTAs at all in -- within the hotel business.

And we're not anticipating moving to using OTAs in the hotel business. We've weaned ourselves off them.

And we've got the booking -- the outperformance you're seeing from us is all done without anything other than direct distribution, except for a small amount, which is travel management companies where, as you know, the people who booked through travel management company cannot be cannibalizing because they're not allowed to book direct. So that's the makeup of the distribution.

Sorry for the confusion on TripAdvisor vis-a-vis restaurants.

No, no, that's very clear. And then the second one, you said there's line of sight for 60,000 rooms in Germany.

I don't know if you want to give more detail or not given the competitive nature, but if you could give any more information on the kind of pricing that you're seeing on assets, that would be really helpful.

Sorry, let me just [indiscernible]. You were asking about...

On potential assets, yes, yes.

So yes, there's not been a lot of moves in Germany on asset prices, i.e., they've not got cheaper all of a sudden. And we have -- there have been and we have been the recipient of some distressed assets.

So for example, our Centro Hotel purchase was a company that was in financial distress, and we were allowed there with them to cherry-pick our preferred number of hotels from their portfolio, and we managed that acquisition not as an acquisition of the holdco, but as an individual negotiation with each landlord to transfer the assets to us with the consent of the current owner and a small premium to them. So that sort of thing, we are not only seeing but executed against.

And I think we are -- we would definitely be set over the coming months, given that the restrictions are just ending in Germany, and therefore, government grants and state aid will start to peter out and come to an end, I think we will see more of that more distressed asset activity over the course of the next 12 to 24 months. And it will -- that will occur throughout [indiscernible].

Was there a first element to that question as well rather than just the asset price. Is something else you have to just start.

Yes. Just any detail you had on how the route to the 60,000 number that you mentioned.

Yes. So in terms of the original 60,000 number, I mean, that's still quite a more market share when you compare it to what we do in the UK.

And just to refresh your memory on it, Germany is a bigger market, has more business and leisure travel and is more fragmented, it's 73% independence in decline rather than about half in the UK. And so actually I think it's quite conservative line of sight 60,000 rooms.

So I think that would give us 6% market share, and we have doubled that in the UK. So we're not uncomfortable that, that is a prudent target to be had over the next few years.

That may well then lead to a longer runway and growth thereafter. It would make us number one player in Germany, and that's our aim.

Sounds good. And if I could ask a follow-up on that bit.

How much do you think would end up having the newbuild versus a acquired hotel?

Hard to say. I mean we've done plenty -- we started organically.

As you know, we've done a couple of acquisitions. Honestly, I don't know where we'd end up.

It will depend entirely I think on what we see as becoming available in the market. Certainly, we're now -- we'll build our own strong organic pipeline, which we like to do.

We're well known in Germany now with developers. We don't have to sell ourselves or our covenants with developers in Germany.

If there are opportunities, they come to us. So we've got much more opportunity to do both organic and inorganic as we move forward.

We set hurdles. We're very disciplined about the capital that we deploy and about how we set the hurdle for it and we make the best choices for capital deployment with the highest returns and we're ambivalent as to which route.

Brilliant. Thank you.

I have my 2 questions on food and beverage, if that's all right. Slide 25 is very helpful.

And then looking at the detail, it looks like within the last 2 months, that minus 4.6% has been a little bit better in the last few weeks, even though that has gone back up to 20%. So specifically, I just wondered what you've done on price in recent weeks as the VAT has gone back up and what you intend to do this year?

This is the first question.

Yes, you're right. It has gone back -- it has gone up as we have gone into the new year, slightly on the chart from 25.

I think it's about 5% back on precoded levels as we speak at in the first 7 weeks of the new trading year. I mean we have done lots of initiatives, quite a broad initiative to bring back both demand and to make sure we've got the right focus on margin as well.

We've launched the spring menus and reconfigured some of the menus, both for supply chain issues and for pricing. But equally, we've been very focused on ensuring that we remain competitive, and we don't just lose covers at the expense of gaining price.

So we're managing it in a sort of relatively dynamic way. We are lucky in restaurants because we do trade on seasonal menus.

So we can always reissue and reprice if we think we've got issues. We've also done a lot of work on drinks and drinks pricing and there have been some price rises, as you've probably seen in beer and other drinks products, which again is helping us improve our margins.

Hemant, do you want to add to that?

I think it is worth mentioning as well that across the value end of the pub market, in particular, a lot of discounting has come out over the last couple of years post COVID and that's meant that the net pricing is actually -- it's been a bit higher across the market and we've obviously had a big part of that as well. And with the new menus that we put in, we've simplified a lot of the [indiscernible] also some of the pricing as well to make it a lot more parting to get to drive drug demand.

Okay. And just sort of a follow-up there was just is there anything material to call-out in terms of the joint sites, the separate pub restaurants and those integrated restaurants within the [indiscernible].

No, nothing to call-out at all.

Just a couple of things, please. The first one is sort of longer term.

I just wanted to ask you about your returns on capital targets. And obviously, the capacity outlook is getting better, the tax being optimized, new hotels getting more operational leverage in them.

Pricing is good. I'm just wondering how conservative, to put some words in your mouth, you might be being on those long-term return on capital targets, which I would have thought might be edging up by now?

And then secondly, just would like a little bit more visibility, if at all possible, on the white collar office demand? I know you said it's I think the phrase in the presentation was that it's recovering well.

I just wondered if there's any harder [indiscernible].

Right. Okay.

I mean we're not at all uncomfortable with our ROCE, with our return on capital position. We've guided for Germany 10% to 14%, which is I thought a mature returns profile for Germany, albeit in maturity, they trade below that until they've reached mature levels.

And so that will be part of the makeup of, I guess, sort of slightly less productive capital or not capital that is operating at its full level as part of the group. So as Germany gets bigger, there'll be a bit of that, which means that we're comfortable with our overall returns profile returning to pre-pandemic levels at which we feel it is comfortable running at.

I haven't got anything to add more. We certainly won't be notching up at this stage.

Yes, I think that's exactly right. I mean, we've talked to getting back to group returns to 10% to 13% ROCE overall with them, obviously depending on the maturity of the German business.

That is roughly the level, that's not the high-end of that level in pre-COVID and our first stage is going to get back to that level before we decide to set any further.

Yes. Okay.

And on business demand and office worker trends, that's about 25% of our revenues, half our business, which is after the main revenue. And obviously, the other half is blue collar or trade person demand, which has stayed very robust throughout the whole coded because it's essential business travel is effectively.

But office worker demand hasn't been. We think I mean, demand was subdued until September, and then we started to see increasing levels of demand from September onwards.

We clearly had a bit of a blip during the early part of the year, back-end of the year and early part when we had that Omicron wave for a short period of time. And then it got back to pretty fast recovery thereafter.

I mean, we now see midweek bookings, which is the predominant white collar worker chooses Wednesday is there all ahead at pre-COVID levels. London is also now ahead of pre-COVID levels as well in the last 7 weeks.

So that's a sort of proof point for the business demand.

We've worked quite hard on business demand while we were closed to make sure we were set up for success. And we've extended our customer reach through an improved business book of portal.

And we've also widened out the number of travel management companies. But certainly, we've seen very good results from the business booker portal with people coming through and we extended credit to facilities into SMEs as well, which we put in place during the COVID crisis.

So again, another step up there. So yes, we can definitely see average room rate growth across that business booking period now and we're pretty comfortable with it.

10 already.

That's fantastic. In which case, thank you everybody for dialing in.

Any follow-ups, please do let us know and have a good day, everyone.

Thank you.