Whitbread plc

Thank you, Adam. Good morning, everyone.

Thank you very much for joining my first call as the Chief Executive of Whitbread for our preliminary results announcement, alongside Hemant Patel, our Group CFO.

I just wanted to begin by reiterating how excited I'm to be back at Whitbread. This business is in great shape.

It's trading strongly as you can see by today's results. Having spent significant time out in our hotels and restaurants with the teams, both here in the UK but also in Germany, I've been really struck by the passion and the dedication that underpins our ability to deliver consistent quality guest experience whilst continuing to offer great value.

This is what differentiates us from our peers and is at the core of our UK model, a model that we are now on course to replicate in Germany.

I do hope you had a chance to read our release this morning and maybe also watch our results webcast. I'm just going to pull out a few of the key highlights in our announcement, and then I'm going to open the call for Q&A, where Hemant and I will be happy to answer your questions.

I guess the first thing for me to say is these are a great set of results. [ They're a ] product of our differentiated operating model, working in tandem with our business strategy.

My predecessor Alison, who many of you know, and our entire team executed brilliantly through the pandemic and we've emerged strongly as a result. In the UK, we continue to outperform the market and delivered significant revenue growth, strong cash flow and we've increased our UK returns.

There's been a structural shift in the UK hotel market with a material reduction in UK supply just as demand has recovered. And whilst that certainly provided a helpful backlog, it is actually the combination of our own initiatives and our clearly differentiated business model that has delivered such an impressive operational and financial performance.

And in Germany, we continue to make good progress. We've now got 51 hotels opened and 7,000 rooms in the pipeline.

Now, we're not yet operating at our full potential, but the performance of our 18 established hotels give us real confidence that we're on track to reach our target rate of turn of 10% to 14%, and our already committed capital of around GBP 1 billion.

We're confident in the full-year outlook, and that confidence is underpinned by a number of important factors. Firstly, we're already delivering great results.

We're achieving record level of occupancy and strong RevPAR growth in the UK. And in Germany, despite our brands still being relatively unknown, we're growing rapidly, led by our more established hotels and the trading line in the market.

Secondly, current trading has been very strong, with positive momentum continuing across a number of forward leading indicators. And thirdly, we continue to see significant opportunities to invest both in the UK and in Germany that will drive attractive long-term returns for our shareholders.

Given our positive trading performance, our strong balance sheet and our confidence in the outlook, we're recommending an increase to the final dividend and have announced an initial GBP 300 million share buyback that will be completed over the next few months.

Now just one small point of [ note ] before we open up the call. We've got a number of people on the line.

So to ensure everyone gets the chance to ask their questions, we are going to ask you to please try to keep it to 2 questions each.

With that, I'm now going to hand back to Adam, the operator, so we can open up the call for questions. Over you, Adam.

First one, just wanted to come back on the organic room growth targets for both UK and Germany. They are just looking a little bit lighter than we might have expected looking into next year.

Just wondering why that is, any particular reason driving that in either market? Is that your choice to go slower?

Or are there any sort of market factors that are worth calling out?

And then secondly, Dominic, just keen to hear your perspective on F&B. Obviously, it's good to see that the F&B performance is improving slightly.

But just your broader views there on the logic in retaining the full ownership of F&B. Is it a different approach?

Is there a different approach that could be considered for you to think about now?

Okay. So let me take the first question, Vicki.

So good to hear from you again. On the pipeline, I mean, I think there are probably a couple of points to reemphasize.

One, actually, we feel really confident about the long-term runway of growth. I think you know a lot of work was done on the network plan over the last 12 months to 18 months with this, and that plan kicked out.

There is strong potential for 125,000 rooms in the UK. And I think we feel really good about long-term growth potential in Germany.

That said, obviously, the hotel industry was impacted by the pandemic, and that could impact the short-term pipeline. And what we're doing currently is we're respooling up that pipeline.

So, we feel good about how that pipeline is developing.

The room growth next year is going to be slightly lower than we've seen in previous years, but we have good confidence there in the medium-term pipeline. And actually, what we're beginning to see, and it's somewhat linked to the structural shift that we highlighted in the presentation with this reduction in the supply, we're actually seeing the benefit of our covenant and our current performance.

Actually, we're in pole position for a number of the key sites that are coming up. So, we're getting access to some really interesting sites moving forward.

So long term, we feel really good about the long way of growth, and we're seeing that pipeline spool up, so both in UK and in Germany.

And then the second part of your question was about food and beverage.

I think there are a couple of points worth reiterating. The first thing is that, actually, food and beverage is important for our customers.

Remember, restaurants are either in the hotel or pretty much right next door to the hotel. Food and beverage is an important part of our offering, particularly breakfast.

Now that is an important part of our [ cost ] offering and we've got a clear competitive edge when we look versus our competitors. That said, is there going to be an ongoing opportunity to optimize and improve our performance in that area?

Yes, there will be. And yes, we will be focused on that.

Yes. And just to clarify, so when you say ongoing opportunity to improve, is that from an operational perspective or you mean sort of more strategically in terms of what's the right full ownership model?

I think -- I mean, definitely, you've seen from the numbers that we saw that we put out today in the first 7 weeks, it's 10% like-for-like. So, we are getting a tailwind from the fact that, actually, the hotels are doing really well.

And I spoke that reiterates the point that food and beverage is important for our guests. We're shareholder returns focused.

We'll look at constantly -- we'll constantly look at how do we continue to improve those shareholder returns over time, both within the hotel space, but also in beverage space. And I think you'd expect us to be doing that.

So the first one, just on the buyback. You described as initial in the release.

There's still clearly plenty of upside to 3.7x investment-grade ceiling. So, I was really wondering could we expect another buyback at H1?

And then secondly, just on Germany, you give a slightly updated numbers on costs and rent metrics. And you've given us, I think a sort of [ GBP 5 million ] of PBT in the year for the 18 established hotels, which is about GBP 300,000 per hotel, and that's about half the level given in the prior target.

I appreciate that was a few years ago pre-COVID. I was really wondering on sort of profit per hotel or profit per room basis, where are we now versus the sort of pre-COVID targets, please?

Okay. Thanks, Jamie.

What I'll do is I'll take the first half of the question. I'll probably touch briefly on Germany, and then I'll hand over to Hemant as well.

So, I think in terms -- and I'm sure he's got a view on both of those subjects as well. In terms of the capital allocation and the share buyback, I mean, Hemant outlined the capital allocation framework last year.

I think it's an excellent framework. There's a clear hierarchy starting from the fact that we want to remain investment grade.

We'll look at investment -- organic investments where we invest our own capital. We'll then look at inorganic investments where we feel we can drive long-term shareholder returns and then we'll look at shareholder returns, the dividend and share buybacks.

We've applied that framework, which we've announced today, and that's resulted in the GBP 100 million dividend and the GBP 300 million share buyback. It is a framework.

So by definition, we will continue to apply. We're not making commitments as to what that is moving forward because we've got that framework.

It's very clear, and we will continue to apply it. We'll update on where we are at the interim, but we think this is a good example of our sensibly applying the capital allocation framework that we've got.

The second part of your question is then about Germany. Just one thing I'll just mention on that before I hand over to Hemant.

I mean, I spent quite a lot of time in Germany, both actually before I officially joined the business and then since I've joined, I did see a lot of our hotels and I think you've been over there, Jamie. We've got fantastic hotels there.

We believe in the structural opportunity in the German market. Germany was behind the UK in terms of coming out of COVID.

So, a lot of those hotels have been closed for quite a significant period of time. And a lot of our hotels have actually, we opened them and then couldn't trade them because they opened in COVID.

So it is actually quite hard to compare to pre-COVID because there's definitely a spooling-up situation that we've got in Germany as it comes back out of COVID. But I think what we've done today is reiterate our long-term confidence in the business.

Let me hand over to Hemant, who can be a bit more specific.

Yes. So, yes, just reiterating what Dominic explained.

These 18 hotels that we are discussing as scheduled, they are our most mature hotels where the hotels have been opened the longest continually from pre-COVID. Now that doesn't mean that they are mature though yet.

And so most of the hotels, if you remember, as Dominic mentioned, the end of COVID restrictions were happening at this kind of time last year over the next few months, in fact, in Germany. So most of these hotels still haven't traded a full 12 months, completely unrestricted [indiscernible].

So they're not mature.

And if you remember, the maturity of our hotels aging between kind of 2 years to 4 years, most of these hotels, they haven't actually traded that long continuously. So, we're still maturing.

So the pre-COVID guidance we gave in terms of getting to the possibility targets to hotels still applies. We haven't updated it.

There will be updates in terms of costs, in terms of the [ top line ]. In general, it still applies.

It doesn't mean that we are there now with these hotels. And as mentioned, we are still very committed to getting to those longer-term 10% to 14% return levels.

We still believe the business overall will get to a breakeven run rate in 2024 as a milestone towards getting to that longer-term level returns.

Just on the balance sheet, [ this is my only ] question, but just on the difference between the upside from the 2.7% to the 3.7%, where you have it to settle? That's quite a big gap, GBP 800 million of upside.

Is there a sort of figure if you can give us, or you can work out what the sort of excess cash might be?

I think probably there's not a lot of figures that we can give you in that. It's the headroom we've got against that.

It's not a target, but it is the ceiling that we want to work within over the kind of medium to long term. So yes, clearly, there is headroom against that 3.7x at the moment.

The framework -- capital allocation framework really gives you the indication how we'll be thinking about that. So once we've understood the capital needs of our different priorities as Dominic highlighted, we'll look, therefore, at the outlook we have going forward, the level of potential cash we might want to retain for inorganic opportunities that may or may not come up and then make a decision based on that as to whether there is excess funds or capital to return to shareholders.

So that's what we'll be thinking about it. So, we'll work within the framework and under that [ term ] as a ceiling of 3.7x.

First question, if you can give more detail on the recent acquisition in Germany. Just in terms of how the opportunity arises to say there, as it's being the first in a while.

Do you get the impression that there could be a pipeline of further acquisitions opening up now given the environment in Germany? And for this acquisition, just noticed the property in Austria, would you keep that?

Could it be part of the new planned expansion? Or is it just on the [ channel ] border makes sense to keep?

And then second question, tying into around a statement from the presentation, I'm hoping to at least maintain UK profit in FY '24. Can you just sort of tie this into your demand outlook?

Does RevPAR need to progress at a similar level for how the year started to support this ambition? Any sort of additional color would be very helpful.

Okay. Thanks, Leo.

I appreciate the question. So let me take the first question and the second part -- the second question, and then I'll hand over to Hemant.

So just touching on the recent acquisition that we did in Germany. So 6 hotels, 900 hotel rooms.

We think it's a really nice portfolio of hotels. We stay very close to the market in Germany.

As you know, we've got a mix of organic hotels that we've opened ourselves generally on greenfield sites, but we've also acquired a number of hotels as well. So, we're very well connected into the German market as opportunities arise.

These was one of the opportunities. It was complementary from a location point of view, good properties and we think strengthen our position in Germany.

And to your question as to will more opportunities like that come up? Possibly.

As I said, we stay very, very close to the market. There has been a structural decline in the independent sector in Germany, not as deep as we've seen in the UK, but there has been a decline.

And we think that hotels will continue to come to the market. And if you look at everything that comes up, we've got very clear parameters you can imagine.

We've got to feel confident that we can drive the correct long-term returns and from an operating model point of view that property works for us. But if they tick those boxes, then we're definitely interested in opportunities as they come up, and this is one of those.

So 6 hotels, 900 rooms.

It did happen to have a freehold hotel in Vienna. That came with the portfolio.

Freehold property in the Central District of Vienna, we think is a good long-term bet and a good addition to our balance sheet. It is actually also an interesting test and trial for us to be in a market close to Germany.

We're not signaling a radical change from our strategy of focusing on Germany. The portfolio happens to have one in Vienna, but we think we'll be able to make that work in long term.

That's a nice addition to our portfolio.

Then kind of the second -- your second question was about effectively the demand outlook and the impact on profit. Let me take the first half of that, and I'll hand over to Hemant.

I think you've seen in the numbers that we announced today. We actually feel good about the demand environment.

We've just outlined very strong numbers for the first 7 weeks, building on the momentum for the previous year. And I think there were key reasons for that.

One is we've got a beautifully balanced business, roughly 50-50 between leisure and business. We continue to see leisure customers prioritizing experiences.

And therefore, leisure spend has continued to be strong and London is particularly strong.

But also, business travel is definitely back, and we've seen more and more business people out. And of course, we're getting benefit from that, and we have really improved our business offering, which is helping us to over-index in that market.

And then that when you couple it, was actually a decline in the -- the structural decline in the hotel market means that supply has gone down and demand is at the same level or actually higher, then obviously, it gives us some confidence about the demand outlook and then the impact on our business. So that's why there is a positive tone in our release today.

Let me then hand over to Hemant for the second part of that question.

Yes, Leo. So yes, I mean, we don't give specific guidance in terms of the top line detailed conversion.

So it's clearly what we will talk to you about is how we're doing this on the market and then, obviously, the regularly published STR data will give you a good understanding of how we might be trading and that seems to work pretty well. What we did say was that we felt that the 7% to 8% cost inflation that we expected to see in the UK -- and we still expect to see in the UK, that along with our efficiency program, along with new sales growth we have, the UK combination like-for-like sales, I'll talk about, should at least offset that level of cost inflation.

Just to make sure that just kind of like -- make sure that people understand that question, some of the forecasts that we've seen out there, that we're assuming that we would be negative to flat to very low growth in terms of UK like-for-likes. Now clearly, we started the year very well in the first 7 weeks of the year.

We started at 17% year-on-year. In terms of UK, our accommodation sales is about 15% like-for-like.

So that won't continue. In that, we are annualizing against the softest, the [ easiest ] capacities for last year at this time of year.

But clearly, as Dominic mentioned, that gives us a lot of confidence in terms of our trading outlook as it stands at the moment. So all we're really saying at this stage is that we think that like-for-like growth in the UK will be enough to at least offset the level of inflation that we're seeing and the UK business would at least maintain its profitability year-on-year.

Clearly, our ambition will be to improve on that and grow on that and the outlook we are seeing at the moment gives us the confidence in our ability to do so.

The first one is on the German acquisition. I wonder if you might give us any kind of commentary on price paid on really adding that [ 52 ].

But expectations on the EBITDA or maybe what you think you can do to the profitability of the room that you've bought?

And then the second one is a really interesting point you raised on the pipeline growth and your position in terms of new sites coming up. I wonder if -- obviously, very particularly UK, but it seems a specific challenge in the US as well that individual franchisee borrowers are struggling to get financing, and therefore, the franchises are seeing kind of less, which obviously is beneficial to your position.

I wonder if there's any other information that you -- or just kind of small snippets that you might share with us on that subject?

Yes. Thanks, Alex.

Let me take your second question first, and then I'll hand you over to Hemant for your question about the German acquisition, which, by the way, we won't be able to say very much about it, but I'll hand you over to Hemant anyway. Yes, the pipeline question is really interesting.

I mean, remember -- and we reiterated this today we're shareholder return focused. As a business, we are return focused.

So when we look at the new sites, we are looking at that site through the lens of customer demand and returns generated from that site. So therefore, the operational -- how we set that operation up and the costs involved in the hotel are a very important part of that.

All that said, there is less demand for properties at the moment. We are definitely seeing -- we've seen a structural decline in the independent sector.

We do believe some of the franchise operators, it's slightly more challenging for them. At the moment, they have a [ sliding ] cost structure.

Our cost structure is really [ A la carte ] model in the UK. And that does give us access actually to -- that reduces the demand as we look at site.

And we've seen some of the other commercial property providers who might look at buying sites traditionally [ Far West ] with some of the uncertainty. So, we're very mindful that we only want to pay the right pricing, a very clear idea on that.

That said, there is also clear that the amount of demand for these sites has formed away somewhat and [ with greater ] covenant and long-term prospects where we are a very attractive purchaser or lessor of these sites. So, that does give us confidence moving forward that one we will let go after this attractive runway of growth and 2, we will get access to some really quite properties and some really quite exciting locations.

Let me then hand over to Hemant for the second part of the question.

Yes. So Alex, I mean, what you will see as a note in the accounts in terms of asset acquisitions is a bit more detail in terms of the purchase price that we paid and that GBP 26 million, plus a deferred consideration of GBP 2.5 million.

I know there's a bit more detail there in terms of the IFRS accounting for it. I think if you want me to understand the impact of that, obviously, we have given -- we've updated our German guidance in terms of other ongoing cost program.

And then, clearly, you can model the RevPAR impact of those new rooms. That would be no different to how [indiscernible] organic RevPAR impacted growth in Germany.

Okay. And I guess we could probably add the GBP 10 million of refurbishment costs on to that GBP 28 million.

I haven't got that [indiscernible]?

The GBP 10 million refurbishment costs are a one-off P&L costs, and it's mostly about disruption as we close those hotels and we recently lost revenue while we were converting them.

Okay. Got it.

So that's just a one-off that you don't need to model in the longer term just this year.

Okay. And lost earnings from closure rather than the actual cost there.

I had a couple of questions about the balance sheet and assets. It feels like churn is picking up a bit.

GBP 60 million disposals in the year has gone. Is it a fair observation that, that could increase?

Which leads me to ask, you haven't referenced the GBP 4.9 billion to GBP 5.8 billion 2019 revaluation. I know it's a long time ago.

Is there a scope for refreshing that? And how disposals looking versus that kind of benchmark.

Thanks, Tim. I'll hand you over to Hemant.

I guess the only kind of macro point I'd make in terms of our property strategy is it gives us a lot of flexibility. I think it's obviously one of the underpins of our business.

It also gives us some flexibility in terms of sales and leaseback when we think it's the right time to do it. But let me hand you over to Hemant.

Tim. So yes, you're right, it was 2018, beginning 2019 when we last did a full valuation of our property portfolio.

When we did that, as you mentioned, the valuation came out in a range of between GBP 4.9 billion to GBP 5.8 billion. Effectively, it was done on a careful set and leaseback basis for each site with an effective yield of 4.5% to 5% was assumed for the portfolio.

I think since then, it's a little difficult because, obviously, since then, we've had COVID and then sort of kind of economic disruption, particularly with interest rates moving. And we haven't got a huge amount, a huge number of evidence points to revalue the properties as it stands at the moment.

What I would say is that 4.5% to 5% yield in those years of pre-COVID, although we've had a huge number of transactions, generally, we're beating that level of 4.5% to 5%. So, we were confident that, that valuation at least held better than what we're seeing.

Clearly, we've seen some very recent disruption over the last 6 months with interest rates moving significantly and therefore, have an impact on property investments as well.

Having said that, we don't -- although we have a [ low evidence], we don't see anything that would change our view that that is still a reasonable range for our valuation of our property asset, plus some additions since then as well. The bit of evidence that we see with conversations we've had with disposals that would indicate what those are all about.

But I'd just reiterate, we obviously haven't had many since the big hike in interest rates that we saw in the autumn last year.

Okay. And is there a reasonable observation that you are churning more based on some of your comments and not afraid to keep doing that in certain markets?

I mean, one of the things that Dominic mentioned is one of the advantages of having a majority freehold stake that it does allow us to optimize our stake much more than other businesses that are quite different model we'd able to do. And obviously, we've got this room target of 125,000 rooms.

So we're continually thinking about adding rooms and optimizing the number of rooms we have in a particular catchment and where they might be. So, there will always be a level of churn that is involved.

As we gradually add rooms, there will always be a level of churn where we are disposing of [indiscernible] we don't need in the catchment because we're able to find other rooms in new hotels or expect other hotels in that catchment. So, I wouldn't read too much into it.

I just think it will be an ongoing feature of our business, and it will ebb and flow depending on our ability to optimize in a particular fashion at a particular time.

My first question is on pricing. I think on the last conference call, you mentioned a UK like-for-like of around 3% to 4% to cover inflation.

And they've given the [ FTR ] that so far has been strong, and given actually that you take less pricing than peers last year, do you think that you can price ahead of inflation this year?

And then my second question is around buybacks. You mentioned an initial buyback in H1.

Should we take that to mean that there's more scope for bolt-ons or M&A in the second half of the year in the UK or Germany? And then assuming that you're applying the ARR framework, what level of [indiscernible] you have on doing buyback?

Jaina, I appreciate your questions. So, I think let me take the first question and then part of the second question, and I'll hand you over to Hemant.

I think in terms of the pricing question, so you're right on what you said. We have taken quite substantial market share overall.

That has been driven in large part by higher occupancy levels. And actually, I think we've optimized and I've been super impressed by the work of the price and the yield management team have done and do.

I think we've done a really good job of optimizing the inflection point between occupancy and pricing. And I think what underpins our brand overall is a value perspective.

And I think we've continued to offer. So whilst our room rates have gone up, we've continued to offer really compelling value.

And I think that's one of the things that's driving our long-term growth aspirations so that we can profitably grow.

I think then kind of within that, we talked about the structural decline in supply earlier and then some of demand signs looking really good. So leisure demand holding up and business demand picking up.

All 3 of those things give us a level of confidence about demand and pricing moving forward. And what we said is, effectively, we need to see, like-for-like, the 3% to 4% level to cover the inflationary pressures that we're facing.

But we've also just said that in the first 7 weeks of trading. We've seen very strong numbers.

So as Hemant said, it's unlikely to see those numbers continuing for the whole year, but we do have a level of optimism about the hotel demand environment, particularly how Premier Inn performed within that for the remainder of the year.

I think then in terms of the buyback question, and I'll just reiterate what I said earlier to Vicki really, which is we've got a framework and I like the framework because it's really quite clear on what our hierarchy is. And we start off with saying we're investment grade, we'll look at organic investment, investment in our own business and are confident of the return on inorganic opportunities and then we look at shareholder returns.

I wouldn't read too much into how we've spoken about their framework there, other than to say it's a framework. We're committed to that framework, and we'll continue to apply it.

We always, as a business, want to allow flexibility if opportunities come up to invest both in our business and inorganic opportunities. And that's how we've applied the framework.

That's why we've announced what we have done today, and we'll continue to apply that framework and we'll update on the interest. Do we think there will continue to be opportunities for us to invest in our business to drive long-term returns?

Yes, we do. We think that's one of the things that's underpinning the strong performance we've got in the business, but we're committed to the framework moving forward.

Yes. I think your question on ARR framework in relation to buybacks.

Yes. So, I mean, we still see attractive returns and we still expect to get attractive returns from buybacks.

And we will make sure we continue to use those as part of our capital allocation framework that we've discussed. [ That's the only thing ] I can say on that at this stage.

Perfect. So, I mean UK peers spoke about being happy with an 8% ARR, is that in line with your thinking?

Like I said, we haven't talked about that. So what we will do is we -- so we haven't talked about that externally.

And I'm not going to talk about that now. But what I will say is that as we acquire the capital allocation framework, clearly, we're going to think about our different ways of creating shareholder value, whether it's through room expansion or whether investing in rooms for long term, whether it's investing back and giving back to the shareholders by dividends or through buybacks.

So, we'll make sure we optimize that mix for the next long-term with our shareholders.

Welcome back, Dominic. Just coming back to food and bev.

You've given the sensitivity to change in sales. In the past, you never split out the profitability of food and bev.

And I don't know if it's a consideration to do that going forward and if you can say any commentary on current profitability that would be interesting.

And then secondly, you spoke about bigger upgauging like in [indiscernible] of hotel rooms. You've obviously got 2 very small brands having that.

Do they still -- are they still part of kind of expansion plans? Or should they even be part of the group?

Thanks, Jarrod. So let me take both parts of those questions.

So firstly, on the food and beverage, as you say, we don't split out the profitability. We do talk about the sales.

We don't split out the profitability. We do think of it as a core part of the customer offer.

And as I said earlier, the breakfast is particularly important, is particularly important to our guests. We're not planning on splitting out the profitability moving forward.

I mean, there lot of our sites are joint sites is actually quite hard to do that and to split out the profitability because in some of our sites, for example, [ numbers ] shared between hotels and the restaurants. But as I said earlier, we will continue to look at how we optimize and improve that performance of fees and beverage moving forward.

In terms of your comment about [indiscernible] and Hub and ZIP, ZIP is one hotel -- well, it's actually a really interesting experiment, which is [ hostel customer ] focused. We don't have big expansion plans for ZIP.

It's operating okay, but we don't see in the short term it turning the [ darn ] materially on the business. Hub actually is really quite -- is an exciting concept.

We've had Hub for quite a few years now. It's a -- I don't know if you stayed in a Hub or not, but it's a super clever concept.

So it's generally for city centers. It works where real estate prices are very high and you can get a higher number of rooms into the space, but the rooms therefore need to be smaller.

So it couldn't be branded as Premier Inn.

We had to create a new brand, and that brand is Hub, and it's very modern. They're small rooms.

They're almost like cabins and rooms, but they're very, very comfortable. I'm staying one night, for example, in Clerkenwell in the city.

It's GBP 200 a night. It's got a good food and beverage offer with a very limited number of menu items.

So it doesn't cost us much to deliver that food and beverage offer.

It's very high customer satisfaction that enables us to price very competitively in the market. And that's an interesting hotel [indiscernible].

We've been open for 11 weeks in that hotel. We opened it ahead of schedule.

So it has virtually no bookings when we opened it because we opened it 8 weeks early. Within 10 days, the hotel was pretty much full.

And that's a powerful distribution system that we've got as Premier Inn. A number of the new hotels that we're opening in London, including the Strand one will be a Hub.

So we're actually -- the Hub brand is going to get bigger and bigger. And we're actually excited about it, and we think it's got great potential.

Most of my questions were already answered. But I just had a remaining one on Germany.

When do you expect Germany to be profitable? You mentioned '24.

Or you postpone a little bit this objective?

No, I think Hemant covered this a bit earlier. So yes, we're still committed to hitting the breakeven point of 2024.

But that makes it sound like it's almost the end of our milestone far from it. We're focused on long-term returns of 10% to 14% in Germany.

We think there are real structural -- there are structural reasons why we believe we can replicate the UK model in Germany. So, we're excited about Germany.

That said, there's still a lot more that we need to do in Germany, where we've just reopened a lot of the hotels after COVID. We're spooling up the commercial engine in Germany rapidly.

There's more work that we need to do. But we're on a path there.

And actually, what we can see is we've got the opportunity to build a scale business in Germany with strong long-term returns.

One of the checkpoints of that is going to be hitting breakeven, and we're focused on doing that in 2024. But that is a checkpoint to a longer-term business.

We've invested GBP 1 billion in Germany, so we've made a big commitment. We think there's a lot of shareholder value to be created in Germany, and we believe we can build a really strong long-term business there, and that's what we're focused on doing.

Okay. If I may, if you had to compare the UK market with the German one, have you seen the same kind of evolution of the market with some independent closing in Germany?

Or is it not really comparable?

No, it's similar actually, Andre. A little -- there have been fewer closures in Germany of independents.

But the independent hotel sector in Germany is still down about 5% versus pre-pandemic, which is quite material. The reason it's not more, there was actually more government support in Germany during COVID.

That said, we believe a number of independent hotels in Germany are going to continue to struggle as they face inflationary cost pressures in Germany. And if they're independent trading hotels, harder for them to drive the revenue line.

So, we think that, that independent sector will probably continue to decline, which gives us the opportunity. The other element of Germany that I find particularly interesting is the branded budget hotel market in Germany is relatively very small.

It's smaller than the UK, and it's very fragmented, which, again, we see a long-term opportunity for us. We think there's an opportunity to build a scale budget, mid-scale operator in Germany.

And if I may follow-up on that side, do you see any aggressive strategy from your main competitors? I'm thinking about Motel One, B&B, Accor.

Do you see them being really aggressive? Or do you have the feeling that you are the most aggressive one at the moment in the market?

Well, we are the one that's opening the most hotel rooms, and you can see that in one of the slides in the presentation. I mean, we're opening materially more rooms in a competitive set, which means that we are scaling faster than anyone else in the German market.

From a commercial point of view, they're all commercially run rational organizations and they behave in the market. They run good businesses, and they're growing, but they're not growing as fast as we are.

So, we are scaling faster than anybody else in the German market. And I'll just reiterate, it's very fragmented.

So whilst Motel One and B&B are 2 of the larger operators, they are still a very small percentage of the total hotel market in Germany, and that fragmentation is a long-term opportunity.

Just a couple of slightly bigger picture questions from me if that's okay. First one, one of the questions I get asked the most about is elasticity demand in this sector.

Of course, prices have gone up a fair bit for customers. Customers are showing there some slowing.

But I just wonder how much headroom you think you might have on pricing? Of course, I appreciate you've raised pricing less than your competitors, but any thoughts on how much more you are going to go would be helpful?

And then secondly, Dominic, [indiscernible] your first sort of formal address to the city as Chief Executive and the businesses, as you've alluded, has been run very well over the last few years. And I just wondered, in terms of emphasis from yourself, what do you think your priorities are and where differences of emphasis might be?

Okay. Thanks, Joe.

Let me take the first question first, which was about elasticity of demand. I mean, I think it's really interesting when you look at our room rate.

So the first thing it says, we are in the value space. And I think that's the right space to be in the climate that we're in now.

And clearly, consumers are facing some pressure with inflation and the cost of living crisis. And therefore, I think you either want to be the absolute luxuriant or you want to be in the value space.

And we are firmly in the value space. So, that is definitely -- that is the right space, I think, for us to be as an important part of our proposition, I think what is one of the items that has led us to have this successful growth.

The second thing I'd point out is, if you look at our room rate growth, if you look at the numbers that we've just outlined for full-year 2023 versus full-year 2020, our actual room rate is only up GBP 10 between 2020 and 2023, which has actually underlines the fact that, A, we're great value; and B, there is opportunity for us to continue to drive that room rate and we think hold on to strong occupancy that we've got.

The other point that I'd make is back to talking about the balance that we've got on the business, which is, it's beautifully balanced between leisure and business. And there is a somewhat different elasticity of demand generally between leisure and business.

That said, I think we've seen that elasticity drop a little bit in leisure since the pandemic because people are focusing on experiences and people want their summer holidays. And that's why I think we've seen leisure demand hold up.

And then the second part is business travel, which is business travel is back. Business people are back out and about.

We've all seen that in London, the cities and in the regions, and we're well placed to take advantage of that. So that gives us some level effectively of hedge as we go through the year.

So if there was a bit of a softening in leisure demand, I think we've got the opportunity to continue to go after the business demand. So, I think this balance in the business and the strong market position we've got and the structural decline in the hotel market are 3 really important points here that effectively somewhat changed the dynamics of elasticity.

The second point, a question that you asked me was about Whitbread. I mean the first thing I'd do is I'd reiterate what I said at the beginning, which is, it's great to be back at Whitbread.

It's a wonderful company. Alison and the team has done a great job, and we've come out of the pandemic really strongly.

The core strategy that we've got is the right strategy, and I think you can see that in the results today. So focusing on continuing to successfully profitably grow our UK business, really replicating that model in Germany and growing in Germany and optimizing our food beverage offering whilst landing the core infrastructure projects that we're focused on at the moment, they're the priority areas that I've got.

But it is evolution of resolution. That said, we're focused on accelerating at pace.

We're focused on really building the energy as we come out of the pandemic and the outperformance currently is helping to support that. So it feels great to back at Whitbread.

We've got the right strategy. It's how do we make sure we execute that strategy, that pace to continue to perform so well.

I think that sounds like that was probably the last question. So, I'll wrap up now.

I'd like to thank you all for your time today. I know you had a lot of information to go through in a very short period of time.

So thank you all for doing that. Thank you for finding the time today to be on the call.

It's great to talk to you all. A great set of questions.

And from Hemant and myself, thank you very much. Thank you.

Thank you.

Thanks, everybody.