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Summary
- Restrictions from Indoor Hospitality eased in England, Wales and Scotland from 17 May
- With economy reopening, Government has achieved another milestone towards a roadmap for lifting lockdown.
- Whitbread PLC has outperformed the midscale and the economy hotel market in UK since reopening in August 2020.
Restrictions from Indoor Hospitality has been eased for the first time in the UK since the first lockdown was imposed, except North Ireland which is due to reopen on 24 May. But whether the consumer will follow COVID social distancing rules or continue showing reluctance to visit pubs and restaurants remains to be seen in the days to come. However, the move to allow indoor dining will bring the country close to normality and eventually help in supporting all the ailing industries like hospitality, tourism and aviation.
Also Read: What Is the Long-Term Future of Restaurants in the UK?
Fear of Missing Out (FOMO), a well-known irresistible phenomenon which leads an investor to buy stocks has come into play as investors will not want to miss the opportunity created by the lifting of restrictions for the hospitality sector stocks. Let us have a look at 2 stocks that are worth watching based on their strong fundamentals and past performance.
Intercontinental Hotels Group PLC (LON: IHG)
The shares of the hospitality company dropped 2.05 per cent, trading at GBX 4,787 on 19 May at 10:40 GMT+1. The company has a market capitalisation of £8953.78 million.
Despite experiencing an improvement in demand during the first quarter of 2021 led by Americas and Greater China, Company recorded a large decline in revenue per available room (RevPAR). Group RevPAR was down 50.6 per cent as compared to 2019 (down 33.7 per cent from 2020). In 2020, company recognised $765 million of System Fund revenue, down from $1.4 billion in 2019, reflecting lower assessments due to pandemic.
Positives to count on:
- The company repaid £600 million UK Government COVID loan (CCFF) at maturity, total available liquidity as on 31 March 2021 is $2.1 billion.
- Recorded occupancy in the three months ending March 2020 had averaged 40 per cent across its hotels.
- Bettered against the Upper Midscale section all through 2020. Opened 136 new hotels, bringing total estate to 2,966.
Also Read: Performance Of Pubs And Restaurant Stocks Amid Likely Total Social Lockdown Plans
Whitbread PLC (LON:WTB)
Whitbread, the leading hospitality business and owner of Premier Inn chain stocks were down 1.01 per cent, trading at GBX 3,053 on 19 May at 10:38 GMT+1. The company has a market capitalisation of £6,228.59 million.
For the last financial year FY20-21, Whitbread’s total food and beverage sales were down 74.4 per cent, which included periods of three national lockdowns. Statutory revenue for the year was down 71.5 per cent to £589.4 million compared to £2,071.5 million a year ago, leading to a statutory loss before tax of £1,007.4 million.
Positives to count on:
- The company is planning to focus on actions to reduce cash outflows which will eventually help in protecting liquidity. At the end of FY20-21, the cash and cash equivalents of the company stood £1,256.0 million.
- The company has strengthened its balance sheet by successfully completing the £1 billion Rights Issue in June 2020 and £550 million Green Bond issuance in February 2021.
- Whitbread is expecting to invest over £350 million of capital in FY22 and expand its footprints in Germany from 30 to 72 hotels.
- The company is expecting strong leisure demand in coastal and other tourist locations during the summer, which represent nearly 15 per cent of hotel estate.
