Morning Note: Market News and an Update from Whitbread.

Market News

The Federal Reserve kept interest rates unchanged but signalled growing support for rate hikes later this year. Half of FOMC members now expect at least one rate increase, with the central bank sharply raising its inflation forecasts amid the economic impact of the conflict in the Middle East. Meanwhile, Fed Chair Kevin Warsh declined to provide guidance on the next policy move but emphasised that inflation has remained above the Fed’s 2% target for several years and reiterated the central bank’s commitment to restoring price stability. The yield on the US 10-year Treasury ticked up to 4.44%, while gold slipped to $4,290 an ounce.

Brent fell to around $78 per barrel on Thursday, extending its decline toward the lowest levels since late February following reports that the US and Iran digitally signed their interim peace agreement. A US official confirmed that the memorandum of understanding has taken effect, although it remains uncertain whether Iran has already started measures to fully reopen the Strait of Hormuz. According to reports, the deal includes the swift reopening of the key shipping route and the removal of sanctions on Iranian oil exports, while negotiations on nuclear matters and possible additional economic incentives for Iran are expected to continue.

US equities moved lower last night – S&P 500 (-1.2%); Nasdaq (-1.3%) – and generally across Asia this morning – Hang Seng (-2.2%); Shanghai Composite (-0.4%). The outlier was Japan, where the Nikkei 225 rose by 1.7% to a new high. The Bank of Japan will raise rates again by December, according to 90% of economists surveyed by Bloomberg.

The FTSE 100 is currently 0.7% lower at 10,449. Companies trading ex-dividend today include 3i (2.08%), British Land (2.62%), Compass Group (0.78%), and Land Securities (3.39%). The by-election in Makerfield today will be closely watched, as a victory for Greater Manchester mayor Andy Burnham would clear the way for him to replace PM Keir Starmer. Results are expected tomorrow. The Bank of England is expected to hold rates as inflation proves less of a threat than feared and energy costs fall on hopes the Middle East conflict is ending. Sterling trades at $1.3305 and €1.1545, while the 10-year Gilt yields 4.76%.

Source: Bloomberg

Company News

Whitbread has today released a trading update for the 13 weeks to 28 May 2026, the first quarter of its financial year to end-February 2027. The statement highlights the company delivered a strong and improved performance and remains confident in the full year outlook. In response, the shares are up 1% in early trading.

Whitbread is the owner of Premier Inn, the UK’s largest and best-known hotel brand, with a 12% share of the total UK hotel market, almost twice that of its closest competitor and significantly ahead of the global midscale and economy hotel brands. The group also has a growing presence outside the UK and Ireland, with Germany representing a significant opportunity to expand. The restaurants currently include Beefeater and Brewers Fayre.

In April, the company outlined a new Five-Year Plan. Key initiatives include:

• Extending the Accelerating Growth Plan to convert remaining branded restaurants to an integrated food and beverage offer. The aim is to exit from all remaining branded restaurants in the UK to become a pure-play hotel business.

• In Germany, now the group has reached profitability, the market strategy will be optimised. The aim is still to deliver room growth of over 50% to reach 18,000 rooms by FY31 but the company is shifting its growth focus to accelerate free cash flow and return on capital. 

• Reducing capital intensity by shifting towards leasehold growth. Net capital investment will be reduced by over £1bn, with £1.5bn of property recycled to fund future growth.

Overall, the group is planning to grow its estate to 96,000 rooms by FY2031, as it progresses towards the long-term potential of 125,000 rooms across the UK and Ireland.

These changes are expected to deliver an incremental adjusted profit before tax contribution of £275m by FY31 and increase group Return on Capital Employed by 500 basis points. The aim is to generate £2bn of free cash flow available for shareholder returns by FY31

During the latest quarter, total group sales rose by 2% to £727m, with positive trading performance in both Premier Inn UK and Premier Inn Germany, partially offset by the expected reduction in UK food and beverage sales as a result of the Accelerating Growth Plan.

In the UK, the company continued to grow ahead of the wider market. Total UK Premier Inn accommodation sales were up 3% to £498m, with like-for-like (LFL) sales up 2%. RevPAR (revenue per available room, the key industry operating indicator) rose by 1.8% to £63.10, with good occupancy (79.1%) and average room rate of £79.77.

The group is competitively well-placed to outperform other budget branded and independent operators, as both have become increasingly financially constrained. In the latest quarter, the group enjoyed continued outperformance versus the wider midscale and economy market with a RevPAR premium of £6.81. 

UK food and beverage sales fell by 5% year-on-year, performing in line with management expectations reflecting the impact of the Accelerating Growth Plan. The LFL decline was 2%.

In Germany, demand strengthened through the quarter and the company continued to outperform the wider market as it progresses towards becoming the country’s number one hotel brand. Total accommodation sales were up 13% in local currency and by 16% in Sterling terms (+5% LFL), led by continued estate growth and the benefit of commercial initiatives. Total estate RevPAR slipped by 0.7% to €62.98, with the more established hotels RevPAR at €73, significantly outperforming the wider midscale and economy market. Food & Beverage sales were up 19% in LFL terms.

The group’s strong operating cashflow funds the ongoing investment in both the UK and Germany whilst maintaining a healthy balance sheet – net debt of £709m at the last balance sheet date at the end of February 2026.

Moving to the outlook, in the UK the group’s forward booked position remains ahead of last year, supported by peak leisure bookings. Whilst visibility remains limited, the strength of the Premier Inn brand and national coverage, together with a best-in-class commercial programme, means management is confident the company can continue to outperform the wider market.

In Germany, the forward booked position is also ahead of last year and with the brand’s increasing maturity and commercial initiatives the company is confident in driving further RevPAR growth and outperforming the wider market.

Overall, the company remains confident in the full year outlook. Whilst the company expects the impact of business rates to remain in line with its previous FY27 guidance, it is continuing to press the UK Government for changes to FY28 and FY29.

Source: Bloomberg