UPDATE 2-Whitbread sees signs of economic recovery in UK regions

Tue Jun 17, 2014 5:30am EDT

* Q1 total sales up 13 pct, like-for-like sales up 6.9 pct

* Premier Inn sales up 9.5 pct, RevPAR up 8.8 pct

* Costa UK sales up 4.5 pct

* Restaurant sales up 4.4 pct

* Shares rise up to 3.6 pct, up 43 pct over last year (Adds detail, CEO, analyst comment, shares)

By James Davey

LONDON, June 17 (Reuters) - Whitbread, Britain's biggest hotel operator, said growth in demand outside of London was a clear sign that the country's economic recovery is gathering pace.

Shares in Whitbread rose as much as 3.6 percent on Tuesday after a strong performance from its Premier Inns hotel business drove a 6.9 percent increase in the company's underlying first-quarter sales.

Premier Inn's like-for-like sales rose 9.5 percent in the 13 weeks to May 29, while revenue per available room (RevPAR), a key industry measure, increased 8.8 percent.

While the London hotel market has been strong for over a year as Britain emerged from a prolonged economic downturn, that has not been the case outside of the capital.

"I think what's interesting is if you look in the UK regions, where RevPar for the total hotel market is up 9.2 percent," Chief Executive Andy Harrison told Reuters.

"We know that hotel demand is quite closely linked to economic activity, so it tells us that there are clear signs of economic recovery in the UK regions which we were not seeing a year ago," he said. "We are seeing a good performance right throughout the UK."

The Bank of England says there is room for further growth in the economy before it raises interest rates although some of its policymakers have started to say they see a growing case for a rate hike.

Whitbread has grown rapidly in recent years due to demand from cost-conscious customers for affordable hotels and an increasing trend for takeaway coffee which has driven growth at its Costa chain.

Costa UK's first-quarter like-for-like sales grew 4.5 percent.

Underlying sales at the group's restaurant business, which includes the Brewers Fayre and Beefeater brands, rose 4.4 percent, helped by a weak comparative number in the same period last year when the weather was poor.

"Underlying, the restaurant market is finding life tough because consumer real disposable income is under pressure. However, there are more people in employment, the housing market is stronger and confidence has picked-up," said Harrison.

The group's overall first-quarter sales compare to like-for-like sales growth of 4.2 percent in the 2013-14 financial year.

Shares in Whitbread, which have risen 43 percent over the last year, were up 149 pence at 4,316 pence at 0850 GMT.

Prior to Tuesday's update, analysts were on average forecasting 2014-15 pretax profit of 460 million pounds, up from 412 million pounds in 2013-14.

"Although comparatives become more difficult in H2, we consider risks to forecasts are on the upside," said analysts at Oriel Securities, who have a "buy" rating on the company's shares.

Whitbread has 43 new Premier Inn hotels under construction in the UK and expects to open around 4,500 new rooms this year. Costa is expected to open around 300 net new stores this year. (Editing by Kate Holton and Tom Pfeiffer)

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