Sales rise again as Costa and Premier Inn owner Whitbread adopts living wage

Premier Inn and Costa owner Whitbread reported a 3.3% rise in like-for-like sales, as the company said it is taking a series of measures to adapt to the new compulsory living wage set by Chancellor George Osborne. It reported a sales rise in the 11 weeks to 13 August, which was weaker than in the first quarter when like-for-like sales were up 4.3%. Whitbread's revenue was largely carried by Premier Inn and Costa sales.

"We are continuing to deliver our ambitious organic growth plans with another good quarter," chief executive Andy Harrison said. "Premier Inn grew total sales by 11.6% with rooms available growing by 7.9%, total revpar growing by 3.9% and occupancy remaining high at 87.0%."

Although the company's restaurant business only expanded like-for-like sales by 0.6%, Harrison said it still outperformed the "soft" market, but the company still depends on its big coffee and hotel brands to generate revenue growth.

Whitbread saw its sales rise in London especially, where its restaurant and hotel business expanded by 21.1% in the 11 weeks. Its Costa sales were up 4.0% on a like-for-like basis. Harrison also said the company might increase prices and take a series of other measures in order to adapt to the new living wage, which was announced in Osborne's summer budget in July.

"We are developing plans to adopt the recently announced National Living Wage," he told investors. "We shall mitigate this substantial cost increase over time with a combination of productivity improvements, boosted by investment in systems and training, efficiency savings and some selective price increases."

It is not the first time a hospitality giant has discussed how the living wage would affect business. Wetherspoon's Tim Martin said the living wage would shake the grounds of the pub industry, saying the disadvantage is compounded by a large VAT and business rates disparity between pubs and supermarkets, making it harder to compete with the latter.

Apart from the living wage, which will ensure all workers earn at least £9 an hour by 2020, Whitbread is also preparing for the replacement of Harrison by current director of Lloyds retail banking branch Alison Brittain. She will take over as chief executive in January 2016, making her only the sixth female CEO of a FTSE 100 company.