Whitbread (LSE: WTB) shares have increased by almost 6% since the beginning of 2021. The stock is up 35% during the last 12 months.
Of course past performance isn’t an indication of future returns. But I reckon Whitbread shares can keep climbing. I tipped the stock as being my one of my favourite ‘reopening’ shares in March. I’d still buy, and here’s why.
Trading update
On the whole, Whitbread’s first quarter trading update was positive. 98% of its UK hotels and restaurants are now open. Accommodation as well as food and beverage sales were down during the three month period since government restrictions were in place most of the quarter.
But what’s encouraging is that there are “very strong forward booking trends in tourist locations throughout the summer, and improved forward bookings across the majority of the rest of the estate, with the exception of airport locations and central London”.
This indicates that a recovery is happening. In my opinion, the summer staycation boom is a step in the right direction in terms of returning back to pre-pandemic normality. Large events and business travel is the next step. In fact, Whitbread is continuing to see a “gradual increase in business demand”.
Outlook
The company guidance remains unchanged from what was said at its full-year results in April. Despite the four-week delay in the UK government’s step 4 lockdown release plan, the Board remains confident.
It’s encouraging that the company expects “leisure demand in coastal and other tourist locations to remain very strong throughout the summer”. This emphasises that many are going to holiday in the UK given the travel restrictions. And Whitbread is in great position to capitalise on this trend.
But the firm does highlight that the “full recovery of leisure demand is dependent on the final release of lockdown, and the return of unrestricted events”. I completely agree with this statement and investors will have to wait and see what the UK government announces near the time.
Whitbread also mentions that it doesn’t expect office-based demand to recover until the autumn. If this does happen then this should fall nicely after the summer staycation boom and should driver the shares higher, I think.
My view
Things are starting to recover for Whitbread. The company has a strong brand and value offering, which should help. The UK isn’t fully out of lockdown, but when it is travel within the UK should resume to pre-pandemic levels. This should improve the company’s revenue.
But as I mentioned earlier, this is highly dependent on the UK’s step 4 of lockdown easing. If there’s another Covid-19 delay then this could hit Whitbread shares.
The company also faces stiff competition from other hotel chains as well as the likes of Airbnb. Customers are fickle and like value for money, so there’s no guarantee that Whitbread will emerge as a winner from the staycation boom.
Despite these risks, I think things look promising for the firm. It’s starting to see a good recovery and I reckon this could continue. I’d buy Whitbread shares.
