Welcome to the Whitbread full year 2021 Announcement Q&A Session. My name is Ruby, and I will be your moderator for today's call. If you would like to ask a question during the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Alison Brittain, CEO of Whitbread to begin. Alison, please go ahead. Good morning, everybody. Thank you for dialing in. I do hope you've had the opportunity of listening to the broadcast this morning to sort of get a firm grip on the start point, because we think we'll just go to Q&A, for this session. I suppose I will just have one small preamble, which is to say, this has been one of the most challenging years in Whitbread's 279-year history. We have been through turbulent times in that history before and have come through strongly, not least because we have a great operation, the advantages of a brilliant operating model, a fantastic brand, and a significant amount of financial flexibility, which we have used to good effect this year to manage through what, as I said, has been a very challenging year. I think we have weathered the financial impact so far and got a good position for liquidity. We've managed to outperform the market throughout the year, and now we are ready for the next stage of the recovery, which is to invest again in order to consolidate our position as a sector winner. With no further preamble than that, I will turn over to Q&A. Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure you are unmuted locally. If you change your mind, please press star followed by two. Our first question is from Jamie Rollo of Morgan Stanley. Your line is now open. Please go ahead. Morning, Jamie. Thanks. Morning Alison, morning everyone. Three questions, please. First one's just on your slide 6, which is a helpful breakout of the different buckets of customers and when you expect RevPAR to recover. You're saying a RevPAR recovery by calendar 2023. I'm just wondering if you could sort of hazard a guess for what the picture might be for calendar 2022, not fiscal, but calendar. Also, I might be reading too much into that slide, but you've got the sort of vacation bounce in Q3, and then you've got possibly winter COVID restrictions and obviously a later recovery for international and office workers. Am I reading it right to suggest that you're expecting a sort of sequential slowdown possibly in RevPAR after the summer? The second question is on the GBP 100 million cost savings. You still have one question. I already thought I'd got two already, Jamie. Carry on. Sorry. Fair point. On the cost savings, Nicholas, I think you said you expect to get back to pre-COVID margins by 2024. Why is that not aligned with the RevPAR recovery a year earlier? Why are the cost savings not sort of dropping through to the bottom line to increase your margins? Finally, if you could just talk a bit about the competitive environment. You talk a lot about it verbally, but Travelodge's data suggests they're outperforming the market by a similar degree to Premier Inn. Are you surprised by that given the advantages you enjoy? Thank you. Great. Thanks, Jamie. What I'll do is I'll take the first and the last, and I'll leave Nicholas with the middle, because that will make for a suitable sandwich, a delicious sandwich. You know, wonderful. Let's start with your slide 6 set of questions. It is quite difficult because we put the slide in obviously to try and be desperately helpful because we know that this is what's on a lot of people's mind just in terms of where we see the recovery. Of course, it is indicative only, and to sort of give you a sort of sliding scale, and I'll go through it. It is important to note, we are still operating to quite a wide range of scenarios. You know that one of the ways we've managed through the pandemic in the last year has been to continuously run scenarios. It's been a delight for the finance and operations teams to do that. That has helped us enormously think through the range of things that are possible and pre-plan for how we've managed certain eventualities, however obscure they might have seemed. We were pretty well prepared for lots of things which did happen, which sometimes were in our core scenario, but actually were sometimes in an outlying scenario. This is just one snapshot on slide 6 of a range of possible scenarios. I wouldn't want everybody to fixate on this and come back to it quarter after quarter to decide whether or not the colors have changed or we were right or wrong. We plan in a slightly different way, and you'd expect nothing less, I'm sure. All of the scenarios we plan to are plausible, even if some of them are worst-case and best-case than the one we sort of laid out here. Just in terms of going through it, you're particularly interested in the sort of recovery by 2023 and how we sort of see this. Well, we're already seeing the staycation bounce in terms of forward bookings and the excitement in the nation overall about people being able to get outside, go to pubs, and start seeing relatives and going on holidays. I think we're confident that we will see a pent-up demand for people to come out from that. I also think people are planning ahead to future leisure recovery. The leisure recovery we've laid out requires rather more to happen than just a great summer, because that isn't the highest proportion of our estate that gets that staycation bounce. Leisure recovery consists of weddings and concerts and sporting events and people traveling to see family and having family events at home, et cetera, and staying for those sorts of things. We're expecting that leisure recovery to take place over a longer period of time. On the business side, it's been pretty robust in terms of trade activity, so what we historically would have called blue- collar. Our 30%-35% occupancy rate at the moment is largely people who have to travel for work. They're essential travelers by definition because otherwise they couldn't stay with us. That's quite a good proportion of occupancy coming from that sector. We do expect that to recover fastest in the business sector. In the normal office worker recovery, given that we won't come out of lockdown properly till the 21st of June, and I'm not sure what restrictions, if any. I know the Prime Minister this week was very optimistic there wouldn't be additional restrictions post 21st of June, but that remains to be seen. I would expect probably office workers not to go back to the office in earnest, even in hybrid working practices, probably until after the summer. Say September onwards is sort of broadly how we're looking at it. Although, again, there was some excitement this week around inviting American travelers who were vaccinated to come to Europe, and I assume therefore the U.K., I think international recovery is actually quite a prolonged change in that. Yes, in terms of will there be any further lockdown or restrictions, will there be a top-up vaccination program in the winter when the NHS tends to be under more pressure and a resurgence of the virus which fares better in the winter than it does in the summer? We would be mad not to build that into our planning horizon. It would be lovely to think that it wouldn't happen, but I think it would be remiss of us not to think that we ought to plan for that eventuality, which I think you called out specifically, Jamie. Yeah. I think even the medical officers have all said to be ready for another wave later in the year. How big that is and what impact is, who k nows overall. Yeah. I've gone to your second question? Yeah. All right. You asked about the efficiencies which we've enhanced efficiencies of GBP 100 million over the next three years, your question was, we've said that we'd get back to like RevPAR in FY 2023, then the margins come back a year after that. Your question was why was the margin a year later? I guess there's two reasons for that is one is, we are going to be investing as we recover. You can see today we announced that we would be putting GBP 20 million investment into marketing and also channel management and development as well, which is positive. Hopefully, you've all seen our advertising on television, bringing back Sir Henry Lenny. The second reason, although we've got efficiencies of GBP 100 million, we do have inflation of around about kind of GBP 40 million-GBP 45 million. A little bit ahead of that at the moment. Inflation will be a little bit lower this year, more like kind of around about 35% because national living wage is lower at about 2.2%, but we do expect national minimum wage to go back up to around about 5%, which will push that inflation back up to GBP 40 million-GBP 45 million. The inflation just running a little bit ahead of our efficiency program, but making a good job to offset as much of it as we possibly can do as well. Third question was about competitors and particularly, Jamie, you were talking about Travelodge. Travelodge are doing pretty well alongside us, I think if you strip us out, the rest of the midscale and economy market is really doing very badly indeed. I think there's a couple of reasons for that. Firstly, I think that the model that we both operate to is advantaged. They also owner occupy and manage their business. They also deal directly with customers. They also over-index on U.K. domestic business. That model that is not an OTA international-led strategy, I think is advantaged currently and will be advantaged going forwards. I think that the businesses that have that model are doing better, and that is us and Travelodge. I think we're probably doing. I know there are some weeks where it goes either way, but I think that broadly speaking, we're doing better. I think one of the missing items for you to understand that is refunds. We, as you know, refunded hundreds of millions of pounds of bookings throughout the pandemic for each wave of government restrictions when terms and conditions would not normally have allowed it. We thought that was the right thing to do. Certainly in the first lockdown, when nobody could have seen what was happening and what was coming, and ahead of us building more flexible rate classes, that was the right thing to do. I don't think Travelodge did, and therefore they will be booking revenue, which is sort of not refunded revenue, if you follow my drift on that. I do think they're doing okay, and I think it's model related. I don't think they're performing as strongly as us in a number of ways which we analyze. I do think that they're likely to see constraint going forward. I think that they've probably got a liquidity position which is more constrained than ours, both because they have a very large debt level now, are very highly leveraged, have a very big rental roll, even with rent reductions that were approved as part of the CVA. I suspect that given their leverage, I doubt banks will be putting more cash in. The equity providers haven't been overly keen to do that either. I think they've also put debt in. Overall, I suspect, therefore, that investment in the business over the next two to three years, either for growth, refurbishment, or anything else, will just be a little bit more constrained. I think overall, that lack of constraint for us will help us in terms of the investment to win in time. Is that helpful? Yeah, very helpful. Sorry, can you just quantify the leisure events business, how big that is for you in your leisure segment? It's really hard to separate that actually, Jamie. We don't, because you don't know if people are staying for the football match or they're staying for other reasons as well. It's really hard to say. Okay. Thank you very much. Our next question is from Vicki Stern of Barclays. Your line is now open. Please go ahead. Morning, Vicki. Good morning. Just firstly, coming back to the point around the independents, I think you referenced in the presentation there's been a step-up in the independent attrition that you saw post the global financial crisis during sort of 2010 through 2012 period. Could you just sort of say what that looked like in terms of annual attrition compared with the sort of 1% average, I guess, you've seen over the last 10 years? Was it sort of 2%, 3%, 4% per annum during those years? Quick answer on that, Vicki, is it sort of went from 1%-2%. Okay, doubles. With that sort of, you're thinking now, obviously there's help in the system today, but you're thinking now as you look at that as a sort of example for what the next few years might look like? We're still 48% independent in the U.K., but it's 72% in Germany. It's enormous. The percentage of budget branded is so much smaller also in Germany. That move to budget branded is an accepted structural shift that is going on. I would expect in both markets to see some acceleration in the dropout, but we're not going to know that until we get through the next little period. There's a lot of support infrastructure in place for the sector at the minute. When that starts to be removed and with some weaker demand still and people having used up reserves, I think we will then start to see that play out. Two things. One is some of the independent sector coming out. Of other players in the market, a more constrained investment horizon because people won't have the cash flow and liquidity, and therefore less rooms growth. It's usually not the following year because when you've got a spade in the ground, you have to finish really. It doesn't make any sense at all to sort of mothball a project that's half-built. You usually see some supply growth going in, it dries up because people don't sign up new deals and across the board. On top of that sort of lack of refurbishment CapEx, which just means that product gets really tired quite quickly and people's brand dips and consistency dips. All three of those will be opportunities for Premier Inn, particularly as we don't need to stand still. We are targeting even this coming year sort of 45,000 new rooms growth, 2,000 Premier Inn Plus rooms, a significant refurbishment program as part of that, and a commercial investment to make sure that we are driving and farming demand that is out there. Thank you. Very clear. On the sort of commercial side, just sort of coming back on the guidance. The GBP 20 million marketing spend, should we think about that now as sort of recurring and in the base? That's sort of an element of that is to relaunch now and any of that- Yeah. ...will pare back in future years? Yeah, no, I think that's in the base now. I think that's in the base. Okay. A similar question on the GBP 20 million COVID safe cost, is that sort of things you have to do now to be COVID safe, or you think this is probably best practice going forward? The GBP 25 million for COVID safe kind of costs, that's mainly around labor, some consumables as well. We would hope we'd be able to. Well, hopefully that goes naturally anyway as COVID disappears, also we'd look to kind of naturally engineer that out. You'd hope that kind of goes over the next year or two. Great. Thank you. Lastly, just coming back to Germany, just an update, please, on the sort of opportunity in terms of any M&A ability to sort of pick up more portfolios, et cetera? A bit of the same position. We were pleased in October to do the first deal. It was good because it sort of really showed people that there were going to be opportunities. It was a distressed portfolio of which we cherry-picked the hotels that we wanted from it, rather than having to take the whole. It was therefore, from us, quite a unique deal and involved us moving over lease arrangements. Renegotiating with landlords for leases and therefore sort of setting rent positions at the right rate for us and getting contributions to refurbishments and getting on with it. It was not having to deal with brands rolling off or anything like that. I think that it was a helpful indicator of the fact that there was distress in the market. In the same way as in the U.K., there's probably a bit of a lag still, I think, with government grants and support propping up businesses through the next few months. I suspect we are therefore going to see more distress when those programs come to an end, and funnily enough, when demand starts to recover but has not recovered in full. During that recovery period, I suspect we'll see quite a lot more distressed assets and action being taken. We would anticipate that in Germany we would see some good opportunities in the market for non-organic growth, and we will be in a position because we're financially set up to do so, to take them if and when they arise. Great. Thanks very much. Our next question is from Bilal Aziz of UBS. Your line is now open. Please go ahead. Good morning, everyone, thanks for taking my questions. Three for me as well, please. Firstly, just again on the independents, I guess one of your competitors suggested that you do not expect some of the independents to open up as early as the 17th of May. It feels like your commentary is still very much that this will be a more gradual capacity reduction. Any comments potentially on that, please? Secondly, appreciate you don't have a crystal ball, but on the forward bookings, can you perhaps put those bookings in context of when you reached your peak occupancy in September last year and any expectations around that as we go into the reopening? Very finally, I appreciate this might be difficult, but any guidance for working capital for the year ahead? I appreciate this is lumpy, but thank you. I'll just kick us off really with the question on the independents. If we think about the U.K., 48% of the market independents, in normal times, the structural shift, which has been the case for many years, is about 1% of that market falls out every year. That's without there being a knock in any way. During the financial crisis, as we said to Vicki's question a minute ago, that was higher during that period and then settled back down. There's a sort of gradual decline of the independents, which is a structural issue, and we would expect, as in the last financial crisis, some acceleration of that for a period of time. In terms of people reopening, we would anticipate that the market will reopen on the 17th of May. We're expecting everybody to reopen that can reopen. We know that there will be, at that point, some people who choose not to, but we won't know who they are until either the 17th of May or actually till the 21st of June. Some people may wait till the 21st of June. At that stage, we'll have a view of what an initial shakeout in the sector might have looked like, and that could be not just the independents, it could be some franchise businesses which might be branded, there could be a whole raft of shakeout at that point. We are not expecting it to be enormous because people have had quite a lot of support. Don't forget, with a lot of independents, they'll be cash-run businesses, and they'll employ a lot of family, and they will therefore have managed through the pandemic. What we expect then is for the next 12- 36 months to be a period where we see more of a fallout of the independent sector and not much growth in other areas. That's the place where, from a structural perspective, it leaves a gap, and that's the gap that Premier Inn can fill. Don't know if that was clearer on what we think sees the independent position. You wanted to talk about forward bookings- Yeah. ...which is kind of hard to call. It's hard to call. All we can say, as Alison said earlier, is during the July, the August, and early September, it's the touristy months in the hotels where we have got tourist destinations, which is about 15% of our hotels. It looks pretty full. We were pretty full last year. We've had a bit more warning this time that we can open up, so we're a bit full a bit earlier, which hopefully has a bit of a halo effect, but there's not a lot else we can say there. Yeah. We would probably say we'd still expect our trades people to be traveling and that to sort of run relatively consistently with occupancy levels that we've been seeing already whilst we've been open for essential travel only. We've had a reasonable occupancy. Most of the people in that essential travel category will continue to be essential travel. That along with the uplift in leisure in the summer months should drive a higher occupancy level than we've been seeing. We can't really predict much beyond the summer months at this stage. Yeah. That's the U.K. In Germany, we're probably seeing Germany probably about two months behind the U.K. at the moment where they are just because they're a little bit behind the curve on the kind of vaccination program overall. Your last question was on working capital, which is difficult because it depends if you're on the up or you're on the down, which way it goes. We had a kind of GBP 70 million outflow in working capital due to deposits this year overall. Hopefully, we're growing and therefore there is a kind of cash positive overall. For planning purposes, I know a lot of analysts are using flat working capital at the moment just to be on the cautious side. Brilliant. Thank you very much. Our next question is from Jaafar Mestari of Exane BNP Paribas. Your line is now open. Please go ahead. Hi. Good morning, everyone. Two questions from me, please. Firstly, just on the CapEx guidance, could you elaborate on your GBP 235 million U.K. CapEx plan for full year 2022? How does that look in terms of maintenance versus expansion compared to the reduced level of this year? Actually maybe worth describing what counts as maintenance and what counts as expansion. Things like refurbishments, the rollout of Premier Plus, by how much are they reduced compared to your initial plans, please, or to a normal year? Secondly, very mindful not to read too much into slide 6, but I was curious, in parallel to those buckets of demand recovering, which is very much exogenous to you, what does your marketing schedule look like in terms of what you're doing to adapt and to drive that demand? For example, how do you market specifically to people who may not have taken a staycation at Premier Inn in years? Okay. Well I take the marketing question, and you take the CapEx question, Nicholas. On the CapEx, you're right, GBP 235 million for the U.K. for CapEx guidance next year. There's about GBP 100 million of that, which is based on what we call product improvement and maintenance. You're right, it is fairly broad. It covers anything from refurbishments, which is roughly around about GBP 45 million. We've got repairs and maintenance, which is just going to call roofs, windows, et cetera, overall. Then it also covers IT, and those are split kind of pinning 50/50 between the rest of that spend overall. That's all. Mm-hmm. And it- The rest are growth. Yeah. On marketing, we've got quite a number of commercial levers that we are working on at the minute. First of all, we've got quite a big marketing campaign, which is probably going to have quite a good share of voice. I don't think there'll be many others out, which is TV, social media, digital platforms, radio. It's a very multidisciplinary and integrated campaign. That sort of drives demand, and that'll drive demand from existing customers, but new customers as well, and we saw some very good statistics early on from that campaign. We're very positive about how that will help us with driving demand. We obviously farm the demand, and we have done a lot of work on our digital and search activity to make sure that we have more reach in our search activity than others. That's much improved. We've also reinvigorated our website with better user conditions, which means that we're seeing higher conversion rates through the websites. We relaunched our Business Booker tool and enhanced the credit management facility, particularly for small and medium enterprise businesses, where that is a real requirement, which again is causing us to get a much higher cut-through and conversion rate. We've broadened our use of Travel Management Companies to a very significantly broader group. That's business which is new business for us, because those business travelers would not previously been allowed to stay with us. If you have to book through a Travel Management Company, you can't book direct. That reaches a set of business customers we couldn't normally reach. That sounds like a beer advert. We think that therefore will help us both drive new demand and farm that demand better. It's quite a big program of commercial activity, some of which has been completed and some of which is ongoing over the next few months. Super. Thank you. That's super helpful. If I could maybe just follow up on the CapEx point. Am I correct in thinking GBP 100 million of U.K. maintenance compares to, in the last few years, it's been around GBP 150? If I'm correct, your competitor, Travelodge, is saying they can spend as much as GBP 40 million of CapEx in calendar 2021. At peak, they were GBP 65. I'm just curious, what are the sub-components within that? Do you think they're going to have to cut a lot more than you're doing? On the headline number, it's not fully comparable as a model, but it looks like their CapEx cut is only a tiny bit above yours. Does that make sense? I can't comment on them overall. There are some differences overall. We have a regular refurbishment of our hotels, the whole of our hotels, our bedrooms, and our ground floors, which hopefully you can see, and that comes through traditionally in kind of the RevPAR, the rate that we get as well. You'd expect us to do that as well. We also own 60% of our freehold, we're kind of maintaining the value in our freehold estate there, 100% leasehold, I think, nowadays as well. There are some differences overall. We've invested quite a lot in IT, making sure we keep that kind of digital 100% direct coming to us as well. I don't know what they've cut and what they haven't cut overall. Thank you. That makes a lot of sense. Thank you. Our next question is from Tim Barrett of Numis. Your line is now open. Please go ahead. Morning, both of you. Could I start with a question about food and beverage? F&B, it looks like it's down over 90% in Q4, obviously for regulatory reasons. How do you expect it to rebuild? Do you think we should expect it to be correlated with occupancy, or can you go faster this summer because of all the pent-up demand? The second area to touch on, please, would be Germany and German distribution. A very atypical year, I guess. It looks like you're at 99% direct, but I suppose we shouldn't read anything into that. Can you talk about the strategy for distribution in Germany this year? Thanks very much. Of course, to both. We'll probably both make comments on both questions. I'll kick off, but I'm sure Nicholas will intercede. You're quite right. Being completely closed tends to give you a problem in the F&B business, and we were, and have been, and are still largely closed. We have opened the first set of sites on the 12th of April from an outdoor perspective. They can do no more than break even when they're outdoors only, so just to sort of manage that expectation. We should be reopening on the 17th of May in full, but with social restrictions, which limits covers and makes it a more constrained environment. Then the 21st of June, we may or may not be relieved of some of the social distancing requirements. At the moment, I can't call that in terms of whether or not they will be relieved or there'll be another thing in place. For us, it's always a combination of local business and the return of local business and the return of local guests to the restaurant, and the return of the hotel guests and the sleeper/diner ratio. It is a combination for us of both of those things. Most of our breakfast business is the hotel. A good percentage of the dinner business is hotel, but rather more of it is local diners. My view is it will be a combination of the two. Nicholas, you want to. No, that's it, yeah. On Germany, yeah, you're quite right. As you know, when we started in Germany, we decided we would start by being direct only, and at the time, we only had Frankfurt as a hotel. If we went OTA, it would be hard to come off it. Whereas if we went direct, we can always go to the OTA. That's always a default option available at any point we want to pay the commission. At the start of this financial year, when we went into the start of this year, we only had three or four hotels trading, and two or three of those had only been opened for a matter of weeks. During this year, we've obviously grown the estate very significantly, but through acquisition of Foremost, where we've been rebranding. Closed the hotels and rebranded them during the year and refurbished them, taking the opportunity of very low demand year to do that. We bought the Centro portfolio in October. Again, we decided that in a world where occupancy levels are running at just over double digits, the best thing to do is to close them immediately and refurb as quickly as we can, rather than keeping them open during a quiet period and refurbing them when potentially demand might be coming back. Really, you can't read a lot into it. Our preference is to build a direct distribution model, which requires us to have brand awareness to do that, as you know. People have to know to come to you. We'd prefer it always to say to people that the best deals that they're going to get are through coming to us direct to our website. We'd like to start the marketing campaigns now. We have a national footprint with business customers and corporate customers who now can look at a portfolio of 30 hotels across many different towns and cities and start to have big business booking direct relationships with us as we do in the U.K. We are absolutely pragmatic. We are absolutely non-philosophical. What we want is the business to be a success, and if that success requires us to have some paid-for activity through commission and OTAs, then that is a route we would be perfectly willing to take. Yeah. The good thing is we can leverage off everything we've got in the U.K. All the work we've done that Alison described on the U.K. website, that's live in Germany as well. The work we're doing on travel management companies and GDS is all going live in Germany at the same time as well. You get that benefit as well. The 99% of direct, it's a very good number. That's a U.K. number. Overall, I think it's 100% in Germany at the moment because we're not using OTAs at all. Our airport sites usually fill up 1% or 2%, which are fairly quiet at the moment as well. You've just got to take that into account. Okay. Do you give a figure on marketing in Germany? It's a topic that comes up quite a lot in terms of how you build an Anglo brand into Germany. No, we don't. We've given in the guidance, we've given what the central cost, support center costs. We've got some marketing in there as well. It's got to give you an overall view. Okay. All right. Thanks, both of you. Our next question is from Alex Brignall of Redburn. Your line is now open. Please go ahead. Morning. Thank you very much for taking the question. I just have a couple of questions just to try and look at the recovery expectations. The OTAs have talked about how the smaller the property, the better it's doing, and Airbnb has been massive. The other alternative accommodation sites, their numbers have been massively outperforming the hotels. I guess my question on that is, what's your expectation as to a recovery? Because that's an entirely different message to what you're saying about outperforming the independents. I think the independents you're referring to are some slightly bigger properties. The smaller properties seem to be doing better. The second question is on corporate travel. Clearly, your corporate travel is quite blue- collar, but overall hotel corporate exposure is quite high and much of it is business. If corporate travel doesn't come back, then there is an overall loss of demand to hotels, and it seems quite difficult to assume that you will avoid price deflation if there is demand loss from the hotel industry. I wonder if you could talk about your RevPAR recovery in the context of probably some RevPAR deflation in the rest of the market, and how you would sort of avoid that. Follow-up questions to that and just in terms of what that might change in your outlook. Your plan on adding hotels and the return on capital assumptions that you have in your hotels, how would you flex those plans in a world where, and it's not your base case, but where RevPAR simply didn't come back to where it was before? How would that affect your new build strategy? Thank you very much. That's fine. Starting with the independent sector. The independent sector's quite varied. Of course, you can be in your mind, you might be thinking of an independent sector that's got small boutique, four or five-star properties that are well invested, offering a great guest experience. That's a small proportion of the independent sector. What's a bigger proportion of the independent sector would be the masses B&Bs on real seafront or Pimlico High Street, which if you see them, are incredibly under-invested, a bit random and not very safe and secure, and probably don't instill people with a huge amount of confidence in terms of their health and wellbeing. Actually, it's quite a sweeping statement to say either that small properties are doing better than large ones or that independents might do better than others. I think if I was calling out a theory at this stage, I would say in our estate, hotels that had good car parking were doing better than those with no car parking. In this environment, people haven't wanted to use public transport, and they want to be able to park their car outside the hotel. They would be the sort of things that were quite important to guests who are currently traveling and who might travel going forward. I think you're quite right in your assessment of the fact there could be trickle-down. You're right that white-collar office conference activity is the purview of the four and five-star market. The people with ballrooms and conference suites and theaters are the four and five-star players. Therefore, in the event that that demand isn't there, what will they do and how will they respond to that is something we will have to watch very carefully. Our price points are, don't forget, incredibly different. Pre-pandemic, our average room rate was about GBP 55-GBP 57. Compared to a four or five-star player's average room rate, particularly on event nights or for conferences, that is a very significant place they have to get to compete with us like for like. We can't rule out a trickle-down effect and the overall market demand effect. We don't think we're immune, but part of the competitive response that we've got has been broadening our own share of the business market through things like the Travel Management Company. In order to offset any of the trickle-down effect that we might see is to have a broader base in the first place. To do all of the credit management, the improving of the Business Booker, a lot of the business booking activity, once it's with us, given that people have discounted rates directly with us and are booking directly with us for their teams, that's very sticky business for us. Those are people are very loyal, and our systems are integrated into their systems, and they're booking for large numbers of employees to stay with us. Those are the actions we've taken to offset. Then finally on the pipeline- Yeah. We've done a lot of scrubbing. A lot of scrubbing. ...on the pipeline already. As soon as this happened, we ran all of our models, sites that we'd approved but hadn't signed. We really gave those a good scrub. A lot of those we walked away from. Overall, some of those we renegotiated as well. We're fairly comfortable actually, with the pipeline that we have. I guess in the U.K., that's where we're more focused on opening those pipelines and getting those efficiencies right, than necessarily signing up new and adding to that pipeline. We think that'll come again, but the focus right now is on opening the pipeline in Germany at the moment overall. We do expect, though, that- ...there will be constraint in the new supply coming into the market overall. We saw this in 2009 to 2014, 2015, that there was very little new capacity opened, which did help RevPAR overall, and if you get the independents decline. There may be a squeeze on price from above us. What we've seen historically is the four and five stars have to hold their price discipline because their square meter per room, per rent doesn't stack up unless you do hold that as well. We're fairly comfortable with our pipeline being able to deliver good returns over the longer term. Thanks so much for those answers. Just to be clear on the pipeline, the assumptions that you put into your models, is that as you've laid out to us in terms of the RevPAR recovering to pre-pandemic levels on the timeframe you talked about? Yeah. As I said at the beginning, we run a number of scenarios. Yeah. Well, thanks so much. Great. Thank you. Thanks, Alex. Our next question is from Joe Thomas of HSBC. Your line is now open. Please go ahead. Good morning, Alison. Good morning, Nicholas. Morning. Morning. I just wanted to ask you, on your presentation, the prerecorded presentation that you did, there were a couple of comments that made me stop and think. One was that you were talking about the return on capital in line with historic levels pre-COVID. There's another one about opening costs for new hotels that were in line with levels outlined at the Capital Markets Day in 2019. I'm just wondering why, over the course of this pandemic, you don't think that there has been an improvement in the outlook there. If we're thinking about market share, et cetera, why that can't get better and, on opening costs, perhaps why that can't drop. That'd be my first question. The second thing that I wanted to ask about is, you were alluding to the capacity again coming out of the market and hotels on real seafront and Pimlico High Street. What happens to those properties as they come out? Do they tend to be convertible into something else? I just wonder what the risk is that they end up in the hands of a competitor instead. The final thing is, I'm just a little bit confused on the GBP 20 million of investment and the chunk of that's going into corporate travel agents, et cetera. Is there going to be a RevPAR impact as well as a cost impact? Is that just the net impact that you're expecting to see going through the business? To just pick those up quickly. The last one it's not just about travel management companies. It's broader about investing in our distribution platforms, but it's also about advertising as well. Hopefully, you've seen our new advert, which went live a week ago as well. It's a broader matter overall. Just in terms of what happens to hotels on the Pimlico Road or Shepherd's Bush Road, one near me. Last time, a lot of them turned into residential developments, because that's probably what they're most useful. They might do that as well. They also tend to change hands into other hotels but drop a star or drop down a level. If they were a retainer hotel or just a different hotel, or they go into a B&B over it. Last time, it was mainly residential development. It'll be interesting to see if that's still there. It's still a hot housing market overall. I think that's probably what they'll go into. In terms of competitors, these tend to be small hotels. They tend not to go into the big IHG or the Accor brands. They're not that suitable for that. We haven't seen any expansion in IHG or Accor budget brands in the recent years. Your first question was just about return on capital and the opening costs, why we haven't seen improvements versus 2019, and why won't we being more bullish and have been talking that up. I guess, we look at our return on capital, we've given 12%, 13% return on capital over many years. We think that's a good return on capital. It's a good premium to where our WACC has been, and we don't think driving that return up above that is necessarily a good thing for the business in the long term. Actually, what's better is actually keeping that return, keeping that consistency, reinvesting in the business, reinvesting back in the customer again to build that long-term sustainability overall. That's really what we're trying to do. We know that if we can do that, no other business is in that kind of position to be able to do that, which gives you a really good competitive advantage as well. Secondly, we talked about it earlier, we are an inflationary sector. We do have to do a lot of work to make sure we're offsetting that. It's getting that right balance between using your efficiencies to offset inflation and to invest in the company overall. Thank you. Great. Thanks. Our next question is from Stuart Gordon of Berenberg. Your line is now open. Please go ahead. Good morning. Hi. Morning. If we look at your sales recovery scenario, and we frame that August to October last year, I think you've spoken about 33% is the business existing tradespeople bucket. Was that similar over that period last year is the first part. Second, if we look at the other buckets, obviously over that period, international leisure events and business offices, you have today are probably still pretty close to zero. How would you have framed the construct of that occupancy improvement, in 2020 amongst the other buckets, and in particular, what was the kind of swing between the business and leisure components over the summer months? Just as a sort of housekeeping point, it looks as if cash burn from the sort of GBP 80 million per month you speak about when all the hotels are closed through to break even is fairly linear. Is that a fair assumption to make as we go through the recovery phase? Thanks. It's quite hard to answer the question on occupancy. I'm going to give it a go nonetheless and judge myself whether or not I'm really doing justice to the question. Last year we were closed from the start of the year until July, and we reopened the hotel estate during July and August and had the benefit of a good bounce of leisure guest travel in staycation-type properties. As we've said, sort of 15% of our business. A return to sort of trade work and people who have to physically be present at work during the summer and then into September and the start of October. I think we saw occupancy peak at about 58%, if memory serves me right, at about that period. Then we went into tier restrictions. In some places, quite severe tier restrictions and lack of movement around the U.K., which then culminated in a second national lockdown, more tier restrictions and the third full lockdown from Christmas onwards to the end of our financial year. Really that is quite a mess to sort of be able to sort of unpick into giving you any real sense of trends. What I can be clear about, though, is that under normal circumstances, in normal years, about 50% of our business is leisure and 50% is business. Of the leisure travel, there is of course the coastal and tourist and destination areas, which is about 15% of our estate. There is a very, very broad leisure market that stay with us for all sorts of reasons. Not just events, but family occasions and general sort of visiting people and having weekends away and all, a huge array. That recovery we are expecting to see almost a better recovery over the course of the next few months because the restrictions feel like, I suspect for people, that they are coming to an end. Our vaccination program is complete. Last year, there wasn't a vaccination program at this point in time, and therefore, there was much more cautiousness and people very much more circumspect. I would be expecting to see both the staycation bounce and the leisure recovery, and particularly that leisure recovery being maintained post the first week in September. Last year, probably, certainly the staycation dropped very dramatically when schools go back and didn't really pull forward everything else. On the business side, just to reiterate again, half our business is usually, for want of a more refined term, blue- collar, and half of it is white collar, but we don't index on conferences and meetings because we don't have those facilities. We don't have gyms and mini bars. We don't have ballrooms, conference theaters or meeting rooms. We index on people, cost-conscious business travel. We have a high proportion of business that books directly through our Business Booker tools. We have not historically ever played in the travel management market. That is a brand-new addition that we have made this year in signing into travel management companies to grow our distribution reach. We're expecting the blue-collar market, which we have seen a sort of relatively resilient position on during lockdown, during the closed period, to continue and to continue its recovery and be a relatively strong recovery. We're expecting the white collar office work type business to be much later to recover. Certainly not starting that recovery really until after September and to take a while to come back and to potentially have structurally altered, which is why we're growing our reach in business to make up for any lost ground that may be there. Hopefully, that covers it. Don't know how else to sort of describe this versus last year. Just on the cash burn, Stuart, good question. Just in the first half of the year, we talked about kind of when we were closed about a GBP 80 million cash burn when we were completely closed. That actually, because we were opening in the first month in March, turned out to be about GBP 75 million cash burn per month across the first six months. Per month. In the second half, we've had kind of half that, so it's been about GBP 40 million cash burn per month, and that's been roughly split about GBP 25 million operating cash outflow per month and about GBP 18-GBP 20 CapEx per month overall. Will that continue to be fairly linear as we head towards sort of the mid-50s? Yeah. We've given cash break even at kind of 55% occupancy rate- Yeah ...down 6% or 7%. Okay. Thank you very much. Thanks, Stuart. Our next question is from Leo Carrington of Credit Suisse. Your line is now open. Please go ahead. Good morning. Good morning, Leo. Morning. Morning. On the TMC distribution opportunity, why hasn't this been a focus in the past? Is this a lower net margin business for you, or some other reason? Have you quantified how many extra guests this could reach, do you think, perhaps on a normalized basis? Second question on the Premier Plus rooms, restarting the rollout of these. Can you remind us on the pricing uplift that you'd expect to have from these, how that's trended over the last year with all the restrictions? If you could do your best to quantify the rollout in 2022 and 2023, that would be very helpful. Yes. I'll kick off and then Nicholas will intervene. For TMCs, we've historically viewed them a bit more like OTAs in that you have to reach agreements with them on what commission levels, how commission's charged, what rates are used or not used. We have historically had some relationship with TMCs but not paid any commission at all. Largely, TMCs have used us because their clients might have asked for us, rather than because they're promoting us through the TMC into their clients. We haven't had to because historically, of course, Tuesdays, Wednesdays and Thursday nights, we were pretty full, the peak business travel nights, which would be the ones they would be looking to fill. If you took an example of a hotel on the South Bank, that hotel would be full on those three nights. Why would we need to go into that sort of distribution arrangement? Now that we think that we ought to play in order to broaden the reach in case we have any issues with any structural decline in any part of that white-collar workforce, particularly because it's mainly white-collar and TMCs, we think that this is a good opportunity for incremental access to guests. There are quite a lot of TMCs in the U.K. There's quite a lot to individually negotiate and transact with. We have taken the opportunity during lockdown to do that. We'll be ready to go once the market restarts. At that point, we will see then what the size of the opportunity brings. I haven't got a prediction for that at this stage that I would want to share. Okay, thank you. Was that the only question? Was there another question? Premier Plus. Yeah. Oh, Premier Plus. Sorry, before we move on, you asked a second question about Premier Plus. Historically, the returns profile has been very healthy for Premier Plus rooms for both business and leisure. They have had good sales rates, i.e., they tend to sell out fast. They're not the last rooms to be booked because there's nothing else left and therefore people having to pay a higher price because there isn't anything else. They tend to be the first booked rooms and therefore are very popular. They have commanded a price premium of sort of GBP 10- GBP 20, depending on the location and the night and the situation. Probably the succinct answer to that. Okay, thanks. On their rollout in terms of this year and next, have you got any targets in mind? Yeah, we said we've done 500 historically. We gave it pause this year, and then we'll do about 1,500 this year. Thanks very much. Review. Yeah. Yeah. Thank you. Okay. Thank you. Our next question is from Ivor Jones of Peel Hunt. Your line is now open. Please go ahead. Morning. Good morning. Now that we can see that you weren't kidding about getting to number 1 in Germany. Yeah When you've got to number 1, you'll still be a much smaller business, obviously, than Premier Inn in the U.K. Is that a good business or is it obviously a staging post to a bigger business at which you get adequate returns from scale and the benefit of the brand and distribution? Where's Germany really heading now? Looks like that's a real target. Second thing, carrying on the discussion about Travel Management Companies, could you wind that into a discussion about how you're going to drive whether you're going to be price-led or occupancy-led during this period of recovery? What are you going to be like as a competitor? You're talking about 5%-15% discount on travel. You mentioned 83% of the rooms are in the regions. In a normal year, pre-COVID, do you mind going back to what the revenue split would have been, regions against London? Lastly, forgive me, I've forgotten what you said in the past about Whitbread's plans to repay government support. Is it maybe or definitely not? Thank you. There's a bunch of things in there. Let's start with Germany. I think it is good to see the acceleration that we've been able to achieve and the fact, as you know well I know, there isn't really a market leader that's got both the momentum of accelerated growth or the baseline largeness that means that we can't catch and be the number 1 in Germany. It feels an achievable target, and it feels even more achievable now with 30 open hotels and the 42 more in the pipeline. Certainly from our perspective, it's the tip of the iceberg, because you're right, we have 800 hotels in the U.K., and the German market is bigger, a third bigger than the U.K. market, and is still in the early stages of structural independent decline and budget-branded growth. We just think it's a great market, and it does have sort of quite an almost unlimited market potential over the next couple of decades. We think, the businesses that we are competing against and, Motel One being the closest competitor, similar competitor, they are good business. That's a good business with good returns and a good EBIT profile. We would expect to have a good, solid business at this size with a good EBIT profile and a good returns profile. For that to get better as it gets bigger, for it just to get better and better and grow and with an available option to grow. We're still very positive about Germany. We look at each transaction, organic, inorganic, and each individual site on its returns merits. Again, with a revised model, post-pandemic, to make sure that the hurdles that we set are hurdles that we can meet. Whilst we would have accepted lower returns, certainly for our first acquisition, in order to get scale, that's certainly not been the case latterly. We've kept to hurdles which give us a good returns profile. I don't know, do you add anything to that, Nicholas? No. I think that's fine. Yeah. Okay. Nick, can I just ask, if you had access to more capital and investor confidence, is that a growth plan in Germany that there could be a step change in growth? Are there natural constraints that limit you to the rate of growth you're currently talking about? Yeah. We don't feel limited in that one of the natural constraints is that there aren't any other big businesses. Yeah. The structure of the German market, which doesn't have the big REITs, et cetera, and is an owner-occupier market where you sign leases or buy freehold and build, is naturally a slower growth market. If you're going to put a spade in the ground, you're going to be waiting three years for your hotels to get built. If you're working with a developer, they can't build it any quicker. There are some constraints to the speed of growth. There aren't an unlimited supply of acquisition opportunities, and quite a lot of them are small acquisitions. Which, like, we made an acquisition of three or four hotels last year, as well as the Foremost 19, as well as the Centro 13. They're not big. We can roll up. There are roll-up opportunities, for sure, and we're not therefore feeling constrained. I'm going to race through your next three questions if you don't mind, actually. I'm just kind of conscious of time. The TMCs you asked about, kind of price-led or occupancy-led. I'm going to give you a really unhelpful answer, both. We're kind of occupancy-led where we've got low occupancy and price-led where we've got high occupancy. We know we dynamically price. If you're looking at the tourist locations over the summer, we're price-led because we know they're going to fill. If you're looking at central Manchester or central London, we're kind of occupancy-led right now overall. It changes. You kind of quote the 5%-15% for a discount. That's the kind of corporate business rate that we're able to give, that's based on volume businesses overall. It's not just a straight discount overall. It's based on how much business each one of them does with us. Of course, it's often the kind of Monday, Tuesday, Wednesday night, which are the kind of higher priced nights overall. The London region split, I think we've kind of got about 16% of our rooms in London. I think that's about 20% of our revenue in a normal year. You've got to look at it's quite different in terms of what's out of London. Out of London right now, which is about, let's say over half of the London portfolio, is behaving much more like the regions at the moment, and it's central London that's the bit that's kind of tougher at the moment. Then your last, government, was about repaying government support. I guess the way we look at this is we're around about the FTSE 70, in terms of taxpayer or tax collector for the U.K. government, I think we tended to be around 35-40, the 40 biggest companies in terms of taxpayer and tax collector across the business. We believe that the government grants that have been given to us have been specific for our sector because we are the hardest hit. We won't be directly paying back the government grants, we do think the quicker we recover, the quicker we'll be paying back through taxes to the table. If I could just add to that. I think we are the perfect company that the government needed and wanted to support. We've had government support about GBP 270 million, but our shareholders have put in GBP 1 billion in a rights issue. We have raised finance-Green bond program and we have a suitable, appropriate debt maturity position. We have paid our people and paid our suppliers and even paid our rent bills. As we recover, the reason we are the sweet spot for the government to support is as we recover, as Nicholas points out, we will revert to paying and collecting a large amount of tax, which will, within a year, would reap more benefit than the support we've had so far. Equally, we're a large employer. We would anticipate hiring more people. We are probably going to be helpful in the solution to youth unemployment. We have the highest number of apprenticeships in the industry. We are helping the investment-led recovery by investing GBP 350 million. We are helping the Leveling Up agenda because we're regional, not just Southeast-based. If you take the sweet spot of all of that together, I think we are absolutely the right company to have been supported. I think having been hit in a sector where you are closed through the regulation and are not allowed to open and have no revenue, that level of support has been appropriate for the circumstances and therefore, no, we don't anticipate repaying it. Good. I hope that's clear. Thank you. We're going to try and finish at half past, if that's okay. We've probably got room for a couple more questions if there are more. Have we got any more questions? Yeah. We have two questions remaining. The next one is from Richard Clarke at Bernstein. Your line is now open. Please go ahead. Hi, Richard. Thanks. Good morning. Hi, good morning. Thanks for taking the questions. Three if I may. Just the first one, actually following on from what you just said. There's been a couple of press reports around sort of saying that companies are struggling to sort of rehire their staff coming back after furlough, and just wondering whether you're suffering from any issues there or whether that actually could be a competitive advantage relative to the market. Second question, we've seen some of your competitors, peer companies, talk about a greater demand for room technology, mobile phone, door entry, controlling the TV, mobile check-in, checkout, et cetera. Is this something you're investing in? Is this included in raising CapEx? Will this be included in the Premier Plus rooms? Anything you're seeing to match demand there. The last one will be a little bit more prosaic, but the impairments you've made. Are any of the projects that aren't going ahead, are any of those in Germany? Is that the Foremost impairment related to that? Could you quantify what the underlying positive benefit might be from reduced lease payments, depreciation, et cetera, from taking the impairments this year? Okay. Yeah. The short answer on the Germany question is no, we haven't stopped our pipeline in Germany. No. We haven't impaired any open sites. We haven't impaired open sites, so that's quick. Do you want to take the others, Nick? Yeah. Just in terms of the impairment, the largest impairment we've got in our balance sheet is about the Foremost acquisition because the timing of that. There's GBP 200 million of that is impairment for that impairment and the other impairment is GBP 100 million is across the rest of our estate and mainly all in the U.K. overall. There's very little kind of reduction in kind of depreciation. It's spread over many, many years, Richard. In terms of the reduction in rent and depreciation, it's fairly minimal over that time overall. In terms of your question about greater investment in technology, yes. The answer is yes. We're continuing to look for a way for automation. We're slightly, I guess, advantaged ahead of the game in terms of most people book online, and that is their check-in, check-out already. We have kiosks in a lot of our large sites already. We're kind of along the journey in there. Some of the other things you talked about, key technology is quite large investments to go forward. We'll do that when the time is right. You're right, we're continuing to move along that journey overall. Do you want to talk about staff ability to hire staff- Yeah. ...disadvantage? Yeah. I mean, we're a strong employer, as you know. We've got a strong employment brand. In normal times, we have a really low industry-level attrition level of people, which is very high compared to many of the industries that others operate in because hospitality itself is a very transient industry and has a lot of attrition. Indeed, many of our competitors could have over 100% attrition a year. It can be that high, where ours in normal circumstances is more like just below 40% attrition level, which as I said, is very strongly industry leading by a significant margin. We have had less attrition, obviously, during the pandemic than in a normal situation because people have been furloughed, they've stayed with us. We've got a good, strong staffing level. We will be hiring and recruiting, even things like temporary seasonal workforce in coastal locations, which we do every year. We will be out in the market and we will be hiring. At the moment, that is going well and we are taking on apprenticeships for people and taking on new staff and hiring in a sensible way. We're quite conscious. We've heard some of the market stories that life might be difficult, but there is quite a high unemployment rate also out there at the moment that we are able to tap into, higher certainly than we ever thought when we did think we might have some constraints vis-a-vis Brexit and the European labor pool shrinking. At the moment, all is well, but we keep a close eye on it and we are out in the market but successfully hiring new staff. Great. Thank you very much. Thanks, Richard. Last question. Our final question is from André Juillard of Deutsche Bank. Your line is now open. Please go ahead. Good morning. Thank you for taking my question. Two very short question, in fact. First one is about Germany. I know that we've talked a lot about it this morning, just wanted to have a rough idea of the critical size you have in mind in this country, considering that you've got close to 70 hotels between the existing one and the pipe. What is your view on the midterm critical size? Second question on CapEx. You're investing more than expected this year, what is the kind of level for the recurring years to come you're expecting? Okay. Germany, from German side of things, we're really pleased with having made the leap this year to get into multiple cities. The important thing in terms of building what I'd call a platform business, which means being able to market in country because it is German domestic business and leisure guests that we are interested in marketing to. We're not interested in Australians or Chinese people visiting Germany. It's the German domestic business and leisure traveler, all of the things that Premier Inn brings, like its direct distribution, like its business-to-business platforms, all operating. For that, you need to be in multiple cities. There's no point asking BMW to have an automatic booking system with you if you're only in three, in Munich, Frankfurt, and Hamburg. The platform is really important that it is varied in terms of cities, and that's what we've started to see now that when we reopen our rebranded hotels that we've now acquired and 30 hotels reopen, that will give us a presence in a large number of German cities. We've got another 42 in the pipeline, but they come on stream over the next two to three years. We would be expecting to top up both the pipeline and, if possible, any more instant opening of hotels, which would be an inorganic acquisition, to grow that platform as strongly and as rapidly as we can. In terms of the long term, the size of the market is bigger than the U.K., more fragmented than the U.K. We do think we ought to be able to replicate our success. Although at the moment we have a midterm target of 60,000 rooms in Germany as our network plan in terms of how we work around that. That's our aspiration for Germany. Capital, you're right, spent GBP 230 million last year, GBP 250 million this year. A lot of that as we've discussed is on opening space in Germany and in the U.K. as well. Historically, we've spent around GBP 400 million, GBP 450 million. It can be quite lumpy depending on the freehold/leasehold mix that you've got. At the moment, it's more leasehold, just because due to where the price of freehold properties is. We'll get back towards the GBP 400 million, hopefully. We will monitor that as we see how the market recovers. Okay. Thank you very much. Thank you, André. I think that's us finished our questions. That was a really long session. I thank you all for all of your questions. If you need anything else, don't hesitate to contact us. Have a good day, everybody. Yeah. Thank you, everyone. Yes. Thanks very much. This concludes today's call. Thank you for joining. You may now disconnect your lines.