Hello, and welcome to Whitbread PLC Q3 of fiscal year 2023 trading update. My name is Harry, and I'll be coordinating your call today. If you'd like to ask a question during Q&A, you may do so by pressing star one on your telephone keypad. I'd now like to hand over to Alison Brittain, Chief Executive of Whitbread. Alison, please go ahead. Good morning, everyone, thank you for joining this call for our Q3 trading update. That covers the 13-week period ending December 1, 2022. As usual, I'm joined by Hemant Patel, our Group CFO, and Peter and Sophie from our IR team. I'm also delighted this morning to be joined by Dominic Paul, who'll be taking over the reins of CEO with effect from Wednesday, January 18, next Wednesday. I will remain, as you know, on the board until the end of the financial year just to ensure that we have a smooth handover. Dominic is with us. Welcome, Dominic. Look, I hope you've had a chance to review the Q3 release this morning. As always, I will start the call with a brief overview of the announcement before we open up for Q&A, and we'll be happy to answer your questions then. Let me start with the Q3 performance before touching on the current trading and outlook. Premier Inn delivered another great quarter, driven by strong revenue performance in the U.K. and very encouraging progress in Germany. Our U.K. hotel performance in the 3rd quarter was excellent, with accommodation sales 37% ahead of pre-pandemic levels. That robust performance was driven by a combination of increased occupancy, higher average room rate, and estate growth, with strong performances across both London and the regions and across business and leisure. Our outperformance versus the mid-scale and economy market also remains strong, underpinned by our continued program of investment that's maintaining our industry-leading reputation for quality and value, and that's enabling us to increase market share. Our U.K. food and beverage sales were 8% ahead of last financial year, but remained about 4% behind pre-pandemic levels. While the value end of the pub restaurant market remains challenging, our position versus pre-pandemic improved since the second quarter thanks to a series of sales initiatives, which is encouraging. Premier Inn Germany had another solid quarter of performance, led by our cohort of 18 more established hotels. In total, we now have 45 quality hotels open in prime locations with 36 more hotels in the pipeline. We continue to attract excellent guest scores across the portfolio, and we're confident about achieving our long-term target of 10%-14% return on capital. Our strategy and business model are combining to generate strong cash flow, and even with our continued program investment in both the U.K. and Germany, our balance sheet remains robust with GBP 284 million of net cash as of the 1st of December, 2022. Moving on to current trading and outlook, we're continuing to see strong trading momentum in the U.K, with accommodation sales up 36% versus pre-pandemic level and a continued strong outperformance versus the market. U.K. food and beverage sales remained well ahead of last year, but behind full year 2020, as was the previous trend. With further commercial initiatives planned over the coming months, we're working hard to return sales back to those pre-pandemic levels. In Germany, our trading performance remains on track, and we remain comfortable with our previous reduced loss guidance of a loss between GBP 40 million and GBP 50 million in the current financial year. There's no change to our cost guidance for this year. As we look forward into the next financial year, we expect net cost inflation on our GBP 1.6 billion U.K. cost base to be between 7% and 8%. That's reflecting increases in labor, utilities, food and beverage, and those are partially offset by lower business rates. Despite macro concerns, we have an encouraging forward booked position in the U.K. Our pricing is expected to remain strong with further estate growth and an ongoing efficiency program. With all of that, we remain confident in full year 2024 outlook. In short, we're in good shape, and we've got a lot to look forward to. Now, after seven terrific years, this will be my last earnings call with Whitbread. It's been an absolute privilege to lead this great company, and I've enjoyed my time enormously, having worked with many outstanding colleagues, as together, we've continued to develop the U.K. business and build an international platform for long-term growth. We faced some significant challenges in recent years, political, social, and economic. I'm delighted to be handing over to Dominic, the group's incoming CEO, at a time when the business is performing strongly and the prospects for the future look very bright. We've got a healthy balance sheet, compelling growth opportunities both in the U.K. and Germany. I've got every confidence that Dominic will take Whitbread forward to what will be an exciting and highly profitable future. I wish him and all the people at Whitbread and my team every success. I'll continue to cheer on that success from the sidelines as a shareholder. With that thought, let me hand over for questions and answers. Harry, we're going to open the line for questions, please. Thank you very much. If you would like to ask a question, please dial star followed by one on your telephone keypad now. Just a reminder, that's star one if you would like to ask a question. Our first question of the day is coming from the line of Vicki Stern of Barclays. Vicky, your line will be open now if you would like to proceed. Morning, Vicki. Good morning. Firstly wishing you all the very best, Alison, and welcome to you, Dominic. Just want to start off with the sort of positive outlook commentaries. In the release you're talking quite positively about pricing expectations for next year. Can you just walk us through your thinking there? Where's that coming from? What sort of demand expectations are you embedding within that? Perhaps any sort of color around what your expectations are on further market supply contraction into next year. Second one's on Germany. Looking at the industry RevPAR data, that market does seem to have been a bit softer than some others. Curious as to your expectations on why that seems to be the case for the industry. In that context, I think you talked at Q3 about the break-even target at some point during next year on the original cohort. Would that still be your expectation looking into next year? Just finally on the balance sheet, curious both, whether you're seeing any more signs of life around possible German M&A, and then just more broadly, how we should think about the scope for cash re-cash returns to shareholders in coming months, given that I guess you're sitting there with at least a turn of headroom to that 3.75 times leverage threshold. Thanks. Okay. Well, look, I'll start off as normal, but I will hand over then to Hemant. Just in terms of the outlook, you know, we're quite positive about the outlook at present. We don't have any of our lead indicators showing any weakness at this stage at all. We haven't got any reason to be anything other than positive in terms of the outlook. We've there are a few things sort of sitting behind that, I suspect, in terms of where we sit versus the market. First of all, as you know, there's been a significant decline in market supply. We are a brilliant brand that is, you know, taking advantage of that. There's ongoing inflationary pressure. That does push prices up, and I suspect that our competitors, particularly those with, you know, leasehold estates, and franchise fees to pay, will want that pricing to remain high. Equally, you know, we have not taken quite as much rate as our competitors, and so we are very high value proposition for our customers, and therefore we are seeing a lot of demand from that on that basis. We've had a lot of success with our own commercial initiatives, which we have continued to invest in throughout the cycle, and we see the benefit of that. We're seeing more demand and stronger demand. Certainly, you know, the full recovery on the commercial on the business side of the business. Leisure has been strong, as you know, for quite a while. Also we're now seeing inbound coming back very strongly. In fact, in the way we look at it, which is people who visit our websites from an overseas IP address, and we look at that by country, we now see we are ahead of pre-pandemic in searches for Premier Inn from overseas. The inbound is very strongly rebounding. That's particularly boosting London, as you would expect. London, which the first quarter of the last financial year, you remember, was much weaker than the regions. This year we're expecting that to be a pretty strong position in London, as well as very strong in the regions. I think we have a lot of reasons to be positive as we go into the new year, into the new financial year. Our forward book position is good, at least as good as it ever has been in terms of, you know, pace and forward book, but at much higher rates. Again, that's a positive sign in terms of that. Everything we're seeing in some of the economic data, it is still showing, you know, people are not buying, you know, large goods, large discretionary purchases, but they are protecting their leisure spend, and we're seeing that come through in the booking profile. Does that help with the first question, Vicki? Yeah, perfect. Thank you. Thank you. In terms of Germany, we had a very strong period in the autumn. That is always the peak period, both in the U.K. and in Germany. We were really pleased with that. Our, you know, we, our 18 hotels that we pull out as a co-cohort that were particularly strong, but the rest of the hotel business in that quarter were also traded very well. Quarter 4 is always a weaker quarter, but our performance is still robust. We are, you know, we're in good shape and the primary 18 hotels that have been open the longest are continuing to strongly perform. Yeah. We expect to remain profitable for this full year. I'm sorry, just on that one. Would the sort of break even at some point for those hotels during next year still stand? To clarify, the 18 hotels we're talking about are the like-for-like hotels as of the half year results. The 18 hotels that have been open for more than a year. Those at a site level we expect to be profitable for this financial year. The overall German business, before any additional M&A, we still expect to get to the run rate break even through the calendar year 2024, the year after next, is what we've said. We're still on target to do so. Vicky, I always caveat that with that depends on growth. You know, that's why we're looking at these cohorts of hotels to see that they are, you know, covering their own costs at site level and then making a big enough contribution to the corporate overhead. Because the more we grow the hotels in the market, then we make losses. Particularly we make an acquisition, we make the acquisition, we close the hotels, we refurb them, we then go through a maturity cycle, or we open a new one and it's got a maturity cycle. That is that prognosis of, I mean, we'll clearly make less loss next year than we made this year, you know, subject to what the growth position looks like. I think, Vicki, your final question was on balancing returns to shareholders. We haven't got a lot more to say at this stage, but, you know, I'll just remind you that pre-COVID, you know, we've obviously delivered attractive and consistent returns over the last decade, if you take out those pandemic years, particularly in that UK core hotel business. We've got a good history of capital discipline, and again, to remind you, we returned GBP 2.5 billion to shareholders following the sale of Costa in 2019. The capital allocation framework I laid out at half year means that we can, you know, maintain our financial strength while continuing to invest in the business and delivering those long-term returns. Just to remind you, we want to absolutely, as you mentioned, maintain those investment-grade metrics. We are, as you say, within the limit of 3.7 times EBITDA. We're well within because we're about 2.8. 2.8 half year, we're well within that, which is very clear to everyone. We are thoughtful, though, of the level of CapEx and M&A opportunities that might be there, and whether it's additional rooms or maintaining our current state, we clearly want to continue to invest in the business and get those returns. We've talked about consistent dividend policy. Depending on outlook, you know, then, potentially we would return excess capital to shareholders. What we said was that we would come back up to this at the full year, and we'll do so when we apply that framework and communicate more at that point. Great. Thank you. Thank you, Vicki. I'm sorry, just within that, it was the German M&A, any more signs of life there on the German M&A was the last piece. I'm a very optimistic prognosis for small bolt-on acquisitions. Okay. Thank you very much. I don't get kicked if I say anymore. Thanks. Thanks, Vicki. Thanks, Vicki. Our next question today comes from the line of Jamie Rollo of Morgan Stanley. Jamie, your line is now open. Please proceed. Thanks. Morning, everyone. Also three questions, please. First on. Morning, Jeremy. Morning, everyone. Morning, Helen. Yeah. Hi, everyone. On the 7.8% cost guidance, just wondering what that figure might be net of mitigation, also the sensitivity to the recent drop in energy costs. I appreciate you're mostly hedged for next year, just give us a feeling for those boundaries. Secondly, on the sort of 2024 profit progress, you're obviously confident pricing remains strong. You've given the cost guidance. I'm wondering how confident are you that PPT can actually make progress in 24 relative to 23. Finally, in terms of the openings in the period, could you just sort of talk about the guidance there, both for the UK and Germany? It's quite a small period for openings in Germany. Any sort of construction delays or anything like that we should think about? Also any sort of early guidance on openings to 2024? Thank you. Okay. Right. Cost. Why don't you pick that up, and then I'll pick up the next question. Openings. Yeah. Okay. I'll do that and the PBT point. Yeah, 7%-8% cost inflation for next year, as we said, Jeremy. The constituent parts of that, just to-- without getting into too much detail at this stage, clearly we've seen a published increase in National Minimum Wage, although we aren't paying anyone at that level. That is the basis on which our labor bill will go up next year. Energy, and you asked a bit more detail on energy. I talked at half year about the fact we were 75% hedged. With that 75% hedge and with the other 25% market rate, I said that we would probably see about GBP 40 million of cost inflation year-over-year, so GBP 20 million from the hedged amount and GBP 20 million from the floating amount. That GBP 20 million on floating of the 25% that's unhedged is still, you know, potentially with the reduced energy cost at the moment, that's the number we're talking about that we could potentially move. You can get a view on that. You know roughly what's happened to energy costs. There might be, you know, GBP 5 million coming out of that potentially within the numbers we've talked about. It's still, we're still waiting, and we'll talk more about full year, what that looks like into next year as well. Your, the other factors then are obviously food and beverage inflation is still at relatively high levels. Offsetting that, we've got a business rates benefit. I'll probably not give any more detail on that, but that's the overall picture, and that's 7%-8% inflation. We've got also mitigations on costs. We've talked about GBP 100 million of cost mitigations over the next three years. If you assume a third of that comes off the 7.5, say 7%-8%, take the middle of that range, you're talking about net inflation something like 5.5%, year-on-year. Net of that, the efficiency plans we've got in place. In terms of profit progression year on year, I mean, it really does depend on, you know, the constituent parts and your view, I suppose, of the U.K. economy. What we can see, obviously, we've got a good understanding of what is happening in our German business, and we know that this year we've given guidance of something, you know, like GBP 40 million, GBP 45 million, GBP 50 million of loss for the German business, and we're still happy that that is relevant. For next year, we expect, you know, we can see the consensus at the moment is something like GBP 20 million-GBP 30 million loss in German business as published. That doesn't seem unreasonable to us as a way point towards getting to that breakeven run rate in the year afterwards, notwithstanding, as Alison mentioned, any further acquisitions. That's one moving part. What that leaves us with in the U.K., it all depends at 7%-8% cost inflation. We've got room growth, as a moving part. We've got the efficiency plan, as mentioned as well. Leaving that then, depending on your view in terms of like-for-like U.K. growth, we are certainly, you know, we don't see any reason why, based on the conversations that we have, that we wouldn't have a good shout at offsetting that overall cost inflation. We'd need something like 3%-4% U.K. like-for-like. Is that possible? Well, we've already talked about the fact that pricing is likely to be strong. It all very much depends on what happens to U.K. economy and U.K. customer going forward and whether there's a hit to demand. Certainly we're very positive about the fact that from everything we can see, we don't see any slowdown in our booking levels, and we're positive about our revenue prospects into next year. Just on openings, we're on course to do, probably, Well, 1,500-2,000 was the guidance for U.K. and 2,000-2,500 rooms in Germany. We'll be there or thereabout. Well, we'll certainly be in those ranges, but probably just shy of 2,000 in the U.K. and the, you know, again, on the, in the right ballpark for Germany as well for this year. That will be good. That excludes, of course, any additional M&A or small M&A that we may have between now and the year-end or in the early part of next year. We haven't yet guided on next year, Dominic will do that when we get to the year-end results. Great. Thanks very much. Alison, congrats on leaving on a high, and best of luck in your semi-retirement. Yeah. Thanks, Jamie. It's definitely semi, isn't it? Thank you. Our next question is from the line of Gerard Khoo of UBS. Gerard, your line is now open. Please proceed. Thank you. Happy New Year, everyone. Alison, wish you the best. I'd probably reiterate what Jamie's saying. Thanks for what can only be described as a job well done, and welcome, Dominic. Thank you very much. That's very kind of you. Yeah. Oh, you know, speaks for itself. Yeah. Just in terms of visibility, you said, you know, you're seeing some good forward bookings, but, you know, is it still very low visibility? From that, I mean, you know, the booking curve itself. I mean, how much bookings are happening, you know, in the week of arrival versus, let's say, you know, February? If you can give any color like... Yeah. January and February. Secondly, food and bev, I mean, that seems to be doing relatively better than the industry. So just sort of color on, you know, maybe what's driving that, you know, any changes there. Then just on pipeline, I mean, you've spoken quite a bit about it, but, you know, just in terms of site identification, thinking about that going into the next financial year, you know, are you seeing, you know, more opportunities and, you know, can that drive an acceleration of the rollout or the, you know, other considerations as well? Thanks. Right. Okay. First question is outlook. On outlook, well, we are still quite a short lead business. Particularly, I mean, that's not new, that particularly business customers tend to be shorter lead in terms of their in terms of their bookings. We know our performance to date in the quarter. If we're talking about the quarter, we, you know, giving you guidance, we're 37% up, I think, in the quarter to date so far. That is pretty strong. Obviously we're now seeing forward bookings towards the end of this quarter. I think we are very confident about the finish of the year and the end of this quarter. As we go into the half 1 next year, quarter 1 and then half 1 next year, we've got good pace in forward bookings, so we aren't down. You know, we are exactly where we would expect to be in forward bookings based on previous years. There has been no drop off in people's propensity to forward book. Yes, it's not a huge% that you book at this stage, you know, into the summer next year or into Easter this year. What is absolutely true is that what is normal for us, even versus pre-pandemic, is what we have on the books. What we have on the books is at much higher rates. Therefore, our revenue projection is much higher. That's why we have some confidence that when you're asking very specifically about what our forward booking position looks like, that's what it looks like. We have confidence, you know, in a number of other areas, because structurally, we're not seeing a dip in demand. Structurally, we're seeing inbound being back and that is gonna bounce demand in London, and we think that that is not going to go away. We think that that will get stronger. We're already ahead of pre-pandemic levels in terms of that inbound demand, which we were not this time last year. That will be a boost for us. We ran at high occupancies last year, but the rate increases that we've seen are sticking. We took less rate than our competitors. If you looked at our competitors, they were flat on occupancy but grew rate last year. We were massively up on occupancy and grew rate less strongly than they did. That gives us more opportunity for rate growth in the year ahead. We've also seen this sort of big structural decline in supply, 10% decline in independence in the last two years versus 12% over the whole period of 2010- 2019. That isn't coming back. That is a supply that's gone out of the market, and we're not expecting, you know, to be awash with new supply, possibly with the exception of ourselves. I think that the combination of those factors, I know a little bit more about the competition who are still struggling with labor. I think our labor position in our business now is very stable and much better. I think generally in the industry, there's still a struggle with labor, and people would rather have a smaller number of rooms open at a higher rate, if they're struggling with labor, than the opposite. Overall, that's what gives us our sense of confidence as we move into next year. Alison, just related, you mentioned business travel. On the white collar side, I guess it's 25% of your business. Is that back now, do you think? Yes. Or. Yes. It is. Yeah, absolutely. In terms of how we've historically been positioned as a business about 50/50 leisure and business, we're back to that split of. We're at very full occupancy levels. I mean, enormously full occupancy levels. Both sides of that are now doing well. If you remember one year, you know, one year ago, the recovery was stronger in leisure than it was in business, but that is back. At the same time, this time last year, the recovery in the regions was stronger than London, and London lagged for quite a long time. Now London is also back. We've got, you know, all the areas are firing pretty much on good cylinders. Yes. Pipeline of new supply then. Yeah. added to the decline in suppliers, I said I don't expect a huge amount of new supply coming in, I think with the exception of ourselves, who will be continuing to build out our pipeline. Site identification, there's more opportunities as, you do find it? I mean, for the U.K., you probably saw in our half year results we talked about the network plan exercise we'd completed, which gave us the data on the dropout of the independent sector and the reduced supply landscape. That also we refreshed at that point what we saw as our long-term trajectory for growth in the U.K., and we extended that runway for growth to 125,000 rooms. Yes, I think, you know, as we move forward, there will be more opportunity. Because the supply side has reduced, there'll be more opportunity for Premier Inn growth. Okay. We're a great covenant. Yeah. If you are a developer and you're wanting to deal with people who are financially strong with a great balance sheet and a great covenant, we will be first place positioned for that. Okay. You asked a question, Gerard, on F&B. Yeah. Just a reminder that we've got these two kind of like parts of our F&B business. There's the internal F&B that we provide for our hotel guests, as well as then the pub restaurants which also provide both that internal F&B for our hotel guests, but also cater for external customers. In fact, the majority of that the trade for those 400 or 440 or so pub restaurants comes from external guests. The internal F&B, as you'd expect, kind of, you know, has gone in line with occupancy, which has been strong for us. Our value, the value pub restaurants we run, feel like performed at the low end, I suppose, of the F&B, sorry, the value pub restaurant sector, which has been behind the rest of the pub restaurant sector. That's definitely been a drag on our F&B sales. Various reasons, you know, including labor shortages and cost of living crisis, higher wages, et cetera, which I think has impacted that market. Q3 performance is a bit better, as you mentioned. We are working on improving our menus, including putting more plant-based dishes in. We've improved our drinks ranges, and we've invested in sites, and we're targeting promotional activities. All those things are ongoing and, you know, continue to improve our F&B business, although that is a slow improvement that we're seeing. Great. Thank you. Okay. Thanks very much. Thank you. Our next question of the day comes from Jaina Mistry of Jefferies. Jaina, please go ahead. Morning. Morning. Hello. Alison. Hi, Dominic Paul. Hi, Hemant Patel. I've got three quick questions. 1, on your market outperformance, can you give a bit more detail on who you're taking market share from? Is it predominantly independents or also the other larger chains that you compete with? My 2nd question is on Germany. In Q2, you mentioned that your mature German hotel estate was profitable. Can you just confirm if that was also the case in Q3? Lastly, on pricing, I know we've spoken a lot about pricing already, but do you expect to be able to price in line with inflation in FY 2024, given that you operate in the value segment of the market? Okay. Do you wanna start with, I guess, outperformance? Yeah. We don't have, I mean, we don't have. Yeah. companies in the performance chart because. Yeah. -have all of them. It has to be the rest of them. Yeah. Jaina, it's difficult to say exactly against whom we're outperforming. You know, clearly the market itself, you know the structure of the market. It's kind of low 40% independents, and the rest, you know... We're talking the mid-scale and economy market here. The rest is the branded hotels of which we're a significant part. I think the biggest factor here really is the fact that supply has come down. If you remember back to what we talked about at the half year, we've done this network analysis piece and really, really understood in a lot of detail the supply situation and forecast for the supply situation. You know, roughly 4% of rooms have come out of the market overall. That gives us, I think, you know, a strong understanding that actually, you know, from the independent sector, there has been an awful lot of leakage toward the branded sector. That's a big chunk of it. In terms of specific other branded competitors, it's difficult for us to say. You know, you can monitor the performance of those branded competitors, and you probably have a good idea of branded competitors. It will, we will be taking share from franchise-based branded businesses. Very likely the case. whatever the case, I'm sure. Okay. Yeah. On Germany? Yeah. Well, first of all, yes. The short. You said it was a short question. It will be a very short answer. Yes, we were very much profitable in 2018 in Q3. Q3, a strong quarter for us. In fact, it's one of the most vibrant quarters for us in both sides of the business. 2018 were profitable, as was the whole of the German business actually. Thank you. That won't continue because in weaker quarters, it'll be the 18 that will do the best. Mm-hmm. Okay. Finally, pricing and wage inflation. I mean, well, as I mentioned earlier on, you know, 7%-8% cost inflation built in. It really is difficult to say what level pricing will be for us next year. Alison talked through all the factors that would support our view that there will still be a relatively strong pricing position year-on-year into the market. You know, including that declining market-wide we just talked about, the fact that cost inflation will be pushing all of the hotel market and competition to keep pricing high. The fact that labor markets are quite tight as well, we push the pricing rather than occupancy. Of course, we've got a lot of confidence on our own, in our own commercial initiatives, that we've talked about and Alison mentioned earlier on. The fact that as again, as you mentioned, we've taken a bit less price than the market. All of that gives us confidence that we should be able to maintain a good level of like-for-like pricing. It's difficult to say whether it will fully offset that cost inflation. I mentioned earlier on in terms of our. The combination. I mean, we've got a combination of efficiency savings, estate growth, pricing opportunities, commercial initiatives that are going to hit. We're very confident that package of activity will not just offset inflation, but which will give us opportunities for growth. Wonderful. Thank you. Thanks, Jaina. Our next question of the day is from the line of Jaime Echanove of BNP Paribas. Please go ahead now. Hello. Good morning. Hi, good morning. I've got two questions, if that's all right. firstly, just going back on the 2024 inflation assumptions on wages. I'm really interested to hear how many, what sequence and what nature of these wage increases and special seasonal bonuses you've budgeted in your guidance in 2022. You've had to do a number of separate moves like that, not just one around National Living Wage. Is that the new normal? on the spread of occupancy and pricing across the estate, just curious what the highest occupancy and pricing micro-market is today and, and where the lowest micro-market is. Have some of those dislocations narrowed downwards? U.K. RevPAR is up 25%. You know, what's the spread? Do you still have some micro-markets up 60 and some down 25? If you introduce 3%-4% next year, this year, do we realistically assume every single property can do +10.5%, or will it be a net of very big moves back down and very big improvements in some of those, silver press markets, please? Okay, thank you. First question was about labor. Just to sort of give you a little bit of context for that, you are right. This year, we did quite a number of things for our teams. We invested in ensuring that we have teams being paid broadly above the National Living Wage, and actually in many cases above the living wage as well. We gave an investment on a cost of living payment during November and December of this year, which, you know, we were going through a particularly difficult cost of living period for people very worried about their energy bill. We invested about GBP 9 million in that additional award. We brought all of our teams in the second half of the year to being over 10 GBP, which is essentially a pull forward of where we thought we would be going to anyway in April with the Living Wage rise. The Living Wage rise has been announced, going to be GBP 10.48. GBP 10.52. Very close, but no cigar for me, on the 4P difference. That is within our projections. Plus, we do pay for progression. We have. You know, you don't just rise the base pay of your lowest paid worker. Everybody up goes in increments, otherwise, you know, managers are paid less than main staff, et cetera. All of that has flown through in our predictions for what we think the inflation will look like. Important to note when you say, is this all a thing of the future where we have to do lots of things? I don't know. There may be further interventions to do next year, but we're in a really good place in terms of our labor position now in the business. We're seeing a lot of stability in the team. You know, nearly two-thirds of our teams will have been in post for more than a year now. You know, that's a level of stability in hospitality often does not see. We made in the summer last year, probably, a third less new hires we had to make last year because we're in a more stable position, and that will be better again this year given the stability of, and the longer service that we'll have by the summer. We've been through that particularly acute difficulty on the reopening post-pandemic with labor, and we've got ourselves into a much stronger position. I expect that we will have appropriately budgeted for wage rises that we can already predict because we've been given the government steer on it. Of course, you know, if there are shortages and hotspots, then we may, of course, choose to make additional investments. Hemant, would you have anything to add, or have I covered it? I think you've covered it. I mean, clearly, you know, we'll see what happens through the year and manage it accordingly. I'm comfortable with the guidance we've given overall, should be sensible for the full year. Yeah. The second question you asked about were micro-markets. Just sort of keeping it high level, you know, lots of places are, of course, in different spaces from each other. There won't be a uniform, everybody uplifted in the same way. You asked specifically, you know, what is our highest revenue highest rates market. Well, that is consistently always London. London properties have the highest rates, but the competition around them have the highest rates, and therefore, you know, we consistently have higher ARRs in London. If you think about London then as an example, you know, this time last year, London was not recovered at all from the pandemic. We didn't have any inbound still. It was very low, there was quite low occupancy in London. Whereas in our regional areas, we'd seen quite a strong rebound in terms of occupancy, London was a laggard. London has now, you know, consistently recovered quarter on quarter, now is firing on all cylinders again. As we lap last year, where it was a weaker occupancy area, we'll have much stronger occupancies in London. That will obviously look like a higher growth rate in London, those are areas also probably where the rates will also be higher. There's this combination of things there. I single out London as being a special case. Across the business though, of course, there are ups and downs in markets, we've had broadly very good occupancy this year. We've got rate opportunity still to go because we didn't push our rates quite as hard as the rest of the competition. Hopefully that gives you enough to go on. Yeah, thank you. If quick follow-up is okay. Just on one wage strategy, this year to be super clear, have you budgeted another summer retention bonus, or was it really a one-off last year? Just on the deltas across micro markets, yeah, London is higher, but I guess compared to history has always been higher, it's not that far away from the group, 41%, group 37%. I'm really more interested in whether there are still some really down compared to their own history micro markets, really abnormally high compared to their own history markets. When you look at next year, do you think some of those will normalize? No. Is that very hard to announce? No. I think everything has risen during the course of the year. If you look at our total estate occupancy, our total estate occupancy probably at, you know, 85%-ish is as high as it's ever been. That, you know, you can't achieve an estate-wide occupancy at that level without a sort of degree of decency in occupancy. You know, we're not uncomfortable. On the wages, the summer bonuses were a company payment, very much a one-off position for it, and that's why they weren't built into core pay. We make decisions on that when we know what our staffing looks like over the summer and we know what our occupancy levels are likely to be. Obviously in the summer, when you're at peak in some areas, well, you're taking on peak of workers. Yeah. At the moment. Thank you. Thank you. I would count that as a one-off, and we're just moving forward on a normalized basis now. Thank you. Thanks very much. Thank you. Our next question is from the line of Tim Barrett of Numis. Tim, please go ahead now. Morning, Tim. Morning, all. Congratulations all round. Two quick things. Related to that question on occupancy, you're at a record level over 85%, that broadly suggests you're full every day apart from Sunday, I guess. Just wondered what your operational confidence in maintaining that in future years would be. Secondly, on net cash, looks like a really strong third quarter, GBP 100 million+. Would you expect it to be at that level of net cash in February? Thanks very much. Yeah. In terms of operationally, yes, much more comfortable, actually. We're managing our current occupancy levels really well, and obviously, they have fluctuated through the year. You know, it's site by site, of course. You know, if you're in Newquay in the summer, you'll have had 100% occupancy, and it would have been families, and families are always more difficult to operationally run because they, you know, you need more cleaning time and more management. We've managed really well this year and stabilized our labor, and the operational standards haven't dropped. If you look at our brand scores, they've been incredibly robust. Our NPS scores have been robust, and our brand scores actually, I think, have improved and are at the highest level, both for value and quality. Yeah, we're pretty confident that we've got a very robust operational system that underpins us. It's one of the strengths of Premier Inn, along with its brand and value for money promise. Our ability to operate and do so consistently across all of our hotels is one of our main strengths. On net cash, Tim, well, I mean, historically, this period has been our lowest revenue period, and therefore, you know, you know, had a slight negative impact on net cash over this kind of last quarter in terms of the profile. It really does depend very much on capital phasing across the year-end. It very much depends on what happens with revenue over the next few periods. I don't expect it to be materially different. I think we'll still be in a strong net cash position at the end of the year. Understood. Thanks both of you. Our next question is from the line of Richard Clarke of Bernstein. Richard, your line's now open. Hi. Good morning. Thanks for taking my questions. Hi there. Morning, Richard. Good morning. Yeah, good luck for the future. Welcome to Dominic. I don't know if I'm allowed to ask him a question, but I'll try and slot one in there for him. Depends on the question, Richard. The first question, I'll sneak it in at the end. Just the first question. You've mentioned that you're at record kind of inbound levels. This despite the fact that you've come off all of the OTAs for all of your airport and tourism hotels in the last few years. Yeah. Just wondering how you're achieving that. Has Germany become a meaningful feeder market? Are you using other channels like Google Hotels? Is it just because there's a lack of other choice out there? Just maybe explain how you're able to achieve that. Yeah. Second question was just wanting to break into the F&B a little bit. Obviously, you give the like-for-like components for accommodation, but not for F&B. Is the down number less customers? Is it less hotel guests using it? Is it pricing is much harder to pass on? Maybe just the sub part of that, what's profitability looking like in F&B if pricing is harder? The third question, and this can be answered by everyone and anyone, is maybe what's your longer term ambitions with F&B? When we've asked about the necessity of restaurants in the past, you've always said, you know, it's important to the guests. There's been this big decoupling between accommodation revenues and F&B revenues over the last over the last year. You're shifting towards your higher margin business. Do you have sort of differing ambitions on F&B? Can they be a slightly different model of a more accommodation-centric business? You know, Dominic, you come from an F&B background, so is there anything you could add there about, you know, looking from the outside of the Whitbread F&B model and how it should look in, say,, 10 years' time? Right. Richard. Well, if that's Dominic's sneaky question at the end, then I won't be inviting him to come on the line to answer it. I'll make that decision for him. I don't think we can expect him until he's made Grover as Chief Executive to answer any sort of detailed questions like that. Let us try and attack them. First question. Now, because I got so engrossed in the F&B question, I forgot what the first question was. Inbound. Inbound. How are you? Yes, inbound. the higher inbound Inbound. Yeah. -levels? Got it. Without the OTA. Yeah. Got it. You've actually come off the OTAs. Yeah. We have come off the OTAs, as you know. Now, don't. When I talk about inbound, let's not overegg it from the perspective of what we book. We still have 90% of our business is coming from domestic, and of course it was 100% when we didn't have any inbound. We are a domestic business appealing to domestic business and leisure travelers as our priority. Of course our websites are open and Google search is open all over the world, and we do track where we get both views to the website and bookings from international IP addresses. We also are able to track the countries that they come from. We have a vast spread of countries, you know, not just European, certainly not predominantly German, yeah, not even predominantly Europe either. Big markets outside of those that come through and click on our website to look and then book. That's why we can see, if we look at our clicks to our website, you can say, "How do you know inbound's back?" We track that. When you look at pre-pandemic levels, then the drop through the pandemic, and then the second year came back a little bit, but very little. Now this year, very strong recovery and now ahead of pre-pandemic levels. That's the data set I'm using in terms of it. You know, I think we attract them because we are really good at digital marketing and we're on platforms where people can search for great accommodation in the U.K., and we come up, and we have great guest reviews and, you know, TripAdvisor scores are very high for us. If anyone's on TripAdvisor and they're looking at review levels, then they'll see Premier Inn's a great place to stay, and they'll read the reviews. There's a whole raft of things. A bit like the same in Germany when we only had one hotel. I think a lot of it was through things like TripAdvisor, where people were looking at the reviews and thinking, "Wow, that must be a great place to stay." Those are the... That's the combination of activities. It clearly shows you that, you know, given our occupancy levels, that we don't need to be on the OTAs to max out on our occupancy and get demand into our business. We did open up, as you know, to TMCs, and they are proving now. Again, as business travel has come back and as inbound travel is moving, those TMC relationships that we built during the period when there wasn't that activity, will be bearing some fruit and also bringing in additional people to the business, as will the business book of activity we did on the business side. Hemant, do you want to pick up? Yeah. Oh, your question on F&B. Give it Grover. Yeah, yeah. I mean, like, the element of the customer, look, I mentioned it a little bit earlier on, but yeah, clearly we've got hotel guests who are using our internal F&B, so our internal restaurants in our hotels, as well as using the pub restaurants we have next door, as well as using pub restaurants run by other people. We've got a wide range of different F&B options, and we understand how they all work. Just in terms of all of our research, even latest research, the requirement that hotel guests have for an F&B experience remains quite high, and particularly breakfast, as it always has been. There's no requirement for lunch, big requirement for breakfast, and we have a big 3-to-diner ratio for breakfast takeout. As you know, what we know is that we see the RevPAR increase. Part of our attraction to customers is the fact that we provide a Premier Inn breakfast, and it's a hot breakfast, and it's a full breakfast, and it's a choice. That's offered through the booking profile. In fact, we just made some improvements to that. When you say we're seeing a much higher incidence of hotel and we're sort of pushing on that side, we are. Don't forget that a core part of that proposition is that we offer the breakfast. The fact that we're full and have this great demand, and the fact that we're taking share, is the full part of our proposition. We're consistent. You get a great night's sleep, you get a hot shower, you get a dark curtained bedroom, you get a great bed, and you get a good breakfast. It's hard to disaggregate, but we can see the differences when we provide the breakfast ourselves and others provide it for us. And we know that customers absolutely would have a much less propensity to book the hotel if they were not being offered breakfast. Yeah. We've even got instances where we have not been able to offer F&B to customers. We can see the RevPAR impact there. Yeah. So what- We don't have to offer it. There are always options for new models for how we go about it. The point is, if we thought one of those models should be, we just don't do food, and we just do a room only hotel, budget hotel offer, that would be a significant drag on RevPAR. We also have some hotels where we did offer food, we closed the restaurant, and we saw then what happened to the hotel and the RevPAR of the hotel. What you see is an almost instant decline, quite dramatic decline, when you do that. We've got a lot of test and learn activity. Of course, it's wide open for Dominic when he comes in to really think about, you know, how this will work going forward. But I suspect that within the parameters of he's going, you know, the evidence, which is that breakfast is an important topic. Dinner is also important, but to less people than breakfast. I think that's probably as much as we can say on that subject at this stage. I'm sorry, don't say that, Alan. Maybe just the middle question again, just pricing within and profitability within. Oh, pricing, yes. Right. Let me just say that. Yeah. I mean, what we're seeing, I mean, again, there's a difference between what's happening in pub restaurants as a whole and then obviously the occupancy driven internal F&B revenue that we're generating. Thinking about those pub restaurants in particular, there's definitely been, you've seen, you know, market data, no doubt, but, you know, there's been quite a lot of pricing coming into the market. Now, unsurprisingly, with the level of inflation, average spend per head is much higher than it was pre-COVID. It's driven by price, also possibly other factors, you know, in terms of the demographic of customers, just trading into more starters, desserts, et cetera, drinks, et cetera. Cover volumes have been lower. You know, we see the same in our pub restaurants as well. As mentioned, they're at the value end of the pub restaurant market. Compared to that market, we've been at kind of the lower end of performance, it has to be said. We also, when we think about the profitability of these sites, as Alison mentioned, we think about the whole site. In the same way we think about a hotel profitability, including its internal F&B, we'll think about a hotel and restaurant profitability as a site as well because of that RevPAR benefits. We need to understand the impact of those as a, in whole. Great. All right. Thank you. Very clear. Right. We've got time only for one more question because we have another thing to do at 10:15 A.M. Could we have the last question, please, if there is one? Certainly. Our next question is from the line of André Juillard of Deutsche Bank. Andre, please go ahead now. Good morning. Morning. Good morning. Congratulations on this strong trading update. Happy New Year. three very short questions. First one is about pricing and sensitivity to GDP growth and inflation. Have you walked that sensitivity and potential limit to the pricing improvement you are doing on the accommodation especially? Second question about CapEx. Considering the inflation on the raw materials, could you consider an upgrade on your CapEx envelope? Last question, very short, on recruitment. Do you still have some difficulties to find some people or is it coming back progressively to a normality? Thank you. Well, pricing is always a question of demand and supply. When demand is higher, we have, you know, levers to pull. When our competitors also move on pricing, we also have additional impetus to it. There isn't a cap per se. We put caps on our hotels in terms of rate because we think there is a level to which, you know, beyond which we don't think the brand stretches. Even those caps have moved, you know, over time and are entirely flexible and can be removed completely should we choose to. There's no particular feeling that I would sort of point out on that. If I then pick up labor as well, at the moment we, as I said, we're very, very stable position on our labor position. We're in a very comfortable space. We've got a lot of longer serving members of staff now. We made a significantly reduced level of hiring in the summer last year. I suspect again this year we'll have a significant reduction in the requirement to hire. Yeah, we're not in an uncomfortable position. It's not, it's not an area that we have great concerns at present. André, the, regarding the CapEx envelope, we talk about over time, a GBP 350 million-GBP 450 million CapEx envelope. That will change gradually. It's much more sensitive to the volume of sites, particularly the level of sites and M&A we were able to achieve in Germany. Clearly, there has been inflation. Right now I'm happy that that very broad envelope is still sensible though. Okay, great. Thank you very much. Just thank you to everybody who's on the call. It's been an absolute pleasure to be dealing with you professionally over the last seven, for some people on the line, for over seven years. It's been a delight to be here at Whitbread. I wish you every success for the future as well as wishing the same to Dominic. Thank you for your time this morning. Thanks, everyone. Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You will now disconnect your lines.