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Annual Report Analysis

Three main Issues Presented in the “At Glance”

The declining business in the United Kingdom is a major concern for Whitbread PLC as an organization. Ideally, the decline in business as highlighted by the reducing consumer confidence translates to reduced sales and revenue by the company. As such, profit margins are likely to decline in both the long- and short-run periods. Similarly, the UK has, for a long time been the prime market of Whitbread. As such, a decline in business operations within the UK is an indicator of a reduced market for the organization. For this reason, it is imperative that the management finds ways to stabilize all Whitbread Premier Inn brands under the current conditions.

The purchasing of the Foremost Hotels at the start of the year is a problem for the company. Notably, the firm believes that the move, which enabled Whitbread to have 52 hotels in Germany is a problem because of the high uncertainty surrounding the hospitality industry due to the impacts of Covid-19. In this regard, it is not clear if the industry will pick up as the government-enforced restrictions affect the operations of hotels due to the limited number of visitors. Therefore, there is a limited return on capital from Foremost Hotels, which is counterintuitive to Whitbread PLC.

Competition is also a challenge for Whitbread as a budget hotel. Notably, about 48% of the market supply and demand in the UK is held by independent providers. As such, the organization has a reduced market size which it shares with other hotels. Moreover, being a budget hotel, competition from new entries is ever high. Similarly, the entry into the German market exposes the organization to other competing brands who are poised to take advantage of the increasing millennials and generation Z.

Issues Mentioned in the Chairman’s Statement

Whitbread PLC’s Chairman main message was that the hotel is committed to being a force for good in all their communities of operations. However, in his statement, he highlighted three issues affecting the organization. In this regard, the first concern highlighted is the Covid-19 pandemic. Notably, the reaction to the virus included restating movement and interaction between people. Consequently, the hospitality sector was hugely affected by the pandemic as people were encouraged to remain at home. Being a budget hotel, most of the clients were domestic persons. As such, they could easily switch the hotel for home-based experience. Thus, the hotel experienced a period of slow sales due to the pandemic.

The second concern highlighted by the Chairman is employee engagement. Notably, he states that the hotel had its first and only employee engagement in January 2020. Even though this was a positive move from the management, it highlighted an entrenched disconnect between the management and the employees. As such, it is still an issue since proper workplace relationships cannot be achieved through a single meeting only. Moreover, the restricted public gathering experienced in 2020 means that the employees and managers have not managed to actively engage recently.

Lastly, the chairman indicated that hotel had set a target for reducing carbon footprint, food wastage, and single use plastics. The statement indicates that Whitbread is grappling with pollution management issues. Due to the growing concern for environmental protection and conservation, there is increasing preference for business which are conscious of their environment. This means that Whitbread PLC have to expedite their plans to eliminate single-use plastics and food wastes. Thus, the limited operations which have characterised 2020 mean that the organization has not done a lot in managing the environment.

Issues Mentioned in “Our Purpose, Vision, Mission and Strategy”

The organization’s purpose highlights the need to offer a “quality, affordable hotel.” Notably, this is a problem that Whitbread is trying to help in the community. Ideally, there are many hotels in both the UK and Germany hospitality industry. However, those that offer high quality services are often costly, thereby not being affordable to the consumer segment being served by Whitbread PLC.  On the other hand, hotels which are affordable tend to offer services that are of low quality. Primarily, this mismatch is the primary variation between what is available in the market and what Whitbread is offering. Therefore, the hotel seeks to solve the problem of quality and affordability for consumers.

The other issue highlighted in the strategy is the need for stronger returns for shareholders. The statement indicates that return on investment by most shareholders in the hotel sector has not been desirable. As such, it is prudent to try and solve the issue at Whitbread PLC. The concern is vital to the organization because shareholders put in significant investment in January 2020 to help acquire the Foremost Hotels in Germany. Evidently, it was a costly move which has created the urgency to start generating Returns on Investment as early as possible. However, the declining business due to travel restrictions means that it will be challenging to generate significant revenue, some of which will be profits.

Lastly, the organization’s strategy is focused on delivering long term value to its clients. In this regard, the company wants to ensure that the experiences of customers create memories that will attract them to come back to the facility. However, the issue is contentious because it questions the sustainability of the Whitbread PLC.

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