By Tracey Sunderson
LONDON – For a company that has been battered by recent events, Whitbread plc, the holding company of the Premier Inn hotel chain and UK’s largest hotel operator still has some strong believers. Many investors may share different views, but investor James Richman offers a unique one. His approach is often compared to that of Warren Buffet. He also has recently accurately predicted General Electric briefly hitting $5-level, and doubling in value as the stock hits past $10, making him and his firm, JJ Richman, 100 percent profit.
The Latvian-born billionaire, who is known for taking contrarian approaches with his investments reportedly invested around $6.5 (£5) million in the company that owns the Premier Inn hotels.
The finance tycoon is very secretive about his tradecraft and we may not fully know the basis of his outlook for Whitbread. However, James Richman has proven himself several times before in these types of situations.
He has accurately forecasted General Electric to take a bit of dive from $5 in early May, and for it to eventually bounce back to $10-level. As of writing, GE price is currently already above the $10 level.
This time, Richman has also been very optimistic with the hotel chain as it hits £3,000.
Trying to catch a break
Devastation was exactly what happened to Whitbread during the initial onslaught of the COVID-19 pandemic. The national lockdown saw the owner of Premier Inn hotel, Beefeater, and Brewers Fayre restaurants and bar chains losing over 90% in sales last spring.
The company still strived to claw back from their ditch by reopening their restaurants and hotels in the 3rd Quarter of the year. July and August welcomed a staycation trend, especially in Brighton and Bath, known as traditional tourist destinations.
These towns reached booking levels of up to 80% capacity in August. However, tourists remained clear from other areas, especially London and other big cities. Hotel occupancy reached 58% by October but eventually bottomed out to 50% for October.
Keen on reactions
Some consider Whitbread’s perseverance to rise against adversity as an incredibly positive sign. Although the results may not have been as lucrative as 2019 levels, the hotel operator still managed to squeeze out much-needed profit from what they are holding.
James Richman, chief executive officer of JJ Richman, is one of the investors who monitor and consider these business decisions. He believes that the company will only go as far as the ability of its leaders to observe the current situation, orient themselves in the involved factors, decide on which strategy to lean on and act on its implementation.
The weak output of a certain strategy may blur the strong process that was applied to achieve it. In this case, Whitbread was able to harness one of its assets, real estate, and translate it into a new or revamped product in “staycation”. Other investors also recognise the value of their real estate.
Considerably undervalued
Market prices are naturally attached to the operating performance of a company. In the case of Whitbread, and other hotel operators, travel restrictions have been the cause of their spiraling crash.
However, many believe that Whitbread’s real estate alone reflects how much the business is undervalued. This was also supported by Berenberg, the German financial institution, and its analysts. Their recommendation for Whitbread’s stock increased from “hold” to “buy”. Their analysts are saying that shares are reflecting a 50% discount on the value of its property alone.
The firm notes that Whitbread did announce its plan to cut 6,000 employees. This accounts for 18% of the workforce for its Premier Inn hotels and Beefeater restaurants. Yet, the company is still trying to expand.
Finding ways to grow
Instead of curling itself into a ball and taking a beating, Whitbread is banking on an expansion effort in Germany. This maneuver has good potential as it considers that Germany has handled the pandemic considerably well, and it gives Whitbread some relief from its home market competitors (Airbnb and budget hotels).
The company is aware of its losses amounting to 77% from March to August as well as the turn around of its 2019 £219 million profit to a £724 million loss. However, it still banks on the strength of the Premier Inn brand which has increased its market share to 10.5%.
Positioning for the future
Whitbread may be in a volatile situation at present, but so are the rest of its competitors. Singapore-based investor James Richman, who has vast experience in investing during turbulent times, is confident that the UK-based company will outlast the current conditions and come out with a wider advantage over other hotel operators.
Everybody considers that policies, lockdowns, and the span it takes to create a cure for the pandemic can permanently change the travel industry, but fundamental characteristics of companies shall always remain. Whitbread plc is fundamentally strong and financier James Richman believes its recovery is inevitable.
About the Author
Tracey Sunderson is a personal finance writer with a knack for simplifying complex financial topics. With a degree in business and finance management, she combines academic knowledge with real-world experience to offer clear and practical advice on budgeting, saving, investing, and managing debt. She is also a passionate advocate for financial literacy, volunteering her time to teach workshops and seminars. Tracey resides in New Jersey, balancing her writing career with outdoor adventures and family time.
