Whitbread to expand into Germany with new hotel trial

LONDON (Reuters) - Whitbread (L:WTB) is to expand into Germany after record demand for rooms at its Premier Inn hotels and a strong performance from the Costa Coffee chain gave the British group the confidence to take its business model into mainland Europe.

Whitbread, Britain's biggest hotel and coffee shop operator, said it had acquired the freehold of a 200 room hotel in Frankfurt to trial its Premier Inn offering.

"We believe that the German hotel market is attractive for Premier Inn with its large scale, low level of branded budget penetration and relatively similar property market characteristics to the UK," it said.

The group, which is also expanding into the Middle East, South East Asia and India, announced its move into Germany as it reported first-half underlying pretax profit up 18.5 percent to 256 million pounds, ahead of a company compiled analyst consensus of 249 million pounds.

The group said the strong momentum from the first half had continued into the first few weeks of the second half, meaning it was well positioned to hit its full-year targets.

Whitbread also raised its interim dividend by 15.6 percent to 25.2 pence.

Its shares, which have soared 11 percent since the beginning of 2014 compared to a 7 percent fall in Britain's bluechip index, traded down 1.3 percent at 4,171 pence in early morning trading.

"The negatives around the investment case relate to a fairly anaemic dividend yield despite the increase, some tough comparatives to follow later in the trading year and a competitive trading environment which will continue fully to test the company's resolve," Hargreaves Lansdown's head of equities Richard Hunter said.

Calling the Premier Inn and Costa brands "the twin irresistible force" he also said Whitbread's half-year results defied economic gravity.

Whitbread has grown rapidly in recent years due to demand from cost-conscious customers for affordable hotels and takeaway coffee, which has driven growth at its Costa chain.

Total half-year revenue rose 13 percent to 1.3 billion pounds, including underlying sales growth of 9.6 percent and 6.1 percent at Premier Inn and Costa Coffee respectively.

"The trading momentum of our strong first half performance has continued into the first few weeks of the second half and positions Whitbread well to deliver full year results in line with expectations," Whitbread said.

(Reporting by Kate Holton; Editing by Li-mei Hoang and Louise Heavens)