Whitbread says the outlook remains challenging
Budget hotel chain Premier Inn has reported a sharp drop in sales as the recession hits trade.
The chain's owner, leisure group Whitbread, said like-for-like sales - which ignore new hotels - at Premier Inn fell 7.9% in the 13 weeks to June.
Premier Inn contributes 70% of group earnings at Whitbread.
Whitbread said like-for-like sales at its pub restaurants, which include the Beefeater and Brewers' Fayre chains, and Costa Coffee had both risen.
Whitbread said Costa had delivered a "market leading sales performance", with like-for-like sales up 2.6%. A net 49 new UK stores were opened during the quarter taking the total number of UK stores up to 930.
Across the Whitbread group as a whole, like-for-like sales were down 2.7%, although total sales grew 2.5%.
"Whitbread has started the new financial year in line with our expectations with total sales up 2.5%, despite the harsh economic conditions," said chief executive Alan Parker.
Revenue per available room at the Premier Inn chain was down 9.6% from the same period a year ago.
However, Whitbread reiterated its intention to grow its share of the leisure market. It opened six new hotels during the quarter, and has launched a sales promotion with rooms available from £29 a night.
"We believe that Whitbread's brands are well placed in their markets, although the outlook is challenging," Mr Parker said.
And Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers said that with both corporate and consumer customers looking to reduce spending, low-cost hotels have been gaining market share.