Hello, everyone, and welcome to the Whitbread Q3 Trading Update Conference Call. My name is Bruno, and I'll be operating your call today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I will now hand over to your host and Chief Executive Officer, Dominic Paul. Please go ahead.
Oh, thank you, Bruno. Good morning, everybody. Thank you very much for joining the call for our Quarter Three trading update. I'm pleased to be joined by Hemant Patel, our Group CFO. Hopefully, you've had a chance to review the Q3 release this morning. I'll start by giving a brief overview for those who haven't seen it, before opening up the call for Q&A, when Hemant and I will be happy to take your questions. During the Q3, which ran to 30th November 2023, we continued to trade well in the U.K. and have delivered another strong performance, with RevPAR up 9% versus last year and 39% ahead of full year 2020. This was driven by high occupancy levels and strong pricing across both London and the regions.
We maintained our outperformance versus the rest of the mid-scale and economy market, with a RevPAR premium of GBP 6.06, up from GBP 4.48 last year. Our food and beverage sales continued to perform well in the quarter and were 6% ahead of last year. In Germany, we also traded well in what is an important quarter. Our performance was led by our cohort of 17 more established hotels, which continued to perform in line with the wider mid-scale and economy market, with a RevPAR of EUR 66. We now have 58 hotels open and 34 hotels in the pipeline. Moving on to current trading and starting first with the U.K.
We're continuing to see positive trading momentum in the U.K., and in the five weeks to the 4th of January, 2024, total accommodation sales are up 12% versus last year, and RevPAR is up 10%. Food and beverage sales benefited from a robust Christmas trading period and are up 7% versus last year. In Germany, current trading has seen total accommodation sales 61% ahead of full year 2023, with total estate RevPAR at 44 EUR and RevPAR for our cohort of more established hotels being 50 EUR.
Now, while there's no change to our cost guidance for this year, as we look forward into full year 2025, we expect net cost inflation on our GBP 1.7 billion to GBP 1.8 billion U.K. cost base to be between 3% and 4%, after taking account of operational cost efficiencies of between GBP 40 million to 50 million . Our guidance does reflect an increase in labor costs due to the increase in the National Living Wage, partially offset by lower utilities and food and beverage inflation. So despite persistent inflation, we remain confident in the outlook for the coming year. Our forward booked position in the U.K. is ahead of last year, with a favorable supply environment, a clear commercial plan with multiple levers and cost efficiencies, and we remain confident in the full year 2025 outlook.
In Germany, we remain on course to break even on a run rate basis in calendar year 2024, and are confident that we're making good progress towards our long-term target of 10% to 14% return on capital. Now, we're a customer-focused business, and before we move into Q&A, we've taken on board the feedback we received after the H1 results call, where some of you said, felt that the Q&A went on a bit too long. So in the interest of listening to customer feedback, could I please ask you to keep your questions to a maximum of two each, and that should ensure that we cover all the key questions. Thank you, and with that summary, I'll now hand back to Bruno to host the Q&A.
Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. To withdraw your question, star followed by two, and please do also remember to unmute your microphone when it's your turn to speak. Okay, we do have our first question registered. It comes from Vicki Stern, from Barclays. Vicki, you may proceed with your question. Your line's now open.
Yeah, morning.
Good day.
I'll keep it to two. Just on the cost savings, so the GBP 40 million to 50 million you're announcing for next year, obviously, that's slightly higher than the, I think we had GBP 30 million to 35 million per annum in mind previously. So just where are the additional saves coming from? And is that a sort of sensible run rate to have in mind going forward, or that's just a one-year thing facing off that higher inflation? And then the second one is just on the RevPAR outperformance, just can you sort of break it down to understand the source of that right now? You think you're sort of taking more price than the market on sort of catch up from last year, or it's, you know, Premier Plus affecting the mix, rollout of Opera, attribute pricing?
I know there's lots of different leads you've got, so just trying to understand what's driving the outperformance, and I guess with that, really, how sustainable that might be going into next year.
Yeah, great. Thanks, Vicki. Two really good questions, of course. I'll start. I'll answer the first part of the cost savings question, and then I'll hand over to Hemant. I mean, I suppose a bit like we talked about at the interims a few months ago, Hemant and I have spent a lot of time over the last 12 months or so, really looking in detail at the business. The beauty of our business is we are vertically integrated, which means we control and operate all the elements of the operations. And actually, that gives us access to multiple levers to drive efficiencies. We're a value-focused business. We can see our guest scores are at record levels, and actually our value for money scores are at record levels as well.
It's really important that we continue that. One of the ways we continue that value for money focus is by ensuring we're incredibly efficient on how we operate. And both Hemant and I are pleased that as we've done this work, we've seen continuing opportunities to drive those efficiencies. And as is often the case with running a business really well, it's not one silver bullet to drive increased efficiencies, it's multiple, it's kind of multiple levers to pull, and it's taking a really rigorous, disciplined approach to running an operationally led business. So we have been able to increase our efficiencies target, and we're really comfortable that we're able to do that in order to drive the value for money proposition with our customers.
But also, over the medium term, it gives us increased confidence that we'll be able to continue to drive our margins up over time. Hemant will build on that question. But before I get to that, let me just talk about the RevPAR side of things. You're right, we have seen a RevPAR outperformance. I think we're really seeing the benefit of being the number one brand in the U.K., and back to that vertically integrated business model, the benefit of that, the direct distribution. We're really balanced between business and leisure, 50% business, 50% leisure. Again, it's not one key lever that we're pulling to drive that RevPAR performance, it's a number of things. One of them is the increased rollout of Premier Plus rooms, as you touched on.
One of them is our increased focus on business guests, making it easier for guests to book with us. We're linking up more with GDSs, which makes it a more frictionless experience. Business guests generally pay a slightly higher amount. It's also trading the business really well. Building the occupancy in our hotels earlier, which enables us over time to take more price, which doesn't necessary, which isn't as blunt as just increasing our prices. It means that we offer value at that point, but actually that also enables us to take more price. So, it's a combination of factors, and they're kind of all underpinned by the strength of the brand and the strength of the proposition.
We're really focused on continuing to kind of drive that outperformance, and continue to profitably take market share. I think the, you know, the results that we've been talking about over the last 12 months, underline the momentum that we're building in doing that. I'll hand you to Hemant, who can talk a little bit more about the efficiencies piece.
Thanks. Thanks, Dominic. Yeah, Vicki, on, in, I think Dominic's laid out the kind of philosophy we have in terms of cost savings. We're, it's a relentless process. We are a big business with a large cost base. The cost savings that we, we can see are across every area of the business, in terms of our operations and labor within the operations, our technology spend, procurement, as well as our central cost as well. We are, we've looked at every single area of cost in the business, and are developing our cost saving plans for the next, you know, three to four years.
We're not giving guidance as to the sustainability, in terms of the exact numbers, but as you can see, we have indeed increased our efficiency guidance from something like GBP 30 million to 33 million, up to between GBP 40 million and GBP 50 million for next year. There's a combination of different processes, and initiatives driving that, all the way from process improvements, from introducing technology or automating efficient processes, renegotiating contracts. I'd say this is something that, you know, we, it, even once you've done it once, you need to go back and do it again, because we're always reintroducing cost investing in the business, and there's always more opportunity for efficiencies. So we're very, very, very confident about this, the efficiency plan for next year.
When we're ready, we'll talk more about what the next three or four years look like in terms of efficiency, and give some more specific guidance on that. But as you can tell, we're very serious about continuing with our heightened efficiency program.
Thank you, Vicki.
Very clear. Thanks very much.
Our next question comes from Jamie Rollo from Morgan Stanley. Jamie, your line's now open.
Thanks. Morning, everyone. My first question is just on the RevPAR outlook. After sort of a weaker October, November for the market, we saw a very big pickup in December. I'm just wondering whether there's anything sort of unusual going on there? And also, PI occupancy's been down sort of two quarters in a row, year-on-year, particularly London. So just sort of talking a bit about the recent data and your confidence on things moving ahead going forward, would be helpful. And then on Germany, I think it's nearly six months into those commercial enhancements, any sort of early feedback you can give on that would be helpful.
And also, any flavor for the cadence of PBT during FY 2025 to get to that break even? Thank you.
Thanks, Jamie. Let me take the first couple of questions then. I mean, I think in terms of the RevPAR outlook, I mean, you're right, in there were a few weeks in quarter three, and I think people saw the Travelodge results, which were slightly softer, and at the time, we said, you know, we would continue to see outperformance versus the market, which we've continued to drive. Our occupancy has been slightly down, but it's still very high. You know, when we look at our hotel network, we are full many nights of the week. So once you're at the kind of occupancy levels that we're driving, it means that our hotels are full a lot of the time.
Which I suppose underlines one of the advantages that we've got as an industry, which is supply is slightly down. We are seeing high occupancy levels across the whole industry, and we're in particular, being very successful at driving those high occupancy levels. Whether it adjusts by a percentage or two here or there, the reality is, it is still very strong occupancy levels, which is enabling us to. Which is supporting a really strong pricing environment. So, in terms of kind of our outlook moving forward, I mean, we feel good about the market overall. We've been very clear about talking about the fact supply is down. We don't think supply is gonna get back to pre-pandemic levels for at least five years. That's gonna support the pricing environment, we believe.
We're also very focused on business customers. At a time where there is some uncertainty about consumer spending, we do see businesses being increasingly value-focused, which helps us, because we are a value player. All we can do is look at where we are currently for next year, and we're booked slightly ahead of where we were this time last year for next year at higher rates. All that said, we're a late booking market, so of course, the visibility into next year is relatively limited. But we've got commercial levers at our disposal. We've got a supportive supply side environment, and as you know, Hemant and I have just talked about, we've also got efficiency levers like efficiencies for us to pull.
So it's not just as simple as looking at RevPAR, it's also about how we continue to drive increased efficiencies over time. And that's when we step back and look at the business, and we're almost moving away from the quarter to quarter outlook, we say, we're in a benign supply environment, which we think is gonna be really supportive for this business. We've got strong commercial levers for us to pull over the next few years. We've got levers for us to pull from an efficiency point of view. And that gives us confidence in being able to continue to drive our margins and profitability up over the next few years. So, you know, I guess our tone has generally been one of confidence this year. We continue that tone of confidence.
Of course, all within the backdrop of, we're relatively low booked for next year, because we're a late booking market. And so, you know, our visibility is relatively low as it was this time last year. But the core drivers of our business and of the market look good for next year. Then kind of talking about Germany, I mean, we're encouraged by the progress that we're making in Germany. We talked at the interims a few months ago about the fact that we were learning a lot about trading in Germany and that we were pulling more levers. We talked about things like increasing our distribution in Germany, starting to build the brand more, getting better at pricing events. And we're seeing those actions taking root.
As you know, our more mature hotels are now, you know, are now nicely tracking the market, so we've seen a relative uptick in the performance of those hotels. And that's giving us confidence, and it's one of the reasons why we've reiterated our confidence hitting breakeven on a run rate basis next, next calendar year.
Just to add then, your question in terms of the kind of cadence and what that might mean for next year, I think you know, consensus at the moment for next calendar year for Germany is a loss of GBP 10 million. This is in line, we think, with our commitment to get to run rate breakeven during the calendar year. I think we can assume that most of that loss therefore will be in the first half of the year, and by the second half of the year, we should be you know, achieving that breakeven run rate you know, at some point through that second half.
Thank you very much.
Our next question comes from Leo Carrington from Citi. Leo, your line's now open.
Thank you, and good morning. If I could-
Hi, Leo.
First, follow up on, on that point about the forward booking position. How close to pre-pandemic levels is your, is your forward booking position? And to what extent is this a factor in driving the outperformance in, I guess, by filling your hotels earlier at the right ADR? And then secondly, in terms of property valuations, I, I think since you last reported, a couple of Premier Inns have traded as well, obviously, as a portfolio of your competitors' hotels. Do you have any comments on, on the valuations there versus your expectations or the valuation exercise that was last done pre-pandemic?
Okay. Yeah, so I'll take that. Just in terms of the forward booking position versus pre-pandemic, I mean, yeah, customers are behaving slightly differently to how they were pre-pandemic, so I'm not sure that's a relevant comparison. If you look at where we were this time last year, though, our forward booking position is actually ahead of that, both in terms of occupancy and rate, and clearly, you know, into the Q1 of next year, and we are very happy with our forward booking position into this quarter as well, on a similar basis.
Clearly, you know, we had, we had a very good Q4 this time last year and a very good Q1 as well into the next year that we'll be analyzing again. So we're very pleased that, you know, that we are, our position is strong, and that therefore, you know, we, we would hope to continue to grow within, you know, our UK accommodation sales into UK accommodation sales. So, very happy with that, that position. I don't think there's anything else really to read versus where we were pre-pandemic. I think, you know, the customers were behaving slightly differently, differently then. Where we are in terms of property valuation, yeah, we've seen, we've seen, you know, a couple of transactions and then some competitive transactions as well in the market.
I don't think the competitive transactions have that much relevance, in all honesty. If I look at the quality of the products that have been on market, they don't necessarily map to our products, and certainly don't map to our covenant. And the yield that we tend to achieve with kind of on the likes of the couple of transactions you've seen on the market that involve Premier product don't lead me to think that actually the kind of the pre-pandemic valuation that there was, even though that would've been since 2020 to 2019, that yeah, we've seen, we're gonna see anything radically different as and when we're able to value our estate.
Clearly, it's a bit difficult to value the estate on a evidence-based basis right now, because the level of transactions is very low. And, you know, the valuation methodology involves assessing each of our individual sites on a market rent basis, and applying them for market yield to those based on the evidence that there is. Yeah, before we actually saw the hike in interest rates, you know, last year, we started to see interest rates go up last year, or sorry, the previous year. We were actually trading where we saw evidence trading ahead of that valuation. Clearly, with higher interest rates, there's been a reduction against that.
I think on the whole, we still feel very comfortable with the valuations that were made in kind of 2019, so there's nothing really yet to report on that. Clearly, a point in time when we have a bit more evidence and where interest rates have stabilized a little bit, I think, yeah, we would be ready to do another exercise, but we need to wait till we've got that evidence in the market to do so.
I guess the only other final point I'll build on, so I think Hemant's covered it all really well. The only other final point I'd make is we, of course, have bought more hotels in that period. So we've added hotels, we've added
Yeah
freehold properties to that valuation. So I think we feel when we, we look, kind of, look at everything, we feel that, you know, we feel good about that valuation, and then we have added freehold properties subsequently to the portfolio.
Thank you very much. Thank you.
Our next question comes from Jaina Mistry from Jefferies. Jaina, your line's now open.
Hi, thanks very much for taking my questions, and congratulations on a fantastic quarter.
Thanks, Jaina.
I'll ask two questions. My first question is around your rate environment. I guess in the context of current trading, your forward booked position, and perhaps your updated macro view, has your view or your sentiment on the outlook for pricing over the next 12 months changed at all since we last spoke? And then on Germany, did your established hotels grow RevPAR in Q3, and were they profitable in Q3 as well? Thank you.
Thanks, Jaina. And I think in terms of pricing, and then has our outlook changed? I mean, I suppose I'd go back to what we spoke about the entrance, which is supply being down and supply in the U.K. hotel industry not getting back to pre-pandemic levels for at least five years. That should support a good pricing environment, and then we've got levers open to our disposal as well. Of course, we read all the same things in newspapers about, you know, the leisure consumers in particular feeling a bit squeezed, but that has also been the case this year. So I think that's why it's really important to understand how balanced our business is.
We've got this big focus on business guests, at least 50% of our revenue comes from business guests. We've actually seen strong demand from leisure customers booking quite far out. Taylor Swift concerts would be a classic example of that. Having said that, it's really important that we take a really segmented approach to our pricing and therefore are able to drive RevPAR up without just doing, you know, without taking just blunt price rises in. It's segmenting the pricing in a really smart way. I mean, consensus next year, I think is for RevPAR to go up 1% to 2%. We would need RevPAR to go up 2% to 3% for PBT to stay flat.
So we look at consensus and don't feel that that is overly challenging. You know, we think the supply side environment, but also the actions that we're taking ourselves, should help support you know, our performance versus the market, but also our ability to continue to take price. I think Hemant's probably gonna pick up on the Germany question.
On the more established hotels, as you say, Jaina, yeah. I mean, we traded them at 66 EUR RevPAR for the quarter. That compares to 58 EUR for Q2, which is obviously part of that is seasonal. But it's also 3% up on where they were this time last year. That's actually, there's a headwind there, because of, you know, the density of trade fairs, some big trade fairs in the previous year, particularly Munich. So, we're actually very pleased with how those are trading, and that they are continuing to mature and in line with our expectations of getting to those, you know, 10% to 14% return on capital employed when they get to their maturity levels.
Okay. So just to summarize, would you agree if what I take from this is you're as confident as you were in the RevPAR outlook since we spoke a few months ago, and then German hotels were profitable in Q3 on the established estate?
Yeah. So I just on the last point, we're not saying that necessarily. You can infer from based on, you know, past discussions in 10 year. We're not specifically saying that. Clearly, you know, the most established hotels have been more profitable, and they are growing, so you would expect them to be so, but we haven't gone into the details of that. And then in terms of RevPAR outlook, I think, you know, as Dominic said, like, you know, we've got a good book position. We've got an awful lot in the locker in terms of our commercial plans and levers that we can control.
Clearly, we can't control what might happen to the overall economic environment and demand overall, but you know, from where we stand right now, we're very confident that we'll be able to trade the UK business really well and push profitability on at least to where it has been this year, if not further.
Very clear. Thanks very much.
Thanks, Jaina.
Our next question comes from Jarrod Castle from UBS. Jarrod, your line's now open.
Thank you, and good morning to everyone. Just finishing off on Germany, but can you give a view on kind of how you see the inflation backdrop? You know, just like you gave for the, I guess, the U.K. and, you know, what kind of RevPAR growth do you need to kind of hit this breakeven? Or is it more a question of scale at this point? And then just secondly, I mean, I know you don't generally say that much, but are you still happy at this point with kind of how room count is progressing, both in terms of German and U.K. rollout, in terms of the targets you've previously provided?
Yeah, thanks. So let me, let me, let me kind of take those questions, but I think Hemant will also build on it as well. I mean, we haven't been specific in our guidance in Germany of saying what RevPAR increase we would need to see to offset the inflation. I mean, part of that, of course, is because our hotel portfolio in Germany, although we've grown really quickly and are now getting to a good scale, the hotels are still pretty immature. I mean, they've. Most of them have only been open for a very short period of time. So the RevPAR increases we're seeing year-over-year are very, very significant and very material. You know, it's kind of, you know, as you're seeing in the numbers today.
So it's slightly less relevant to talk about exactly what we'd need to offset the inflation, because we're going up the maturity curve so quickly. What we have been really specific about is saying that, you know, we feel good about our goal to break even on a run rate basis at some point next calendar year. And we're seeing good progress. We're seeing good progress in Germany. So I talked about the commercial levers that we're pulling, and we're, you know, we're seeing increasing performance from those hotels as they mature. And we're investing in our local team in Germany, which is really helping us to act, I would say, really like a challenger brand in Germany to support our growth aspirations in that market.
And then in terms of, in terms of a room count, I mean, we still feel really good about the long-term milestones that we talked about. We talked about 125,000 rooms in the U.K. So remember, we're at, we're at about 85,000 rooms now, so material growth in the U.K. And we've got about 7,000 rooms in our pipeline in Germany, so we've got material growth coming there. We have talked about the fact that, our pipeline of growth for the next couple of years is slightly lower than we have seen historically. All of that said, our pipeline of growth is greater than all of our key competitors put together in the, in the U.K. market. So, we are able to access growth much better than our competitors are.
The high interest rate environment, and the lack of balance sheet strength that most of our competitors have got, means that they're really struggling to add capacity. That, of course, will help support a benign pricing environment, but it will also enable us to take profitable market share over the next few years. So, we still feel good about that kind of runway of growth that we've got, ahead of us. And we feel particularly good that we are going to be growing disproportionately quicker compared to our competitors, and will be able to do that, and continue over time to grow our margins and our profitability.
Yeah, and just to add, to build on, Dominic's response on Germany. The inflation guidance we've given overall of this net, of net 3% to 4% applies to Germany, actually is about the same, in terms of net inflation in Germany. And as Dominic says, you know, it is. You know, there are a variety of factors that determine, you know, when we get to that breakeven position overall for the business. You know, the growth, you know, as we add new rooms, obviously, and open rooms, as each of those different cohorts matures at different rates, as well as, you know, how the commercial initiatives that we're overlaying. So there are a variety of different things that will enable that.
I think overall, as we say, we're still confident we'll get to this break even run rate through this calendar year. And then, you know, from there, you know, towards getting to our, you know, mature estate return on capital of 10% to 14%.
Okay, thanks a lot.
Thank you.
Our next question comes from Paul Sheridan from Bank of America. Paul, you may proceed with your question.
Hi, good morning. It's Paul Sheridan
Hi, Paul.
in place of Muneeba Kayali from Bank of America. I'll stick to two. First is: How should we think about U.K. National Living Wage increase in context of your 3% to 4% inflation guidance? Maybe more generally, what are the other moving parts in that 3% to 4%? And then second question, maybe also in Germany, and strong, and you call out a large number of leisure and business events in Q3. When you think about Q4, do you see similar level of contribution to your performance from leisure and business events? Thank you.
Thanks, Paul. I mean, let me just briefly answer, and I'll pass over to Hemant as well to build on it. I mean, the UK National Living Wage increase, which you have all seen, that is included in our net inflation, in net inflation guidance, so that has added top-line inflation to the business. One of the ways we offset that impact is by having a strong efficiency program, which Hemant talked about earlier. And I think we're really pleased to see that we have effectively expanded our efficiency program. I think it underlines the levers that we've got open to us as a business. In Germany, the events ebb and flow. They are quite spiky. We've definitely got better at trading the events.
When we first operated in Germany, I don't think we appreciated how far in advance customers book these events, nor how strong the pricing is. So, effectively, we had certain events where we charged too low rates for our customers when they would have been actually willing to pay higher rates. We've got a much better handle on that now. We've got a really good calendar of when those events are coming on, and we've got automated systems to alert us when we see increased demand, which is the immediate notification that an event has been loaded. And then we've changed our pricing ladders to enable us to maximize revenue during those events.
The Q4 events calendar is relatively similar to what it's been at in the year before, but of course, within the months that does slightly change, 'cause we've now got 58 hotels open in Germany, which means that we've got, you know, kind of more access to markets where there are potentially events. And then maybe to build a bit more on the inflation question.
Yeah, Paul. Yeah, I mean, the living wage increase is probably a bit higher than I think most expected, at just under 10% year-on-year. The majority of our 40,000 people that work at Whitbread are hourly paid, but no one is paid at minimum wage. Everyone's paid above that minimum wage level. Just use an example, last year, we had a similar rise in minimum wage that ended up in a 6% to 7% increase in our overall wage bill, because there are also salaried staff, and as I say, we pay above that level anyway, so that, the, it's not quite you take that increase and, you know, apply it directly to our entire wage bill.
But yeah, clearly, it's a large factor, and it does drive the overall wage increase for the hourly paid teams. Against that, we have seen a lower level, but still inflation in food and beverage than we've seen in the past. So there's still a level of inflation in food and beverage. And then, obviously, now there's net effective deflation in utilities, as obviously spot rates have come down, and we've unwound hedges from the previous year when we saw where the really peaky utility costs.
All of that in total gets to, you know, a gross inflation level of, you know, 5% to 6%, but the net inflation level, as we talked about, 3% to 4%, including the GBP 40 million to 50 million of cost efficiencies, as we said. So, although, yes, living wage has been higher than probably expected, you know, we've obviously been working really hard to push our efficiency levels to be as high as possible, to offset that and other parts of that inflation level. So we're happy that, you know, we're doing everything we can to combat inflation.
Thank you, Paul.
Thank you.
We've got time for three more, three more questions.
Sure. The next question comes from Jaafar Mestari from BNP Paribas. Jaafar, your line is now open.
Hi, morning, everyone. Yeah, a couple for me. So just going back on, on the cost inflation guidance, if I read this correctly, X efficiencies, what you're effectively saying is, is gross cost inflation, is expected to be between 5% and 6%? Just curious on your, your budgeting process, how does that compare with, where it's trending at right now? Are you assuming the same as the exit rates, or are you making assumptions for, further normalization down in, in inflation? And then on the pipeline, I'm sure you'll have the, the full details on openings in the complete 25 guidance, in April, but, you know, just very broadly, appreciate all your comments on, on, growing more than competitors.
But is 2025 going to be a year of acceleration in terms of your new openings in the UK? Or should we assume not much higher than 1,500-2,000 rooms in the UK?
Okay, thanks, Jaafar. Let me take the openings point first, and then I'll hand you over to Hemant for the inflation. I mean, we haven't given guidance on the openings for next year yet. And the openings for this year that we're in are quite heavily quarter three and quarter four focused. So the team are busy now opening hotels and putting finishing touches on hotels, but we feel good in terms of our, what we've said about our guidance for this year of hitting that. Next year, I mean, we were, I think we were very open at talking about a year ago about saying that the next couple of years, we will see slightly lower openings compared to our normalized run rate of hotel openings pre-COVID.
Obviously, during COVID, the number of hotel transactions fell quite substantially. That said, we do see opportunities now to access sites, and we're seeing some really exciting sites coming up. The kind of beauty of the hotel business, and the frustration of the hotel business, is when you find a great site, it generally takes a few years to open that site. It can easily take four years. The beauty of that is, our competitors are the same, which is why we're not seeing supply coming back quickly. And we are getting privileged access to those sites at a time where our competitors can't. So when we look over to the medium term, we feel really good about rebuilding that pipeline. That's why, you know, we can already say with confidence, our pipeline is greater than all of our competitors put together.
That said, this couple of years we're in now, we're expecting to see slightly lower room openings than we have seen. But we also have other opportunities available to us, which is, for example, restarting our extensions program. Again, we're privileged to be able to do that. We own the freehold for a significant portion of our estate. And with our high occupancy levels, accelerating extensions program enables us to add rooms. So that'll be one of the ways over time that we'll look to rebuild our pipeline. So the next couple of years, slightly lower than we've seen historically, but feeling good about rebuilding that pipeline over time.
Thank you.
And then just in terms of, you know, the kind of how we budget for cost inflation. Clearly, what we tried to do is give you guidance for what we think we will actually see. If our cost base is, you know, specific to our business, obviously, and we can see the different constituents of forecast inflation across those, and we will have some very, very specific understanding in certain areas as to, for instance, laundry, where we've got a real depth of understanding exactly what might be happening in terms of inflation. We'll apply our best judgment to that, and that is the guidance that we're providing you.
Thank you. So a mix of where it is right now and, and where you expect it?
Yeah, I mean, net of everything, you know, basically of giving you our best guidance as to what we think will happen next year.
Super. Thank you very much.
Thanks, Jaafar.
Our next question comes from Tim Barrett, from Numis. Tim, your line is now open.
Hi. Morning, both of you.
Hey, Tim.
First, just quickly on food and beverage, wondered if you could talk about recent trends, about 7% in December, looks similar to the Q3, so is that in line with the market? Then the second thing, it's probably more of a request than a question, but on property, it sounds like you're talking about the February 2019 valuation, GBP 4.9 billion to 5.8 billion. Obviously, that's five years old. I, I wouldn't expect you to know it now, but could you give us, at some point, the total freehold that you've bought since then? That would be massively helpful. Thank you.
Thanks, Tim. So yes, we can on the freehold. So we can follow up on that separately. In terms of food and beverage, I mean, you know, as I think everybody on this call knows, the core of our business is the hotels business. And you know, the high margin, high profitable hotel business, but the food and beverage is important to support our hotel guests. In our branded restaurants, we also do serve the local community. And actually, the performance, we've worked hard at ensuring that we're delivering a great quality, a great quality experience for our hotel guests. And actually, the performance has been okay in the branded restaurants in terms of like-for-like sales as well.
So, it upticked a bit during the December period. I mean, we're slightly different to the market because, actually for breakfast, the majority of our guests are our hotel guests. And then we have a reasonable number of our hotel guests who come for dinner. But, 6% and 7% and we had a strong, actually a strong Christmas trading period, about where we would want and expect that performance to be. It acts as a service primarily for the hotel business, and, you know, as we've talked about today, we're very pleased how the actual hotel business is trading.
Okay. Thank you very much.
Thank you.
Thank you.
Our next question comes from Richard Clarke, from Bernstein. Richard, your line is now open.
Hi there. Good morning. Thanks for taking my questions. Two of them.
Hi, Richard.
Just in answer to the last question, you said you had a strong Christmas in F&B and probably accommodation. Just your thoughts on the rest of Q4. You know, can you sustain 10%, or should we expect that to slow down? And then second question, just going back to Germany, you reiterated on the call, you could match the return on capital you see in the U.K. Germany is a much higher leasehold mix. It's about 78%, I think, leasehold. So freehold to freehold, that looks like you're aiming for quite a lot lower return on capital. Is it just a milestone, or do you expect you won't be able to match the sort of freehold returns you make in the U.K.?
Okay. I'll tell you, on in terms of our Q4 current trading, we are gonna be annualizing across this quarter against very strong trading last year. So I don't think it's quite as simple as taking the 10%. If you look at how we're doing versus FY 2020, which may be slightly more representative shape, I hate coming back and talking about FY 2020 over and over again, but you know, we're probably in line with that kind of shape. Overall, I think over, you know, what that means is that we expect to trade really well and outperform the market across you know, across the rest of this quarter. As mentioned already, our booked position is looking good.
Low though it is at this stage, but it's looking good into next year in Q1 into next year. In terms of where we're targeting, yeah, like for like, yeah, we would expect a freehold site in Germany to get to a similar level of return to freehold site in the U.K. We talked 10%-14%. We use that as a proxy for the U.K. business and where the U.K. business was when we set that target two or, you know, three or four years ago, in fact, to say what we want to do is replicate the returns that we were enjoying in the U.K. business.
Clearly, over time, you know, as the estate matures, you would expect our return on capital to mature in our most mature sites, and you'd expect that to keep going upwards, yeah, over time. So we're not committing to anything over the very long term. We're not what we're saying, though, is we expect the whole business, and we expect this business to still be maturing, because we'll still be adding to this business over the next few years at a higher rate than we do in the U.K. to get to that kind of 10% to 14%, in that 10% to 14% level in that, you know, medium to long term, as we talked, as we talked about.
Clearly, you know, if we stopped adding sites, you know, we would get to higher levels of return the same way that, you know, you would expect to, you know, the freehold estate has done in the U.K. as well.
Thanks.
Answers your question, Richard?
Yes, it does. Yes, very much.
Thank you. Thank you.
We currently have no further questions, so I would like to hand the call back to you, Dominic, for closing remarks.
Perfect. Thank you, Bruno. Thank you all for sticking to your questions. I appreciate it. So thank you, everybody, for your time today. You know, we're proud of the results. We think it shows strong momentum for the business. We appreciate your time, and thank you very much.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.