Whitbread PLC

LSE:WTB

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the Whitbread PLC First Quarter Trading Update. My name is Holly, and I'll be your coordinator today. I would now like to hand over to Alison Brittain, CEO, to begin today's presentation. Alison, please go ahead.

[Alison Brittain, Chief Executive & Director]

Good morning, everyone, and thanks for dialing to Whitbread's first quarter trading update. I'm joined by our Group Finance Director, Nicholas Cadbury; and Costa MD, Dominic, is here with us -- Dominic Paul is here with us this morning. We started the year with total group sales up 3.2%, driven by investment in new Premier Inn hotels, coffee shops and Express machines. This growth, along with our group-wide efficiency program to offset the sector-wide inflation refreshes, means that we're expecting to deliver full year performance in line with this year's expectation.Since our announcement to demerge Costa from Whitbread at our full year results in April, we are pleased with our initial progress. We have a dedicated project team in place, appointed external advisers as well as continuing the core infrastructure and efficiency program work that was already underway. We'll update you further at our interim results in October, however, we remain committed to demerging Costa as fast and as practical and appropriate to optimize the value for our shareholders.Turning first to quarter trading in Premier Inn. Premier Inn in the U.K. has continued to gain market share, with total accommodation sales growth of 4.3% in the quarter, delivered by ongoing investment in attractive new hotels and extensions, which we expect to mature to levels of returns in line with the current estate. [ the angsell ] market remained subdued in the first quarter due to a combination of high levels of supply growth, including significant openings of our own, and the strong performance of the market this time last year when the weak pound encouraged inbound tourism. Consequently, Premier Inn delivered flat like-for-like sales in line with the market.Levels of supply growth and the annualization of last year's influx of inbound tourism have impacted London more, so the market was softer here than in the region. However, Premier Inn's significant capacity addition of 13.8% meant that we grew accommodation sales by 6.3%, well ahead of the market.The London market continues to be an attractive long-term opportunity, given strong occupancy and higher average room rates, and we have a lower market share in London. So we plan to increase our presence and take advantage of the opportunity through our new hotels, including our compact hub hotels, which continue to perform extremely well and mature very quickly.The regional market has been more robust as domestic business demand has continued to grow, and Premier Inn's market share is increasing through new hotels and extension. In addition, the early success of our business booker tool is attracting more corporates to book through our dedicated platform, making them more loyal to the brand.Forward bookings have improved recently, and we're confident of achieving our room opening target of 4,000 to 4,500 rooms this year in the U.K. and Germany as well as our 85,000 U.K. room target by 2020, with over 72,000 rooms open today and more than 14,000 rooms secured in the committed pipeline.Our food and beverage sales had a tough quarter, with like-for-like sales declining 1.9%. The adverse weather during the spring led to lower footfall across the industry, and the timing of Easter also impacted sales. However, we're confident that our menu and pricing reviews as well as new targeted promotions will lead to improvements on our first quarter performance.In Germany, we've secured another hotel in Mannheim. This brings the committed organic pipeline to 12 hotels, which, along with the acquisition of 19 hotels announced in February, means our total pipeline is now 31 hotels and almost 6,000 rooms. In the year ahead, we expect to open 3 hotels from the pipeline, and our existing hotel in Frankfurt continues to perform well with good occupancy, good room rates and good customer scores.Our property team in Germany remain active in looking at all opportunities to accelerate and extend our pipeline further, including more freehold and leasehold sites for organic expansion, along with further bolt-on acquisition.Moving on to Costa. We grew total U.K. sales by 5.2% in the quarter as we increased our market share through new stores and Express machines. As we experienced in previous quarter, we're seeing higher growth from our convenience channels, which offset this negative like-for-like sales in stores in more traditional High Street locations, where the market experienced a retail footfall decline of minus 3.5% during the quarter.We continued to pursue our strategy to reweight our estate towards high-footfall and convenient locations, such as drive-thru travel locations and Costa Express, and we aim to sell more Costa coffees to customers across the U.K. We expect the weaker consumer environment to continue throughout the year. However, it's worth remembering that, overall, our High Street stores remain very profitable and deliver very strong return on capital.We continue to review the returns of all of our stores and have been actively managing the very short tail of underperforming stores over the last 2 years, and we'll continue to do that. This is facilitated by our flexible lease structure. We remain excited about our investment program and product innovation pipeline in Costa. Given the overall coffee consumption continues to increase, we can deploy capital at attractive returns, and we've maintained our investment in new stores and refocused our refurbishment program. The completion of our point-of-sale upgrade program in April, [ backtills to you and I ], that's also enabled us to introduce our first value bundle deal at lunchtime and to trial Click & Collect across 16 stores in London. We'll be expanding this trial both in terms of number of stores as well as the range of menu items available through the app.During the quarter, our food launch is focused on an improved range of savory snacks as well as continuing to add to our core coffee range with flat black and flat mocha coffees complementing our flat white family range. We've made a good start in terms of investment in our product range, digital capabilities, operational excellence and further store network expansion, and we've got good momentum in delivering the plan.In Costa, our international business continues to grow, with good momentum in China, like-for-like sales grew in the first quarter, and we've seen positive early signs from the increased investment in new stores and product. We are on plan to open 100 stores this financial year and we'll also close some underperforming legacy stores to improve the performance of the Chinese estate overall.Costa Express grew U.K. sales by 9.6%, driven by machine additions over the last year and positive like-for-like sales growth. We've started to enter attractive markets proactively in order to secure new partnerships and have a number of trials underway in Europe. Across the U.K. and internationally, we're confident of achieving our target of 1,300 machine installations by the end of the year.In conclusion, we remain committed to delivering our strategy to grow by investing in the structural opportunities in the budget hotel and coffee market, both in the U.K. and internationally. Alongside this, we've made good early progress on the demerger of Costa, which we continue to pursue as fast as practical and appropriate to optimize value for shareholders. Our efficiency program and investment in strong capabilities in technology, procurement, property and supply chain is ensuring that we can deliver our growth plans efficiently. And despite the [ shorter term ] trading conditions in some of our markets, we had a good start to the year and remain on track to deliver full year results in line with expectation.Thanks for listening this morning. Nicholas, Dominic and I will now be pleased to answer any questions that you have. Can we hand over to Q&A?

[Operator]

[Operator Instructions] Our first question on the phone lines comes from Lena Thakkar of HSBC.

[Lena Thakkar, Analyst]

I just wanted to ask 3 questions, actually, if that's okay. Firstly, in terms of Premier Inn, I'll go one at a time if that's okay, could you just elaborate on the comments around being in line with the market? I'm just wondering which metrics you're comparing there.

[Alison Brittain, Chief Executive & Director]

Okay. Nicholas, do you want to pick that up?

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. It's in line with our expectation. So if you just look at our total sales in Premier Inn, accommodation sales roughly over 4%, which is actually ahead of the market, overall. Our like-for-like sales, which is what we normally kind of -- which is, as you know, what we measure ourselves on, was fairly flat, this is minus 0.3. And the market is flat as well, the mid scale and economy market was flat as well. So that's what we're referring to when we talk about our like-for-like performance, overall. As you know, it was a fairly soft market in London, overall. The market was down 3% overall RevPAR. Actually, our sales were up 6%, overall, and we've added 25% capacity over the last 2 years and 13% over the last year. So actually, we think we had -- although the London market was soft, we actually had a good performance overall. And the regions, the market was a little bit better than London, it was up 0.9%. Our like-for-like was up 0.5% [indiscernible] or thereabouts, but our total sales in the regions was up about 4%, overall, again so ahead of the market.

[Lena Thakkar, Analyst]

But why wouldn't that compare the market RevPAR to your RevPAR, perhaps, like-for-like RevPAR if you wanted to strip out the...

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Because we're really focused on opening extensions. And when we open extensions, that's -- that dilutes our RevPAR overall [indiscernible].

[Lena Thakkar, Analyst]

Forgive me, it's [indiscernible].

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

That's what we're expecting, like-for-like. I think we've kind of flagged before that, really, about 1.5% of where the market is for RevPAR versus our RevPAR because of that point, and that's roughly where we are at the moment.

[Alison Brittain, Chief Executive & Director]

Plus, of course, well, it's 2 things. So remember, we're one of the few companies that can do extensions and that path of earning the freeholds and having control of the estate. And the extensions are pretty low risk for us because we already know that there's high demand for a particular location, so we know we're turning away business 2 or 3 nights a week. And so putting the extension on, we know that we will have good occupancy when we sell it, but it reduces RevPAR and increases profit and revenue. And the same goes if you take a London position where we open a lot of space, our aim is to get the total sale number across all of our space up. And we know that we do cannibalize an existing hotel when we open one nearby. And in London, they're not too far away from each other. But we know, also, that in year 2, that the original hotel comes back. So we know it's good business, overall, and it drives an increase in [ tential ] sales in like-for-like accommodation sale [ I mean ] returns profile remains constant throughout. So that is the way. We were quite unique in the way that we run our business. If we have no stock, no supply, no extension, we'd be driving only occupancy and rate, but that's not how we run the business.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

We're really focused, Lena, as you know, at driving return on capital and the best value. And if we just focused on RevPAR, we wouldn't be maximizing that. It's about opening a space, getting good returns from that new space has been very effective, that's why our like-for-like is more relevant.

[Lena Thakkar, Analyst]

Sure. I mean, I wasn't questioning the logic of extensions, et cetera. I was just -- from a -- for comparison, to me, it seems like the like-for-like is flatter, but maybe we can take that off-line. Secondly...

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

The like-for-like RevPAR versus our total like-for-like has been roughly in line with where it's been about the last 2 or 3 years.

[Lena Thakkar, Analyst]

Okay. Secondly, just on Costa. I know you've made a comment in the statement, but if you could update us on the demerger plans. Not so much the internal processes, but interest that you receive. And then also, on Costa, obviously, it's been quite a weak quarter. Perhaps you could give a bit more color on how the actual High Street stores have behaved and also when you expect some of the initiatives around food, Click & Collect and tech to start paying off.

[Alison Brittain, Chief Executive & Director]

Right. So the answer to your second question, we're quite sure, which is, in April, we announced we would demerge within 24 months and as fast, as is practical and appropriate to do, and we've got a range of activity, which we're working on. And both the program, the project itself to demerge, which is -- which we are keeping it away from the operational teams, and then the operational teams delivering both their trading performances on the ongoing transformation program. And I have nothing further really to update you on that other than that which I said already. We'll give you a further update at the next results presentation in terms of anything more we have to say then. And on the question of Costa. I mean, that footfall on the High Street, as you know, from the external data in the quarter was down 3.5%. And clearly, on our High Streets, we have been negative like-for-like, and that's compensated, to some extent, by our changing mix, which is we should have active activity where we are looking to put more of our estate into high-growth and high-footfall channels, like drive-thrus and travel locations, et cetera. And so you see our openings reflect the new pattern of opening. On the High Streets themselves, even if the like-for-likes have gone back, the stores remain very profitable. They're unlike some of the issues you see in retail at the moment where the stores themselves are unprofitable and they're on long leases. We have profitable stores with high return on capital, a very, very small tail of unprofitable stores. And we have a very flexible lease structure so that we can churn where we need to, with 5-year break in most of our leases, so our average lease is much lower than that, as you could work out. So overall, that -- I guess, that's the summary of how the High Street fits into the remaining part of our business. And in terms of our initiative, lots of those initiatives are having good impacts in and of themselves, but they're being launched into a world where it is quite trust trading and consumer environment. And for example, Click & Collect that we have -- it's a very small trial we've been running, I think you asked specifically about that, we have 16 stores, but not marketed. We're about to increase the product set on the app so that it allows personalization and people can all have different milks and different styles of coffee, that will happen in the next few weeks. And then we will roll that out to a much larger store base for a much bigger trial as we go through the second half of this year.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

We're very much in the operational testing parts at the moment.

[Lena Thakkar, Analyst]

Right, okay. Sorry, one last one. You say you expect the full year to be in line with expectations. Could you just tell us what those expectations are and, in particular, what your sort of projection is for top line trends around Costa like-for-likes and RevPAR? If you can give some sort of a feel for that, that would really be helpful.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. I mean, if you look on our website, we've got PBT [ about 609 ] is the consensus for the beverage [indiscernible] that we're comfortable with at the moment. I think if you look in terms of our -- if you look it through the year, we've made a comment in the statement that we've seen an improvement in our forward booking sales at the moment. Our forward booking sales are never direct lead into performance, overall. But we are seeing kind of some positive signs there at the moment. And what we also know is, as you go through the year, our comparatives get easier. Say, for example, in London this time last year, in the first half, we were about plus 2. In the second half, actually, we were minus 5 in the second half in London. So the comparatives get easier as well. The comparatives get easier in Costa as well, although we're just a bit -- a little bit more cautious there about what consumers buy [ which is ] overall.

[Alison Brittain, Chief Executive & Director]

And we changed expectations on like-for-like in Costa, but Premier Inn has got good forward momentum.

[Operator]

Our next question today comes from the line of Richard Clarke of Bernstein.

[Richard J. Clarke, Research Analyst]

Three questions from me, if I may. One, I'm going to repeat a question I asked, I think, at the last results session about so now you've got the kind of more standard like-for-like presentation. The maturing effect, you've kind of been opening around sort of 4,000 rooms a year for the last few years now, so simple math would imply the sort of dilutive effect would just begin to kind of balance out against the maturing effect if your hotel rooms are maturing after 1 year, like you expect. So if you can maybe talk to how we can balance that up and why you're still saying a dilutive effect from extensions and newbuilds. Second question, on Costa unit growth. I know you don't reiterate every piece of guidance at every quarter, but are you still speaking to the kind of 230 to 250 new stores? Or are you thinking you might close a few more High Street stores this year and you still think...

[Alison Brittain, Chief Executive & Director]

Yes, I'll do that one quickly, Richard. Yes, we're sticking to previous guidance.

[Richard J. Clarke, Research Analyst]

Okay. And then the last one, just on -- we've seen Starbucks talk about how they're really suffering in the afternoon coffee sales. Are you sort of seeing a similar effect in the U.K. that it's the afternoon that's really sort of dragging you down at the moment?

[Alison Brittain, Chief Executive & Director]

Yes, I'll do that, and then I'll leave Nicholas with the like-for-like question on restaurant. So -- and on Costa, yes, if we were picking a day part that was weaker, I think we'd pick afternoon. We've -- as you know, we've introduced new offers into breakfast and into lunch during the course of the last year, and they've gone well. And we've just done another lunch bundle, et cetera, but we haven't done much yet on our afternoon, and that will be our next thought process is what do we do with our afternoon activity in terms of tackling that daypart. But yes, I think that is a weaker area than mornings and lunch times.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. Yes, just in terms of the maturity, you're right, so you do get a maturity benefit as you -- and you're going to get into that 4,000 room kind of consistency, yes, so that kind of evens out. But the only thing I would say, Richard, is that what has happened is we've changed the mix of our openings, so we've got a lot more openings in London right now. So I think we've added about 25% capacity to our London over the last years and 14% over the last year. So the mix has changed. And of course, we've opened capacity in London in a soft London market. Now we're still getting above 80% occupancies and it's a very good strong market, and we're still getting good returns in there. So over the long term, I think we're very pleased with it, but it's just the right -- current -- right now, in a soft market, you don't quite see that kind of maturity in a place you may have seen 2 years ago.

[Richard J. Clarke, Research Analyst]

Okay. So you're expecting 2-year maturity in London rather than 1 year or something like that?

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

I'm just saying, right now -- so normally, I think we've kind of talked about a year ago that we were seeing about a year's maturity in London, overall. But it's just a bit soft. As you can see, the London market is just a bit softer at the moment, so naturally, we expect to see that it's kind of slightly prolonged.

[Alison Brittain, Chief Executive & Director]

It used to be 2, and it speeded up to 1, and it's probably now set back a little bit. Yes.

[Operator]

Our next question today comes from the line of Julia Pennington of Crédit Suisse.

[Timothy Ramskill, Research Analyst]

It's actually [ Timothy Raskill here ]. Guys, quick questions on Costa from me. So obviously, just maybe can you talk a little bit more about the refurbishment plans for this year? So a couple of things I'm interested in. One, will there be any kind of drag effect from those stores being taken out of action on the like-for-likes? So when you kind of strip it out of that, so any sort of thoughts around that? And then kind of maybe just sort of give us some sense as to what you feel the opportunity is from that sort of refurbishment process. I know a couple of years ago, you were talking about some stores being kind of maxed out in terms of sort of sales potential. So just sort of scoping for us what you think the uplift could be on those stores. And then as regards China, Costa China, I think back at the Investor Day, you sort of indicated that around 75% of the stores in China were what you'd kind of call at decent levels of kind of U.K.-type profitability. I just wondered if that sort of mix had shifted at all from that 75%.

[Alison Brittain, Chief Executive & Director]

Okay, great. And we've got Dominic here as well, so I'll get him to chip in on a bit on our store and China position.

[Dominic Paul, Managing Director of Costa]

I think -- Julia, it's Dominic.

[Alison Brittain, Chief Executive & Director]

It's Tim.

[Dominic Paul, Managing Director of Costa]

Sorry. [indiscernible], just on the store reimage plan. So we've been trialing a new look and feel of the stores effectively. So think, at Costa, you will recognize that a much better version of it, with a brighter, lighter environment and a slightly wider product mix. And the early indications are really encouraging. So we're planning to do probably about 150 of the relatively light images this financial year. There is some drag for like-for-like from that because they are closed for a period of time. Anywhere from a few days to weeks, depending on the level of the image. But from the early tests, we feel encouraged on the longer-term sales building opportunity that new stores provide. And then next year, we will plan to do a more significant number of reimages. And it's one of the key pillars of the plan that we talked about at Capital Markets Day, 18 months or so ago. It's one of the key pillars of the plan, is in reimaging, revitalizing and improving our store estate, which I think will help us to, one, continue to grow profitably, but also continue to, for us, to grow market share. So we feel positive about our program. Just on your question on China. Yes, numbers are still broadly similar. We're doing a couple of things. We're closing some of the more unprofitable stores that were opened quite a few years ago. And that's probably to be expected, there were something, for example, shopping mall which have turned to be not as successful as some of the other shopping malls, so we're doing the right thing to close those stores, but we are now opening an increasing number of new stores. Again, we trialed a new store design and a new product in China, which has proven to be really successful. And we're now rolling that out apace, both in terms of new openings, but also reimages, so we feel very comfortable with the level of sales return on those stores, but also the overall profitability.

[Timothy Ramskill, Research Analyst]

And then just a couple of quick follow-ups. So just can you give us some sense as to how many more reimaging, reimaged stores you plan to do next year? And then maybe just sort of back to sort of previous discussion about how businesses mature. How quickly are the stores in -- the Costa stores in China maturing, please?

[Dominic Paul, Managing Director of Costa]

Yes. So the -- I mean, we will do -- we would expect to do over 250 reimaged stores in the U.K. next year. And then in terms of maturity of the stores in China, we feel -- we see sales maturity coming pretty quickly. So generally, between 6 and 12 months, depending on their -- depending on the location. The benefit we've got in China is that the market itself is growing very quickly as well in terms of coffee consumption, and there is somewhat less competition than there is in some of the more mature markets that we operate in, so we therefore see a slightly quicker maturation curve in those stores.

[Alison Brittain, Chief Executive & Director]

Any other, Tim?

[Timothy Ramskill, Research Analyst]

That's perfect. No, fantastic.

[Operator]

Our next question today comes from Jeffrey Harwood of Stifel.

[Jeffrey Robert Harwood, Analyst]

Two quick questions. Two questions on Costa. First of all, the momentum in food sales. Is food still in growth? And secondly, presumably, May was impacted by the very hot weather.

[Alison Brittain, Chief Executive & Director]

Yes and yes.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. If you look at the retail trend actually, retail in April was actually quite a challenging month, overall, in retail. As you may have thought so, it was slightly better, but it was hot weather, and they offset each other overall as well. And of course, if you look at what's happening right now as you've got the kind of -- you've got hot weather and you've got the World Cup going on as well.

[Alison Brittain, Chief Executive & Director]

Food sales are still -- food penetration is increasing.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Food capture rate is moving up, so we're seeing good response to the new product. As Alison said, particularly within breakfast and lunch, we've actually launched new afternoon sweet products as well, and we are seeing an increased food capture rate from that. So actually, we're very encouraged by the food progress.

[Operator]

Our next question today comes from the line of Monique Pollard of Citi.

[Monique Pollard, Vice President]

Three questions for me, please. Firstly, on Premier Inn. Could you comment just quickly on what are the drivers of the strong forward bookings you're seeing at the moment? Is that sort of domestic versus international business, leisure, or is it geographical, regional versus London?

[Alison Brittain, Chief Executive & Director]

Okay. We do them in turns.

[Monique Pollard, Vice President]

Okay, sure.

[Alison Brittain, Chief Executive & Director]

Unless you want to [ speak those ] you want to give us all 3 and then we'll work out who's answering what.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Just in Premier Inn, we are seeing the business-to-business bookings are being stronger, the consumer, that would be, we're seeing the effect the consumers are having on the [ pressure ] -- that means our Monday to Thursday is doing well and our kind of Friday to Saturday is a little bit weaker, and they were a little bit weaker, overall. And that's been helped by our kind of business booking tool that we put in, which is really kind of helping businesses kind of getting more sticky into our website overall. So that's been one of the case there overall. We are seeing London being a bit better as well. I think I just mentioned that London, as we went through the comparatives, got weaker as we got through the year as well. So we are seeing kind of some pick up in London as well. A bit early, I think, kind of 2 or 3 weeks since the end of the quarter.

[Monique Pollard, Vice President]

Yes. Okay, understood. And then in terms of the Costa like-for-likes, could you give an update on sort of pricing strategy for the year? Do you think you will increase pricing or do you think pricing likely to be kept flat?

[Alison Brittain, Chief Executive & Director]

We're unlikely to do much on pricing. I mean we -- it's always the case, isn't it? We have the option available to us. We've not built it into our plans, but we can -- we do sometimes change our plans, however, to take price if we think it's necessary. But any guidance you've got or the way you are thinking about like-for-likes at the moment, continuing, as [ they said ], would not include a price increase.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. We're more focused on actually how to premiumize our coffee sales. So actually, how do we sell up and how do we sell more bundles, how do we get a food attachment laid out to increase the spend per head rather than just pushing price.

[Monique Pollard, Vice President]

Okay, understood. And then, finally, could you just give a quick update on the Costa Express machines, which [indiscernible] slightly down in the quarter. I mean, obviously, you seem happy with your guidance of 1,300 machines worldwide. Yes, if you could just give an update on what's happened in Canada.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes, okay. I mean if you look at the net opens in the quarter, they were fairly flat, and the reason for that is we actually opened quite a lot actually in the U.K. but actually we came out of Canada which is about 120 machines. So we're still on plan. Once -- we've done that now, and we've now said at year end that we'd now come in [ expected year-end ] at the market, so we're on track for the full year expectations overall. Sales, overall, is we're positive at plus 10, like-for-like is a little bit lower. I mean one of the things about Express is they're weighted towards travel, and -- where we had the kind of snow right at the beginning of March of course less people travel, and then you had the hot weather as you got into kind of May. We do have a cold drink option as well, which benefit those as well, but actually, overall 10% total growth, we're pleased with.

[Alison Brittain, Chief Executive & Director]

Sorry, Dominic? [indiscernible]

[Dominic Paul, Managing Director of Costa]

Yes, I was going to say -- I mean that Express business, overall, we're seeing is you get some ups and downs because of the weather. But overall, it's a really resilient, kind of hugely successful business, and it's really working for us in terms of an extra point that's convenient to our customers, and that's why it's contributing to the overall Costa growth. So we feel really positive about the momentum we've got in that business. We also think there are real opportunities internationally. China kind of in itself was not the best market for us to go into. The customer taste and price points in that market, it's a really interesting trial and test to do. We learned a lot from that trial, and that's actually forming up much better as to which of the future international markets hold real potential for Costa Express.

[Alison Brittain, Chief Executive & Director]

And just to underscore that a bit, we probably wouldn't have gone into China just [ as our that ] for sure, but we did it at Costa Canada. And we see words getting confused this morning, too early, apologies, Canada. We did that as a Shell partnership, and Shell were really keen to test it in Canada. We were probably less keen, equally, however, and why would we do that? A, because they're a great partner for us, and we think they have some great international opportunities. They also wanted to test Malaysia, which we also did with them, with more foreboding than Canada. And Malaysia has been brilliant, and it's got 200 machines and it's doing fantastically well. So actually, these tests are a good thing to do in market, they won't all work, but some of them do brilliantly well.

[Operator]

Our next question today comes from the line of Tim Barrett of Numis.

[Timothy William Barrett, Leisure Analyst]

I had a couple of things. Firstly, on Premier Inn. We've already obliquely touched on it. The occupancy being down a couple of points. I think it's one of the weakest for several years. Did you deliberately yield manage a bit less this quarter? And how should we think about occupancy targets for the full year?

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. So our occupancy in the quarter and like-for-like was down about 1.7%. The market was down about 0.5%, overall. You saw, particularly, you saw our occupancy down in London, just a little bit higher than that, around about 2%, and that was mainly because of the amount of capacity we put in the market, overall. And that's about 25% additional capacity put in the market. In the regions, occupancy was down about 1.5%, so we did take the opportunity, actually we [ do we're ] taking more assured bookings, so actually it was an area where we were able to take a little bit more weight in that market, overall. It's more of an inflection, I think. It's a softer market, actually, overall.

[Alison Brittain, Chief Executive & Director]

First of all, [ it's an inner bit ] capacity in London. And yes, we will be targeting some of that to come back.

[Timothy William Barrett, Leisure Analyst]

Yes, presumably, because of your forward bookings comment. Occupancy, from here, you'd be more bullish.

[Alison Brittain, Chief Executive & Director]

We're trying not to be bullish. Nicholas is staying a long way from bullish, but nonetheless, forward bookings are more positive. I think that's fair to say. Is it Nicholas?

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes.

[Timothy William Barrett, Leisure Analyst]

Okay. And on a different topic, costs. We obviously talked about this a lot at the full year results. But are you still thinking around GBP 70 million of savings this year, mitigation, or are you thinking about trying to pull forward costs from the [indiscernible]?

[Alison Brittain, Chief Executive & Director]

I think at this stage of the year, it's fair to say we're confident in our original GBP 70 million, so we've got that well laid down, well-planned for. And it's certainly driving -- it's been very helpful in terms of us managing our year and delivering profit on expectations. So I would just stick to our previous guidance.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Early days, but we're pleased with it.

[Alison Brittain, Chief Executive & Director]

We're pleased with where we got to.

[Operator]

Our next question today comes from the line of Rachel Fox of Goodbody.

[Rachel S. Fox, Analyst]

Just 2 questions from me. On Premier Inn, you said you're gaining market share in regional U.K. Could you give what your market share is at the moment in both regional and London? And then, secondly, given the level of [ iso ] closures and CDAs and wider eating and drinking sector, has this created many opportunities for you in terms of more favorable sites becoming available for store openings?

[Alison Brittain, Chief Executive & Director]

Nicholas, do you want to deal with the...

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Yes. Just in terms of market share in the regions, we got 9% overall. And in London, as you know, we got a lower market share as it relates to the London market, that's more at about 7% market share in London.

[Alison Brittain, Chief Executive & Director]

On property, generally, I'm not sure that I'd read straightforwardly from things happening on the High Street to us necessarily taking more space because High Street is not the priority for us. It's our drive-thrus where I think we're keen in the first quarter, for example, in terms of drive-thru. So we're really focusing on our high footfall. We've got plans on the High Street. So what, generally speaking, we are having conversations with landlords about our own rent positions. And we're also having conversations about whether or not we're going to commit to renewing leases if we don't get more favorable terms earlier in the cycle. So we're certainly making some progress on our rent costs.

[Dominic Paul, Managing Director of Costa]

Yes. And just to echo what Alison said that the -- one of the benefits of our model is we -- again, we have 5-year leases or 10-year leases with 5-year rent. So effectively, a 5-year lease compared to a lot of the other retailers that have 20 or 25-year leases, even some -- many of the restaurant groups. What that enables us to do is get into conversations with the landlords, either on the point of renewal of the lease or even sometimes before that, which with [indiscernible] costs of covenant, obviously, creates an opportunity for us to have a more robust conversation with the landlord.

[Operator]

Our next question today comes from the line of Anna Barnfather of Liberum.

[Anna Elizabeth Barnfather, Research Analyst]

Sorry to return to an operational question on Costa. But you mentioned the new point-of-sale tools been rolled out at April. I just wondered if you could just expand on what you found since then, whether you've got higher capture rates at the busy peak times or whether this is more of just a cost-saving benefit coming through.

[Alison Brittain, Chief Executive & Director]

Yes. I mean the tool rollout itself, the core of it was, because we had to completely update an old method technology. So it was one of those projects which started as a -- we have no choice, we need to change our [ tool which is ] 50 years old, which, if you have had an iPhone for the last decade, you'll know that the tools were old and people didn't think of an iPhone when they were put in. And so what it's been doing is giving us functionality to then move forward with. So the technology sells better, we're configuring it so that it's helpful to the team in terms of how they run the store. But then, what we can do with it, there are things that we couldn't previously do like Click & Collect, et cetera. So we've got -- now we got increased functionality to drive sales off the back of the technology, but the technology was re-platformed in its entirety because it was end-of-life. So hopefully that sort of explains, we've got 2-pronged attack on the back of it.

[Anna Elizabeth Barnfather, Research Analyst]

Yes. I just wonder whether it's improved efficiency from speed of pay, particularly if you think about your loyalty cards or people paying on points if that has been integrated.

[Dominic Paul, Managing Director of Costa]

What we -- sorry, Anna, it's Dominic here. A couple of things I'll say. The first thing is it's really -- it was a really big program, that -- the re-platform of all of our stores. If you think we got 1,400 [ actually ] stores, but our franchise partners also put the same till system in, so that's over 2,000 points of sale that have new till systems. And we did that in -- the majority of that in quarter 1. So that is a -- that's a lot of disruption to put into the store network. Of course, you have to put one business tills, but also train all of our teams as well, which we did, and it was a relatively seamless process, which I think was -- operationally, was a real success for the team. What we are seeing in terms of the loyalty system is a more reliable connection between the tills and the loyalty system, so that has definitely improved. And as Alison said, the phase 2 of the till process will be continue to add functionality, which will improve the store experience. And it also enables us to do things like Click & Collect, which we'll be rolling out to more stores later this year. And also, of course, enabled us to do the price bundles as well. So operationally, very successful so far. We are seeing some improvement, but the key thing is it enables us to do more things for the business. It will be better for our customers and that will over time, it will be better sales.

[Operator]

We currently have no further questions registered, so I hand back to the room for any further remarks.

[Alison Brittain, Chief Executive & Director]

Great. Thank you very much for your participation this morning, for dialing in, and for the questions and answers. And have a great day, everybody.

[Nicholas Theodore Cadbury, Group Finance Director & Executive Director]

Thank you.

[Alison Brittain, Chief Executive & Director]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining today's call. You may now disconnect your lines, and enjoy the rest of your day.