Whitbread (LSE:WTB) might seem like the perfect FTSE 100 stock for me to pick up as the UK’s economy continues to reopen. The company owns Premier Inn and a range of branded restaurants and bars. This should allow Whitbread to benefit from people taking UK holidays and going out to eat and drink.

Or should it? A lot of investors had this idea back in February as the UK emerged from winter and bought into ‘reopening’ stocks. One of these was Whitbread and this resulted in its share price flying to around the 3,500 mark.

Since that time, shares in the FTSE 100 company have fallen to 3,046. Full-year 2021 financials released at the end of last month showed a loss of £1bn for the year and a 71.5% drop in revenue. A tough year but not unexpected because of the pandemic.

The big reopening

The problem for Whitbread is that it won’t benefit drastically from the reopening compared with other FTSE 100 companies. Premier Inn is a major driver of revenue for the company, with locations across the UK, Germany, and the Middle East. However, customers are split evenly between business and leisure. With business travel not recovering to pre-pandemic levels, there won’t be an immediate uplift in numbers here. The company stated that it doesn’t expect this to change until offices reopen in earnest.

For leisure, only 15% of Whitbread’s hotel estate is in coastal and other tourist locations. As a result, its revenues won’t receive a major boost from the ‘staycation’ boom expected in the UK.

On top of this, the food and drink segment of the business is closely aligned with its hotel business. The restaurants are generally located within or next to a Premier Inn. This means that the boom in food and drinks sales expected this summer may not arrive for Whitbread without higher numbers of hotel stays.

FTSE 100 long-term play?

For these reasons, I don’t see Whitbread as a short- or medium-term investment to benefit from the UK economy reopening. On the other hand, I could see it as a potential option for a long-term investment.

The FTSE 100 company does benefit from being well placed as the largest hotel operator in the UK. It is aiming to expand internationally, focusing on Germany where it plans to more than double its footprint from 30 to 72 hotels. Its balance sheet is also particularly strong, with only £46.5m in net debt and cash reserves of £1.25bn.

Whitbread’s share price also hasn’t fully recovered from where it was pre-pandemic at around 4,000p. This means that if the numbers of people staying at its hotels return to pre-pandemic levels and profitability improves, there could be a pop in the share price.

But I don’t see this playing out in 2021. As a result, I will be staying away from Whitbread for now. But I’ll potentially return for another look once the sector is on a stronger path to recovery.

The post One FTSE 100 reopening stock I’m avoiding appeared first on The Twelfth Magpie.

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Ben Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

You might be pleased to know that I am not going to go through the billion reasons to invest in Whitbread (LSE:WTB) shares one by one — instead, I will sum them all up in three words: one billion pounds.

Before Covid-19, Whitbread had a strong balance sheet what with the sale of Costa. Now it has raised another billion pounds, meaning its bank balance is bulging.

I think the strength of the Whitbread balance sheet represents an outstanding opportunity. The reason is simple — it’s a great time to be cash-rich. Bargains will be plenty.

Post-Covid-19

No one knows what the economy will look like post-Covid-19. As for property prices — predicting how they will move is a mug’s game — but there is one area where I do expect to see bargains, and that is in commercial real estate.

It is a sad inevitability that pubs will go out of business. Hotels will probably either be sold or put up for sale. As a result, prices will fall.

But isn’t this how the economic cycle works? Any sector, whether it be oil, retail, or the hotel and pubs sectors that Whitbread operates in, follows a similar pattern. In a downturn, prices fall, they eventually become so cheap that demand rises pushing prices up, until they become too high, and another downturn begins.

Those that have sufficient cash, and foresight to invest at times when the downturn is especially severe, can play the cycle to their advantage.

That is why I like Whitbread shares.

Whitbread shares long term

Whitbread has been a good long-term play for years.

If you had invested in the company back in the mid-1990s, when it was first listed on the stock market, then your shares would have increased by almost nine-fold at the beginning of this year. Factor in that the company usually pays reasonable dividends and you can see that Whitbread shares have been good long-term performers.

Okay, shares have fallen this year. They are down by almost half, but even after this massive drop they have still doubled over the last decade and more than quadrupled since 1995.

But this year’s fall in the Whitbread share price does make it look especially tempting.

Solid performance, unique opportunity

It is the combination of Whitbread’s steady performance in the long term and what I see as a unique opportunity that makes the company such as a compelling investment.

I expect it to grab market share such that when the economic recovery finally begins in earnest, Whitbread will be well placed indeed.

That is why I think now represents such a great opportunity to invest in Whitbread shares.

The post There are a billion new reasons to invest in Whitbread shares appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.