Premier Inn owner Whitbread said business customers using its hotels outside of London remains weak, although this was offset by a strong performance in the capital.
Sales at its UK hotels fell 1.3% in the 13 weeks to November 28, meaning they dropped 2.2% in the first nine months of the financial year.
Regional sales were down 2% – compared with a 1% fall for the sector more broadly – although this was helped by large tourist numbers boosting sales by 4.8% in London.
Shares dropped nearly 6% on the news, down 282p to 4,555p.
Chief executive Alison Brittain explained that the regional fall was due to a drop in last-minute business trips, with companies reining in their spending.
She said: “Our leisure business has held up very well. People taking short trips and staycations has been strong.
“The weakness we’ve seen has been business confidence and business investment. Clearly people are feeling better from the election in general terms. But it’s way too early for that to transfer into business confidence.”
Whitbread currently has an 80/20 split between regional and London hotels, but has a pipeline that is 50/50, as the company continues to try to cash in on a strong tourist market in the capital.
She added that the London growth came from central locations, with its hub sites doing well.
In the regions, the boss said she hopes to see an increase in spending by businesses, as confidence returns following the general election, but recognised improvements to infrastructure would take years to impact the business.
Ms Brittain said: “It’s the business investment that drives business stays and business travel, but we haven’t seen any data (to show improvements) and we must plan in a cautious way.”
Overall, when new rooms and hotels including its German division are included, sales rose 1% during the quarter.
The company said: “Despite the short-term economic uncertainty, there remains significant long-term opportunities for Premier Inn in both the UK and Germany.
“We can access these due to our strong financial position, resilient model and ongoing investment to improve our market-leading proposition.”
A further 50 hotels are planned for Germany, to add to the three opened in Frankfurt, Hamburg and Munich in the last year.