Whitbread , which has the most hotel rooms in Britain, said its size and flexible pricing had helped it win market share as sales growth at its Premier Inn business and the broader sector stalled over the Christmas and New Year period.

Chief executive Andy Harrison said a soft hotel market was showing a divergence in performance between a robust London and the regions. Whitbread, said on Tuesday it would meet forecasts for 2011/12 profit despite the hotels slowdown.

Consumers are still under heavy financial pressure, with falling disposable incomes. We think the economy is pretty flat, Harrison told reporters.

Whitbread said sales at Premier Inn hotels open over a year fell 0.9 percent in the 11 weeks to February 16, the bulk of its fiscal fourth quarter. That compared with a rise of 2.6 percent in its third quarter.

The company, which also owns Costa Coffee shops and the Beefeater and Brewers Fayre pub restaurant chains, said total sales rose 10.1 percent, with like-for-like sales growth slowing to 1.8 percent from 2.4 percent in its third quarter.

Costa fared well, with a like-for-like sales rise of 6.2 percent, tempting customers seeking affordable treats and benefiting from rapid international expansion.

Whitbread shares, up 13 percent over the past three months, were down 1.9 percent at 1000 GMT, one of the biggest fallers on a 0.1 percent higher blue-chip FTSE 100 index <.FTSE>.

The shares, having been solid performers over the last quarter, may be subject to some near term profit taking, but we believe that the long term fundamentals remain attractive, Numis Securities analyst Wyn Ellis said.

Harrison, pointing to Whitbread's scale with 620 hotels, flexible pricing model, and investment, said: There is a long list of reasons why we believe we (Premier Inn) can continue to outperform the market.

Many Britons have been cutting back spending over the past year as price increases outpaced wage rises and higher unemployment weighed on confidence. The lack of consumption has been one of the main drags on economic growth.

However, latest official data showed retail sales rose in January. That data, a string of strong business surveys and stabilisation in the labour market have raised hopes of recovery in 2012.

STRONG PERFORMER

Premier Inn has previously performed strongly through the downturn, benefiting from business customers trading down from four and five star hotels and a 29 pounds ($46) per room offer that wooed leisure customers.

Harrison said that with 10,000 rooms in its committed pipeline the company was on track to have 65,000 rooms by 2016, raising its market share to 10 percent from 7 percent.

He did not expect much of a boost from the London Olympics, given only 15-20 of Whitbread's hotels would be directly impacted.

(Reporting by James Davey; Editing by Mark Potter and Dan Lalor)