As part of its new growth plan, Whitbread, owner of Premier Inn, plans to sell more than 120 branded restaurants and convert a further 112 into higher yielding hotel rooms.

These major changes are aimed at achieving cost savings of £150 million over the next three years. However, this strategy includes the loss of 1,500 jobs.

These measures are expected to facilitate the addition of 3,500 new room extensions, ultimately aiming to reach a total of at least 97,000 open rooms in the UK by the end of the 2029 financial year.

Despite the job cuts, Whitbread is emphasising its commitment to providing support and exploring alternative opportunities for affected employees. The changes are part of an overall investment plan of around £500 million over the next four years.

While these developments are likely to result in a one-off reduction in adjusted UK pre-tax profit of between £20 million and £25 million in the 2025 financial year, Whitbread remains optimistic about the long-term benefits of the strategy.

Alongside the growth plan, Whitbread announced strong financial results for the 52 weeks to 29 February 2024. Total sales increased by 13% to £2.96 billion and adjusted operating profit increased by 24% to £674 million.

Dominic Paul, Whitbread Chief Executive, said :

“We have delivered an outstanding set of results in FY24, led by the strength of our UK hotels business. Our
increased levels of profitability, operating cashflow and return on capital reflect the power of our unique operating model. Our freehold-backed balance sheet, together with our strategy of continuing to invest, is allowing us to take advantage of the significant structural growth opportunity that exists following the decline in UK hotel supply."

“In Germany, we are encouraged by our progress to date and the opportunities we now have to both build our
brand awareness and refine our trading strategies further. We are on track to break-even on a run-rate basis
during calendar year 2024 and with 10,500 rooms now open and a further 6,000 in the pipeline, we are on
course to fulfil our ambition of becoming the number one hotel brand in Germany."

To explore further...

Whitbread's strategy for the expansion of its rooms in the UK is taking place against a backdrop of crisis and inflation, where profitability per square metre is becoming crucial, with rising development costs and reduced operating margins. 

In addition, in the UK, the labour crisis in the restaurant sector following the Covid-19 pandemic has been particularly intense, making it difficult to recruit staff. Moreover, catering is often more complex to manage than hotels, which raises the following question: will catering services in future be reserved for mid-range, top-of-the-range and luxury hotels?

Hotels, whether luxury, mid-range or lifestyle, are looking to rethink their F&B (Food & Beverage) offerings in order to meet changing customer needs and to stand out in a competitive market. The growing importance of the F&B offer is reflected in the significant percentages of turnover generated by this source in establishments. 

However, a study carried out by Hospitality ON shows that this trend is more pronounced in certain segments, such as the lifestyle segment, where the percentages can be as high as 55%. Luxury hotels are also integrating catering as an essential element of the customer experience, where creativity and innovation come to the fore.

This suggests that budget hotels may have to drop this activity in the long term in order to reduce their operating costs. However, breakfast-only budget hotel models are also proving to be very profitable. A good example of this is B&B HOTELS.

In hostels and lifestyle hotels, where square metres are occupied to the maximum and F&B is part of the product identity, the restaurant and its concepts will always remain a strong element in the product concept.