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Premier Inn owner Whitbread is cutting about 1,500 jobs as part of a plan to convert its struggling restaurants into hotel rooms, after strong demand for the budget accommodation chain pushed up profits last year.
The company, which owns 821 restaurants including Beefeater and Brewers Fayre, said on Tuesday it would sell 126 lossmaking restaurants and convert 112 more into hotel extensions.
The job cuts, which are under consultation and equate to 4 per cent of its 37,000-strong workforce, are part of a drive to add more than 3,500 hotel rooms and follow record profits from Premier Inn UK last year.
Strong accommodation sales helped boost Whitbread’s annual adjusted pre-tax profits by 36 per cent to £561mn, the company said on Tuesday, amid a rise in leisure and business travel. Revenue rose 13 per cent year on year to £3bn.
Whitbread’s UK food and beverage arm performed less well, reporting a 2 per cent drop in sales year on year, with strong trading in its hotel restaurants offset by “softer trading” in its branded eateries.
Chief executive Dominic Paul said: “We’ve got the option to turn these brand new restaurants into room extensions, which ultimately is a much more profitable way for us to go.”
Paul, who joined from Domino’s Pizza last year, added that Whitbread was “working hard” to try to find new roles for affected staff. It has already agreed to sell 21 of its restaurants for £28mn.
The company is aiming to increase its number of hotel rooms from 85,000 to more than 97,000 over the next five years, including the 3,500 sourced from former restaurants.
Whitbread said the plan would require £500mn of investment and deliver a boost to pre-tax profits of between £80mn and £90mn by 2029. Its shares rose by more than 4 per cent in morning trading on Tuesday.
The conversion of its restaurants would enable Whitbread to “make the most of the reduced supply” after many independent hotels left the market following the pandemic, Paul said. The company was adding rooms “at a time when our competitors are struggling to grow, with interest rates still pretty high. Developers are struggling to develop sites,” he added.
While the market has been softer at the beginning of this year than it was last year, “consumer confidence is up as people are expecting some kind of interest rate cut at some point this year”, he said, adding that “while the cost of living prices has been really difficult, people have generally got quite strong pay increases”.
Paul said Whitbread’s restaurant business, meanwhile, had suffered from a “reduction in footfall from non-hotel guests and increased costs”. He said its “lower performing branded restaurants are generally smaller sites next to smaller hotels, which “are harder to run in an efficient way”.
Whitbread raised its final dividend for each share by 26 per cent, while announcing a £150mn share buyback.
