Whitbread plans 3,500 more rooms at Premier Inn but some restaurants and 1,500 jobs to go: reaction

“The performance of Whitbread’s Beefeater and Brewers Fayre have become something of a burden” – Mark Crouch, analyst

Whitbread, owner of Premier Inn, Brewers Fayre and Beefeater, is putting its budget hotel business first and foremost with plans to add thousands more rooms across the UK at the expense of 1,500 jobs.

City analysts responded positively to the group’s proposals to “optimise” its food and drink offering, to add more than 3,500 hotel rooms across its estate and increase “operational efficiencies”. The overhaul will see the firm sell 126 of its less profitable branded restaurants, with 21 sales already having gone through. It will also convert 112 restaurants into additional hotel space.

FTSE-100 Whitbread plans to axe around 1,500 jobs as a result of the shake-up. Those job cuts are still subject to consultation and would come from its total UK workforce of 37,000 employees.

Value hotel chain Premier Inn has been the standout performer for FTSE-100 company Whitbread.

Mark Crouch, an analyst at investment platform eToro, described Premier Inn as the “leading light” for the group, generating record cash flows and profits.

He said: “The performance of Whitbread’s Beefeater and Brewers Fayre have become something of a burden. The effects of higher food inflation now mean so many of us opt to eat in, heavily impacting the restaurants. As a result, a proportion of the sites are due to be sold and a larger number set to be converted into expansions of the high-flying Premier Inn.

“Whitbread’s share price has been dragged down to a 12-month low and with Premier Inn doing all the heavy lifting, this move seems to make sense and will likely lighten the load and hopefully lift the price.”

Whitbread said the cost-cutting programme will save about £150 million over the next three years. It will also offer a £150m stock buy-back to shareholders in the next six months and increase dividend payments by 26 per cent this year.

Julie Palmer, a partner at business rescue and recovery specialist Begbies Traynor, noted: “For now, the focus is clearly on accelerating the growth of the hotels business. Whitbread wants to add another 3,500 rooms in the UK alone, something it looks well placed to achieve after record profits and a keen understanding of its customers’ needs.”

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