Whitbread, owner of the Premier Inn chain, is planning to convert 112 of its branded restaurants to unlock 3,500 bedroom extensions.
The plan comes as the group reported a 13% increase in revenue to almost £3bn, with pretax profit up by 36% to £561m.
The group said the conversions would enable it to have at least 97,000 bedrooms across its Premier Inn estate by 2029.
Alongside the conversions, Whitbread said it would exit 126 of its branded restaurants. Deals have already been agreed to sell 21 sites for £28m.
The conversion programme is expected to require around £500m of investment over the next four years, which Whitbread said would be funded through existing capital.
The removal of more than 200 restaurants from its portfolio is expected to result in a loss of 1,500 roles from Whitbread’s 37,000-strong workforce.
Whitbread said the plan would “drive increased margins and return” for the UK business but would result in a one-off reduction of £20m-£25m in UK profit in 2025. It expects that sum to be fully recovered by 2026.
Chief executive Dominic Paul 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.
“Against this backdrop, we are increasing our momentum to deliver long-term profitable growth. In addition to our strong commercial programme, we plan to optimise our F&B offer at a number of our sites to unlock up to 3,500 room extensions that will enhance the service for our hotel guests and deliver increased operational efficiencies.
He added: “Our scale and vertically integrated model mean we have the commercial and operational levers to underpin long-term profitable growth, strong cashflow and increasing returns on capital. We are on course to deliver a step change in our performance and look forward with confidence.”
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