British hospitality firm Whitbread PLC is making moves to focus more as a hotel company.
During a conference call to present 2024 fiscal year results, Whitbread executives said the company will exit 238 restaurants through conversions to hotel rooms or sales to third parties. In addition to Premier Inn, the United Kingdom’s largest brand by hotel and room count, Whitbread owns and operates such restaurant brands as Thyme Bar & Grill, Beefeater and Table Table.
According to its earnings release, Whitbread will convert 112 of its branded restaurants into additional hotel rooms, with plans “to unlock 3,500 new room extensions, that will see us reach at least 97,000 open rooms in the U.K. by the end of" the 2029 fiscal year. The conversion plan carries an estimated cost of approximately £500 million ($) that will be funded through Whitbread's annual capital expenditure program.
Whitbread CEO Dominic Paul said on the company's earnings conference call that one advantage the company has in owning all of its freehold leases is the ability to add rooms to existing hotels.
The company plans to exit another 126 lower-return restaurants via asset dispositions and has already reached terms to sell 21 of them for £28 million, the release said.
Paul said Whitbread's remaining restaurant portfolio where will become more integrated with its hotel portfolio.
As part of this restaurant exit strategy, Whitbread anticipates 1,500 jobs will be cut. The company employs about 37,000 workers in the U.K. Executives added they seek “to find alternative opportunities wherever possible through the roles created by this plan and our existing recruitment process that makes [approximately] 15,000 hires each year.”
Whitbread has become more of a hotel-first company within the last decade. In August 2018, the company sold its Costa Coffee retail chain to Coca-Cola for £3.9 billion.
“We have had a fantastic year and delivered our highest level of profits and cash flow since becoming a focused hotel group,” Paul said. “Profits and margins were significantly ahead of last year. … I was delighted that our U.K. business achieved its highest ever return on capital of 15.25%.”
Whitbread's hotel revenue per available room for full-year 2023 was 10% higher than in full-year 2022, said Chief Financial Officer Hemant Patel.
Whitbread has approximately 92,000 hotel rooms in the United Kingdom, with the goal being to increase that number to 97,000 by the end of its 2029 fiscal year. Long term, the company wants to grow its U.K. hotel portfolio to approximately 125,000 rooms.
The company is also improving its Premier Inn brand with its “Premier Plus” rooms format. Paul said the brand extension rollout is expanding and Premier Plus has an uplift in average daily rate of between £15 and £20.
In Germany, Premier Inn now has approximately 16,500 hotel rooms open or in the development pipeline.
“We have made really encouraging progress [in 2023] and are becoming a business of scale, with great momentum as we continue to progress towards our ambition of becoming the country’s No. 1 hotel brand,” Paul said. “We added over 1,400 rooms [in Germany] this year and reduced our losses. The market is 40% larger [geographically] than the U.K.”
Paul predicted the firm’s German business would break even in the current financial year, with the goal in the long term to see annual returns of 10% to 14%.
Financial Results and Share Buybacks
Whitbread's revenue for its fiscal year — between March 2, 2023, and February 29, 2024 — was approximately £3 billion, a 13% year-over-year increase. The company's profit before tax equaled £561 million, an increase of 36%.
Earnings before interest, taxes, depreciation, amortization and restructuring/rent costs came in slightly less than £1.1 billion, a 22% increase over a year ago.
Patel said due to inflation, operating costs had increased by 9% in 2023 compared to 2022.
The firm’s net debt now stands at £298 million ($374 million).
“Our balance sheet remains robust,” Patel said.
Paul said the results have given the firm confidence to return £150 million ($188 million) to shareholders of via share buybacks during the first half of next fiscal year. Since April 2023, Whitbread has returned more than a £1 billion to shareholders, Paul added.
As of press time, Whitbread’s stock was trading on the London Stock Exchange at £31.78 per share, a 12.1% decrease year to date. The London Stock Exchange’s FTSE 100 index was up 5.9% over the same period.