Ritika Janiya
Whitbread, which owns the Premier Inn hotel chain, Beefeater restaurants, and Brewers Fayre, will take big financial blows to try to cut costs in preparation for an ugly future. The company’s revenues are dropping off, and this economy is expecting a tax increase that can be detrimental to hospitality all over the country. Let’s see what’s going on with the company and how it might hurt it.
Slower Demand and Falling Profits
Whitbread reported that profit before tax fell by 22 per cent in six months to August 29, 2024. It said that the firm generated £309 million of profit, but at a lower stage than it was earlier. It announced that total revenue for Whitbread in the same period were flat at £1.57 billion.
During the past six weeks leading up to the October 10th, the UK hotels of Whitbread sold off by 1% less than the same period last year. It means business and leisure travels went slowly lately and are not so bright for Whitbread.
Expansion of Cost-Cutting Plan
Whitbread has decided to expand the present cost-cutting plan that it has undertaken in response to these challenges. This is not to say that the company had envisioned just saving up to £40 million to £50 million in cost each year. The company now has set out to raise the figure from £50 million annually until 2030. In other words, such decisions would have to be taken by the company, such as job cuts and restaurant closures. The Whitbread company has already set aside £60 million to be saved this year, that is, £10 million more than what was anticipated earlier.
Apparently, investors seem to like the idea of such cost-cutting measures, believing that the cost-cutting measures would help Whitbread survive the worst. The shares of the company increased to around more than 5% following the announcements.
Closing Restaurants
Whitbread has made one of the most notable moves by selling and closing some of its restaurants. Earlier in May, the company had already announced that it would sell 126 Beefeater and Brewers Fayre restaurants that were failing to reach the break-even level. Besides that, it had announced another round of job cuts, having to reduce 1,500 of its overall number of employees, which stands at 37,000.
Lucky for the company, it managed to avoid drastic job loss reduction by redeploying some of these workers into its hotels. At the end, it lost only less than 1,000 people. Whitbread has already closed down 112 restaurants and sold 51 sites for £56 million.
Preparing for the Future
Whitbread cut cost but at the same time brainstorms how to enhance and expand going forward. The company will construct additional restaurants within its hotels, as it has fared better in the former restaurants. Secondly, the company deals with other cost-cutting means, among them being more efficient scheduling of the employees, improving the booking systems, and updating the websites, the apps, and menus.
The firm is also using technology to cut cost. For example, it has used robot cleaners in some of the rooms in its hotels to cut down on the amounts of human labor that will be needed. Small changes so aggregate to enormous savings over time.
Big Ambitions for Premier Inn
With all these challenges thrown in, Whitbread has massive plans up for Premier Inn, the UK’s largest hotel brand. Premier Inn currently accounts for 86,000 rooms. Mr. Whitbread wants to see that increased to 125,000 across the UK and Ireland. The firm has another 6,000 more rooms pipelined meaning that they are at such a stage of being under development.
But Whitbread doesn’t stop there with plans for the UK alone. The company also operates in Germany, and manages 59 hotels. Premier Inn has got the target of becoming No.1 in the German market. The German market is 40% bigger than the UK’s without a clear market leader like Premier Inn. This opens a big window of opportunity for Whitbread to spread its brand across global markets.
Tax Hikes Looming
While Whitbread is doing its utmost to save money and grow, the company also faces a daunting new challenge: tax hikes. The UK government led by Keir Starmer and Chancellor Rachel Reeves has indicated it might increase employer national insurance contributions in the pending budget. What this translates to is that it will collect higher taxes on the money which goes to pension among staff, or at least a portion, from businesses, in this case, Whitbread.
