Premier Inn owner Whitbread has revealed a drop in profits on the back of its recent restaurant closures and “softer” UK demand for hotel rooms.
The company, which also owns Beefeater restaurants, told shareholders that adjusted pre-tax profits fell by 14% to £483 million in the year to February, compared with the previous year.
It said this was driven by higher costs and the impact of Whitbread’s growth strategy from last April, which included an overhaul of its restaurant business.
The £500 million plan, which executives dubbed “Accelerating Growth”, involved converting 112 branded restaurants and selling 126 more.
The company hopes this will help it build about 3,500 extra hotel rooms, eventually reaching 97,000 rooms in total.
Chief executive Dominic Paul said the plan is “progressing well” in the UK and Ireland.
The disposal and closure of a raft of restaurants led to a significant slump in food and drink sales, which dropped 11% year-on-year in the UK as the shake-up wiped out the benefit from strong breakfast sales.
It contributed to a 1% decline in revenues across the group to £2.92 billion for the year.
Meanwhile, the group’s Premier Inn UK business saw revenues per available room dip 2% due to “softer UK market demand” as the higher cost of living put pressure on consumer finances.
Whitbread said however that Premier Inn benefited from further openings, with the group’s continued expansion adding another 1,075 hotel rooms over the past year.
Mr Paul added: “Having laid the foundations for significant growth, we are executing at pace and making excellent progress on our strategic initiatives, against what has been a softer market backdrop over the past year.
“By focusing on what we can control, our five-year plan is on track to deliver a step-change in our profits, margins and returns and we remain positive about the medium-term outlook.”
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Investors in Premier Inn owner Whitbread won’t be losing too much sleep over today’s final results, which have come in a little better than analysts had been forecasting.
“It’s tough out there for hoteliers but the UK’s largest hotel brand is continuing to outperform the competition.
“Domestic room openings offset a small drop in occupancy and room rates, but it takes time for new beds to match the profitability of the existing estate.”
Shares in the company were 4% higher in early trading.
