Whitbread executives are confident their hotel business — including the Premier Inn brand — can withstand the headwinds ahead in its home market the United Kingdom and in Germany, its second-largest market.
In the U.K., a major concern is that taxes will likely increase in the United Kingdom government’s upcoming budget on Nov. 26.
Whitbread CEO Dominic Paul said the U.K. hotel industry was hit hard by policies included in the November 2024 budget, and it is thought by many that taxes will increase again to underpin the government’s stated aim of putting U.K. finances on firmer footing.
Speaking at the firm’s latest earnings report conference — Whitbread refers to these results as its interim results for its 2026 fiscal year — Paul said he was pleased with how the business was executing at pace its strategy that he said would result in a “step change in our profits, margins and returns.”
For the 26-week period through Aug. 28, 2025, Whitbread's revenue per available room fell in 2% in the first quarter year over year but rose 1% in the second; however, adjusted profit before tax fell 7%. In the six weeks since the end of August, hotel RevPAR is up 3%, Paul said.
“The U.K. market returned to growth in the second quarter and results are aligned to last year,” he said, adding Whitbread's hotels outperformed their segment in both average daily rate and RevPAR.
Chief Financial Officer Hemant Patel said the company's prior outlook anticipated net inflation across 2026 to be between 2% and 3%. That forecast remains unchanged.
Food-and-beverage costs are the hotel industry’s current challenge.
“F&B inflation is higher than the industry is expecting. That’s the surprise,” Patel said,
He added U.K. hoteliers knew of the inflationary headwinds that came in April due to government's decision to increase employer national insurance contributions as part of its November 2024 budget.
“We have a history of being able to drive efficiencies. We’re a big business,” he said.
But one of Whitbread's major efficiency projects that it's executing is converting hotel restaurants that are operating at a loss into new hotel rooms, Paul said. A total of 100 restaurants have been converted into approximately 3,500 hotel rooms and there are another 100 restaurant conversions on the way. Paul added that fewer restaurants meant fewer diners but a “a more profitable model.”
Whitbread is also trimming down its hotel portfolio via property disposals, Paul said.
“Most of our disposals are sales and leasebacks. We do exit some, under-trading ones, smaller sites, ones from which we can migrate demand to other hotels” within our portfolio, he said.
The sales of those hotels are not indicative of what value Whitbread can derive from trading most of its other hotels if it we were to do so, Paul said.
Extension solutions
Whitbread's strategy of adding rooms to hotels that return strong profitability is indicative of how strategy and thinking is improving the company's bottom line, Paul said.
“That is a super-strong efficiency plan for our value-based business. It is important we challenge ourselves to do things more smartly, and we are well ahead of this, delivering well on everything of which we have control. There will be extension rooms in hotels performing well and a strong pipeline of new hotels,” he said.
There has been an accelerated level of sales-and-leaseback deals, Patel said. Whitbread's forecast predicts £1 billion of such transactions since that five-year asset disposition plan was announced in October 2024.
“This year, we are on track for between £250 million to £300 million in property disposals, so we are ahead. There is demand for our assets. There will be a few changes in phasing from accounting changes, and we have done a property valuation, our first since 2018, which has increased our valuation by approximately £500 million,” he said.
The net initial yield range of upcoming disposals would sit between 5.5% and 6.5%, and the average net initial yield of disposals in the latest earnings-report period came in at 5.3%, Patel said.
These projections come against the backdrop of significant increase in U.K. interest rates by “some 400 basis points,” Patel added.
“Our results show the strength of our covenant. We will continue careful valuations asset by asset, and we have achieved better than our valuation on recent transactions. Yields are better yields, and we will negotiate hard,” he said, adding yields between prime London hotels and properties in the regional U.K. evidently would be wide.
Both Patel and Paul underlined Whitbread's German business would reach profitability by the end of its current financial year’s trading. They added Whitbread's German hotel portfolio is on track to increase trading and market share despite softer performance of late.
“Germany now is a business of scale, and [our hotels are] resonating with guests. We need to see a strong pick-up there in RevPAR, but we are very comfortable with that,” Patel said. “In the first quarter, RevPAR was in double digits, and there is a very strong forward-bookings position, much stronger than it was at this time last year.”
Whitbread executives teased an upcoming Germany deal that will result in eight new hotels and approximately 400 rooms in “bull’s-eye sites in city-center locations,” Paul said.
The company's hotel portfolio in Germany now has 20,000 open rooms and a RevPAR greater than €80 ($93.27), he added.
Paul said Whitbread has become savvier in how it conducts hotel conversions and expected to recycle £1 billion of property proceeds and return £2 billion to shareholders within the five-year-plan.
Both Whitbread's German and British hotel portfolios have profited from an uptick in corporate and events-based trading, he said.
“The underlying market this summer was positive, and the key thing is that trading momentum has continued. Last year it was Taylor Swift; this year it is Oasis, and next year it will be Take That and others,” Paul added.
During the first half of the year, Whitbread's U.K. revenue was £1.1 billion, which was flat year over year, according to an earnings release. In the same period, Germany revenue reached £100 million, up 7% year over year. EBITDA for the overall business fell in the period by 2% to £601 million, and £182 million was returned to shareholders.
“We will mitigate any cost increases. Looking at our numbers, I would continue to back us,” Paul said.
As of press time, Whitbread PLC stock was trading at £29.23 a share, a 9.9% year-over-year decrease. The London Stock Exchange’s FTSE 100 index was 12.8% up over the same period.