Whitbread, the owner of Premier Inn, has revealed that its food and drink sales have slumped after announcing plans to sell its restaurants and focus on a hotels-only business. The firm's first quarter results showed that food and drink sales fell by five per cent to £148m, compared to a three per cent jump in accommodation revenue to £498m.
The drastic cost-cutting programme, which includes slashing nearly 4,000 jobs and offloading all branded restaurants, has been met with criticism from investors. However, chief executive Dominic Paul stood by the plan, saying it will help drive higher profits and returns.
Whitbread has agreed to sell 51 of its restaurants for £50m and plans to offload 60 more, subject to employee consultation. The firm's total group sales grew by two per cent to £727m in the three-month period to the end of May, with growing hotel revenue dragged down by the expected reduction in food and drink revenue.
Despite the slowdown in food and drink sales, Whitbread's accommodation revenue rose by three per cent in the UK, while sales in Germany jumped by 16 per cent. Analysts have welcomed the firm's focus on hotels-only business, with Derren Nathan from Hargreaves Lansdown saying it should become more apparent in the firm's headline financials once the planned scale-back in food and beverage operations washes through.
Whitbread has also lobbied the government for reform to the business rates system, which it claims will contribute to £35m in additional yearly costs. The firm has been critical of the tax burden facing hospitality businesses, with chief executive Dominic Paul saying it is 'extremely disappointed' by the Treasury's changes to business rates.