Whitbread, the FTSE 100 owner of Premier Inn, has unveiled plans to sell and lease back at least £1 billion worth of its mature property assets to help fund the next phase of its expansion, despite facing softer demand in the UK hotel market.
The proceeds will support chief executive Dominic Paul’s five-year growth strategy, which includes returning over £2 billion to shareholders and delivering £300 million in additional profits by 2030. The announcement came alongside a new £250 million share buyback.
“We’re confident in the value of our property portfolio and the more favourable investment market,” said Paul. “This gives us flexibility to recycle capital into higher-return growth opportunities.”
Whitbread emphasised that the planned asset sales would not significantly alter its freehold-to-leasehold property mix, which it has been carefully managing through targeted acquisitions in recent years.
For the year to 27 February, group revenues dipped 1% to £2.92 billion, with UK Premier Inn sales down 3% to £2.69 billion. Revenue per available room fell 2% to £64.42, as muted supply growth and restaurant restructuring weighed on performance. Adjusted profits dropped 14% to £483 million, while statutory pre-tax profit declined 19% to £368 million, impacted by one-off restructuring costs.
The £500 million overhaul of Whitbread’s Beefeater and Brewers Fayre brands is expected to generate returns longer-term. The revamp involves converting 112 restaurant sites into 3,500 hotel rooms, with 126 restaurants marked for sale.
Despite UK softness, Whitbread continues to add capacity. Last year, it opened 1,075 new rooms, bringing its total UK portfolio to 85,984 rooms across 852 hotels. It is targeting 1,200 new rooms this year and plans to reach 98,000 rooms by 2030.
The standout performer was Premier Inn Germany, where revenue grew 21% to £231 million, helping slash pre-tax losses from £36 million to £11 million. The division is forecast to deliver £5 million to £10 million in adjusted profits this year, with a strong pipeline of 18,230 additional rooms.
“We are growing quickly, performing well ahead of the market, and our more-established hotels are on track to hit their double-digit return targets,” Paul said, describing it as a “breakthrough year” for the German business.
Though UK conditions remain challenging, recent trading has slightly outperformed expectations, with total accommodation sales down just 1% in the seven weeks to April 17 and forward bookings ahead of last year. Analysts at Shore Capital called the performance “better than feared”.
Whitbread shares surged as much as 8% in early trading before closing up 5.8% at £27.43, boosted by the share buyback and confidence in the long-term expansion strategy.
Founded in 1742 as a brewery, Whitbread sold its beer business in 1999 and its Costa Coffee chain to Coca-Cola for £3.9 billion in 2019. The group now employs 38,000 people, and its focus is firmly on scalable hotel growth in the UK and Europe.
With strong brand momentum, a revamped UK footprint, and accelerating growth in Germany, Whitbread is betting big on bricks — but not afraid to lease them back to fuel its future.