Whitbread, the owner of Premier Inn, has doubled down on a strategy to convert its underperforming restaurants into profitable hotel rooms, as the company works to overcome revenue headwinds.
The UK-based hospitality company said Thursday it plans to add approximately 3,500 new hotel rooms by repurposing struggling food and beverage outlets. It expects the move will produce over £100 million ($130 million) in incremental profit by 2030.
According to CEO Dominic Paul, 70% of all planned projects to convert loss-making branded restaurants into higher-yielding hotel rooms are currently in the planning phase, and half of those have already been approved.
Construction is underway at many sites, and by the end of the 2026 fiscal year, between 500 and 700 new extension rooms are expected to open.
At its Harrogate South hotel, for example, a restaurant is being replaced with a 22-room extension.
“Having already sold 38 sites, we are on track to exit the remaining affected branded restaurants over the next 12 months as planned,” Paul said.
The closures impact the company’s bottom line, contributing to a reduction in food and beverage revenue, but the company expects a quick rebound.
CFO Hemant Patel acknowledged that construction has caused “a slight dip in guest scores” but said the company is managing disruption to minimize impact on guests.
The pivot comes as Whitbread reported a revenue decline of 1% year-over-year, to £2.92 billion (about $3.87 billion) for last fiscal year (through February 27). Adjusted profit before tax fell 14%. Revenue per available room (RevPAR) declined by 2%, driven by a slight dip in occupancy to 81%.
UK & Ireland Room Growth
The room conversion initiative forms part of a broader growth strategy. Whitbread opened 1,075 new rooms in the fiscal year. During the current fiscal year, the company plans to open between 1,000 and 1,200 new rooms, including extensions.
Paul said Whitbread’s expansion is happening in a cost-effective way by often under-bidding competitors on the typical potential hotel development project.
“But because of the strength of our covenant, the balance sheet, the property valuation, we will often get chosen for that site over our competitors,” the CEO said.
Whitbread has continued its expansion of hub by Premier Inn, its smaller-format brand designed for city centers. The company now operates 18 hub hotels across London and Edinburgh.
Germany: Progress, But Not Yet Profit
In Germany, where Whitbread has operated since 2016, accommodation sales rose 24% in local currency, though adjusted losses remained at £11 million. The company expects its German operations to achieve profitability in the next fiscal year.
Still, Patel admitted no hotel in the country has yet hit maturity: “The reality is we don’t know exactly how long the maturity profile is because we’ve not matured any sites in Germany yet.”
Cost Savings and Outlook
Whitbread plans to recycle £250–300 million ($330-400 million) of property this year through disposals and sale-and-leaseback arrangements. The company is also completing a formal revaluation of its real estate.
This fiscal year, Whitbread expects to find about £50 million to £60 million in cost savings via efficiencies.
While a shortage of hotels relative to demand in key markets helps bolster rates, Premier Inn’s recent RevPAR decline suggests the limits of trying to push rates higher in a sluggish demand environment, according to analysts at Bernstein Research.
Yet Whitbread says it doesn’t need strong RevPAR growth to hit its targets — just enough to offset inflation alongside continued efficiencies.
“All we need effectively is like-for-like RevPAR growth and efficiencies together to offset inflation to achieve a 60% uplift in profitability, and we will aim to do better than that clearly,” said Paul.
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