Premier Inn owner Whitbread 'facing UK growth problem' as sales fall reported

That was driven mainly by a 14 per cent fall in sales from its UK bars and restaurants, many of which it is either converting or selling in favour of hotel rooms.

Chief executive Dominic Paul said the company is making “good progress” against the plan for its food and drink offering.

The £500 million plan, which executives dubbed “Accelerating Growth” and announced in April last year, involves 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.

Whitbread’s hotel business fared better in the three months but even there sales were only up 1 per cent on the same period in 2023.

That was mainly driven by roughly one-fifth growth in its German business, while UK sales failed to surpass 2023 levels.

The group said inflation, coupled with policies in the October Budget, are expected to push up costs slightly across its £1.7 billion set of annual outgoings.

Chancellor Rachel Reeves announced a rise in national insurance contributions for companies – a tax which makes it more expensive to employ people.

Whitbread said it would push cost inflation up by between 2 per cent and 3 per cent across the group, after taking into account a raft of cost-cutting it is carrying out at the same time.

Mr Paul continued: “The structural shift in UK supply has meant that Premier Inn is continuing to sustain the significant gains made since the pandemic.

“Whilst forward visibility remains limited, the favourable supply backdrop, together with our brand strength and commercial initiatives, means we are confident that we can continue to outperform the market.”

Russ Mould, investment director at AJ Bell, said: “Premier Inn has a growth problem in the UK. Once again, the hotel chain’s owner Whitbread says its homeland operations are treading water and the business is not making solid progress with growing like-for-like sales.

“The backdrop is not favourable as consumers continue to watch their spending closely and the idea of a quick weekend away is off the cards for many people.

“Tough decisions in the Budget have hurt business sentiment and that’s causing jitters in the jobs market. At the same time, interest rates remain relatively high compared to the past decade and so households remain under pressure financially. People might find enough cash for a summer holiday, but many cannot also stretch to the short city breaks of which Whitbread is normally a beneficiary.

“Something needs to change to get the UK operations moving faster again. It’s precisely moments like this one that a company may be tempted to make acquisitions to accelerate growth. If it cannot achieve solid organic growth in the UK, Whitbread might need to get creative, but acquisitions don’t always pay off.”