The group, which is one of the UK’s biggest employers with around 48,000 staff, said it had already increased pay for baristas in its Costa Coffee chain by around 10% this month to take pay above the incoming national living wage.
This will cost it around £5 million over the second half of its financial year, while wider wage hikes across the group to meet the new minimum pay rules and its own pay plans will add £15 million to £20 million a year to annual costs.
The group said it cannot rule out price rises as it looks to offset the higher wage bill, but stressed it hoped to make savings in other ways, such as through moves to improve productivity across the business, including better staff rostering.
Outgoing chief executive Andy Harrison insisted the group wants to maintain a “good value proposition”.
Its first-half results showed a 13.8% jump in underlying pre-tax profits to £291.3 million for the six months to August 27 after seeing robust sales growth across its Premier Inn hotel and Costa chains.