Premier Inn owner Whitbread has cautioned it will face a roughly £35 million hit linked to business rates changes from the Budget, in a reduction from previous warnings. However, the hospitality giant stressed the tax changes announced in November’s autumn Budget are still “damaging” for the industry and is pressing the Government to change its policy.
Whitbread had previously said it expected an annual impact of between £40 million and £50 million from the 2027 financial year. It came as the company reported “strong” recent trading momentum and improved cost savings across its operations.
In November, the UK government announced permanent business rate cuts for retail, hospitality and leisure premises with rateable values below £500,000, funded by higher charges on larger properties. However, hospitality groups have warned that higher rateable values and the phasing out of existing reliefs mean many businesses will still face sharply rising tax bills when the changes take effect in April.
Following the announcement, investment bank Bernstein downgraded Whitbread’s shares, warning the changes would have a material impact on the company’s profitability.
Speaking after Chancellor Rachel Reeves’ Budget announcement last year, Whitbread chief executive Dominic Paul said the group was “extremely disappointed” by the outcome, warning it would significantly affect both Whitbread and the wider hospitality sector.
Trade body UKHospitality has also criticised the measures, saying wage rises, holiday taxes and steep increases in rateable values are effectively wiping out the 5p business rates discount offered to the sector. It warned the additional pressures are squeezing business viability and being passed on to consumers, keeping inflation higher for longer.
Despite the headwinds, Whitbread said it continues to explore options to improve profitability, margins and returns, with the improved outlook potentially easing pressure from activist investors after Corvex Management LP called for a strategic review. An update is expected on April 30.
The group said it now expects to deliver between £75 million and £80 million in cost efficiencies as part of its five-year growth plan.
Whitbread reported group sales rose 2% to £781 million in the three months to November 27, driven by growth in its Premier Inn businesses in the UK and Germany. UK accommodation sales rose 2%, with revenue per available room up 3%, while both measures increased by 3% in the six weeks to January 8.
The performance comes as Whitbread presses ahead with a restructuring launched in 2024, which included cutting around 1,500 jobs and shrinking its branded restaurant estate by about 200 sites in favour of expanding its hotel room portfolio.
Dominic Paul said: “We delivered a strong performance in the third quarter, with positive momentum across the business.
“We remain highly disciplined regarding our strategic actions and by focusing on what we can control, we have continued to make great progress against our key initiatives and will deliver a higher level of efficiencies in full-year 2026 than previously expected.”