Whitbread intends to raise £1.5bn from the sale and leaseback of its freehold properties over the next five years.
Earlier today, the owner of the Premier Inn hotel brand unveiled its new five-year plan to 2031, which will see it reduce gross capex by £1bn and recycle its real estate portfolio to fund future growth.
Whitbread intends to reduce the proportion of freehold property it holds from circa 50% of its total portfolio today to 30-40% over time and will increasingly look to grow its footprint on a leasehold basis.
The company said it had reappraised all of its UK development projects and intended to exit a “small number of sub-optimal sites” in addition to “stepping away from sites in our pipeline where, following the changes to UK business rates, the potential returns are no longer attractive”.
Dominic Paul, chief executive of Whitbread, said: “We always challenge ourselves to improve and, in light of significant cost increases in the form of business rates and National Insurance, as well as the implied market discount to our inherent value, we’ve looked hard at the options open to us to maximise value creation over the medium and long-term. This has been a rigorous process and we’ve approached all options with an open mind.
“Our conclusion is that our model is the right one. Owning a significant proportion of our property is a unique strength which powers the growth of Premier Inn while supporting our resilience as a business, underpinned by a strong balance sheet. But we can improve our approach. We will refocus our capital spend and recycle more of our freehold real estate, driving increased margins and returns, reducing our capital intensity and increasing cash returns for shareholders. By making our assets work harder and focusing on the highest returning projects, we will be able to continue to take advantage of constrained supply to strengthen our position in both of our core markets, whilst at the same time deliver attractive financial outcomes for shareholders.
“Our new five-year plan builds on our strengths and drives a significant acceleration of our strategy. In the UK, by reallocating some of our capital spend and building on the success of our Accelerating Growth Plan, we plan to convert all our remaining branded restaurants to an integrated food and beverage offer that is preferred by our hotel guests and will unlock the addition of more highly profitable extension rooms. Our continued efforts to drive our commercial plan and efficiencies will extend our market-leading position and allow us to take share from our competitors, many of which are struggling to grow.”
