Whitbread to cut 6,000 jobs as tourism sector troubles worsen

Whitbread, which owns Premier Inn and Beefeater, has today announced that 6,000 staff could lose their jobs as a result of the new COVID-19 regulations introduced this week.

The firm has already suffered greatly due to the loss of income experienced across the leisure, tourism and restaurant sectors.

Also, the firm has blamed the end of the government’s furlough scheme, which will still pay more than 27,000 Whitbread staff until the end of October. Whitbread employes around 35,000 people across the UK.

Whitbread Chief Executive Alison Brittain said: “With demand for travel remaining subdued, we are now having to make some very difficult decisions, and it is with great regret that today we are announcing our intention to enter into a consultation process that could result in up to 6,000 redundancies in the UK, of which it is hoped that a significant proportion can be achieved voluntarily.”

The firm’s first-half sales were 76.8% lower than last year, as Whitbread’s hotels were closed for a large part of the period. The group did, however, sees a slightly improved second-quarter result, with 98% of UK hotels open by the end of the half and occupancy averaging 51% in August. That reflects strong demand in tourist locations and a boost from the ‘Eat Out to Help Out’ scheme.

Whitbread expects demand to remain subdued for a while and as a result has announced plans to make up to 6,000 redundancies, approximately 18% of their workforce. The group said it is a ‘regrettable by necessary step to emerge from the crisis with a lower cost base’.

The shares fell 2.4% following the announcement.

Industry reaction

Emilie Stevens, Equity Analyst at Hargreaves Lansdown

The Premier Inn owner has had one of the toughest first halves out there and with expectations that demand will remain subdued for a while, the group’s announced plans for up to 6,000 staff or 18% of the workforce to go.

This is unfortunately a reflection that coronavirus may have changed Whitbread’s world for good, without full hotels the group isn’t profitable, so a lower and more flexible cost base is essential.

There was brighter news that the group’s August sales were down just 39% on last year, boosted by staycations and the ‘Eat Out to Help Out’ scheme. In fact the UK’s desire to holiday at home meant Whitbread’s hotels in seaside and tourist destinations were 80% full. Unfortunately this boost is likely to be short-lived and focus now turns to business travel. We know city demand remains subdued and with more and more businesses announcing permanent work from home plans, we wonder if the return of business travellers is more ‘if’ than ‘when’. The group’s full first half results in October should shed light on just how much change Whitbread sees and how permanent.