Whitbread said that it faced “difficult decisions” while the demand for travel remained subdued, announcing that it was starting the process to make up to 6,000 employees redundant.
The company said that it was “too early” to assess the impact of Covid-19 going into the traditionally-busy business travel period of September and October.
The group said that the cuts, which equated to 18% of the total workforce, would “create a more flexible labour model that can adapt with changes in the demand environment going forward”. Whitbread said that it was also close to completing a process that would result in a reduction of its head office headcount by 15% to 20%.
Shares in the company fell by 3% on the news.
CEO Alison Brittain said: “Maintaining our financial flexibility alongside our leading operating model and powerful brand will allow Whitbread to pursue enhanced long-term structural growth opportunities both in the UK and Germany. This will leave us in a position of strength to continue to invest, increase market share, support our colleagues, guests and suppliers and create value for shareholders.”
In the UK, the vast majority of hotels and restaurants were reopened by the first week of August, and a total of 801 hotels, representing 98% of total UK capacity were open by the end of August. In Germany, all six operational hotels were closed at the end of March, and reopened during May, alongside 13 of the acquired Foremost hotels that were fully refurbished and rebranded during the lockdown period, to bring a total of 19 hotels now open.
Whitbread reported that demand had been strong in seaside & tourist locations, with occupancy levels of almost 80% during August in those locations. However, demand remained subdued across the rest of the hotel market, particularly in London and metropolitan areas.
Across the entire UK estate, overall occupancy levels steadily improved on a weekly basis, averaging 51% in August with year-on-year accommodation sales recovering to -47.3%, while UK Restaurant performance was boosted by the positive impact of the Eat Out to Help Out scheme. Total UK sales (accommodation and food and beverage) improved to -38.5% in August.
Performance trends in Germany mirrored the UK, with strong demand and occupancy levels in tourist locations, while locations with a greater business skew remained at low occupancy levels. In August, total sales were over 300% ahead, boosted by the acquired Foremost hotels, while occupancy recovered to 54%. It said that it continued to "actively assess opportunities to accelerate our pipeline growth in Germany”.
In January Whitbread said that it was investing in driving more B2B customers, through the addition of Premier Inn Plus rooms, investment in direct channels and IT infrastructure.
Nicholas Cadbury, CFO, said: “We’re looking to drive B2B, where there have been headwinds. We are looking to invest in the Premier Inn Plus rooms, where early readings have been very encouraging. We’re also looking at how we’re targeting our B2B customers and we want more demand coming into our direct channels so will look at more marketing there.”
Brittain added: “We are prepared to extend our distribution reach into channels we haven’t played in, where a business consumer has to go through their business travel agent. We are not making a generic travel agent play, but those are guests we wouldn’t get any other way.”
Insight: And now Whitbread isn’t getting those business customers at all, as corporate travel going into the Autumn is anything but buoyant and the company had the misfortune to announce its trading update as MP Michael Gove was doing the press rounds telling people to work from home if they could, something of a volte face from ‘go to work or risk getting fired’.
Which takes us back to Whitbread’s £1bn. The company is in a stronger position than many others in the sector, who will be taking Gove and the 10pm closing time to their lenders with head in hands. Whitbread still won’t be drawn on what it’s planning to buy, other than muttering about Germany, which is starting to make observers nervy.
The company is not known for its risk taking and, while it may well be waiting for bargains, so is everyone else and many of those it will be competing with have more cash and more nerve. The longer Whitbread does not deploy it, but saves it for a rainy day - sensibly, one might also say - then the rainier many fear it will be, further niggling at confidence.