Whitbread costs to rise by up to £30m as it hikes pay to attract workers

Premier Inn owner Whitbread has cautioned its annual costs will rise by up to £30 million as it hikes pay to attract workers in a tough recruitment market and as demand ramps up.

The group said it was making targeted pay increases across the business, given the difficulties in hiring across the hospitality sector as it also sees a stronger-than-expected recovery in trade following the end of pandemic restrictions.

Whitbread – which also owns restaurant chains including Beefeater and Brewers Fayre – said its costs are set to rise by between £20 million and £30 million overall as it also brings forward refurbishments and maintenance projects, as well as some investment in IT.

It said: “Labour supply remains tight across the hospitality sector and assuming that consumer demand and occupancy remain strong, we expect some additional costs due to targeted pay increases.

“We are also taking the opportunity to bring forward our investment in refurbishments and maintenance projects as well as accelerate some additional IT spend that will underpin our market-leading position and drive future earnings.”

Official figures on Tuesday showed that vacancies in the hospitality sector jumped to a record high of 174,000 last month as businesses face the possibility of staff shortages over the key summer season.

The Office for National Statistics’ figures revealed that overall job vacancies rose to a new record of 1.3 million – and more than a tenth of these were in the hospitality sector.

UK hospitality businesses recorded 83% more vacancies over the three months to May than over the same period in 2019, before the pandemic struck.

Whitbread said UK demand was ahead of its expectations, with first-quarter accommodation sales 31% ahead of the pre-pandemic levels two years ago, and 235.6% ahead of a year earlier when restrictions affected trading.

Like-for-like accommodation sales were 21.3% higher on a two-year comparison.

But total UK food and drink comparative sales were still 4.3% below 2019-20, it added.

Its chain across Germany has also benefited from a strong rebound in demand across the market, with Premier Inn occupancy levels standing at 64.7% in the last four weeks of the quarter and 40 hotels now open in the country.

The group said it was around 40% booked up for the second quarter over the peak summer season.

Alison Brittain, chief executive of Whitbread, said: “The strength of Premier Inn’s recovery in the UK continues to be ahead of expectations with a particularly strong first-quarter performance that is well ahead of pre-pandemic levels and we continue to significantly outperform the market.

“This impressive first-quarter performance together with improved visibility into the second quarter gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year.”