Premier Inn owner Whitbread warns of the consequences of UK property tax

Whitbread warned on Friday that British budget measures would cost the Premier Inn owner 40 to 50 million pounds ($66 million) in the next fiscal year, as a sharp rise in business rates threatened to squeeze its margins. Chancellor of the Exchequer Rachel Reeves’ budget increased taxes on prime commercial property, posing a new challenge for the UK hospitality industry, which has been struggling with labor shortages and higher operating costs since the pandemic.

Britain’s largest hotel operator, with more than 840 hotels across the country, said it would explore various options to boost profits, margins and returns as significant increases in rateable values ​​would push up taxes for many hotels.

Bernstein analyst Richard Clarke said a sample of 67 Whitbread hotels showed an average increase in value of 174%, with most above the £500,000 exemption level.

“We are extremely disappointed with the outcome of this week’s UK Budget, which will have a significant impact on our business and the wider hospitality sector,” Whitbread CEO Dominic Paul said in a statement.

‘A HAMMER BLOW’

Whitbread shares fell more than 7%, leading to losses on London’s blue-chip index after the update. They had previously fallen after Bernstein double downgraded the stock from ‘outperform’ to ‘underperform’.

“We were big fans of Whitbread’s five-year plan, but the government has derailed it (again),” Bernstein’s Clarke said in a note, noting that the changes represented a “hammer blow” that put the company’s plan at risk.

Whitbread maintained its outlook for the 2026 financial year, saying UK trading remained positive in the third quarter, while its German operations were on track to become profitable this year.

The company now expects gross UK cost inflation to be between 7% and 8% on its £1.7 billion cost base, but accelerated efficiency improvements of £60 million would reduce the net figure to between 3.5% and 4.5%. ($1 = 0.7575 pounds)