Whitbread PLC (LSE:WTB), the FTSE 100 hospitality group behind the Premier Inn hotel chain, has unveiled a sweeping five-year strategic plan designed to transform the business into a higher-margin, lower capital-intensity operation, following a detailed review prompted by surging employment costs and business rates.
The plan, which targets £2 billion of free cash flow available for shareholder returns by financial year 2031, centres on recycling £1.5 billion of freehold property to fund future growth, reducing gross capital expenditure by £1 billion and cutting net capital spend to between £200 million and £250 million per year.
The group expects the measures to deliver a 500 basis point improvement in return on capital employed and an incremental £275 million contribution to adjusted profit before tax by FY31, compared with FY26.
Chief executive Dominic Paul said the review had concluded that Whitbread's vertically integrated model remained the right one, but that the company could improve its approach to capital allocation and property ownership to unlock greater value for shareholders.
A central plank of the plan is an extension of the group's Accelerating Growth Plan (AGP), which will see all remaining 197 branded restaurants converted to a more efficient integrated food and beverage format preferred by hotel guests.
Whitbread has already agreed the sale of 51 branded restaurant sites for £50 million and reached terms, subject to conditions, on a further 60 sites, with the conversion programme expected to generate returns on capital of 15% to 20% by FY31.
The transition will create a short-term earnings drag, with a net £10 million reduction to adjusted profit before tax expected in FY27 and total food and beverage sales falling by between £140 million and £160 million during the transition year.
Share buybacks will be paused in 2027b as capital is redeployed into the AGP extension.
In Germany, where Premier Inn reached profitability for the first time in FY26, the group will shift its focus from network building to accelerating free cash flow and returns, targeting room growth of more than 50% to reach 18,000 rooms by FY31 while concentrating investment on the highest-returning formats and locations.
The strategic overhaul was announced alongside full-year results for the 52 weeks to 26 February 2026, in which statutory revenue was broadly flat at £2.92 billion and adjusted profit before tax held steady at £483 million, despite significant cost headwinds from higher National Insurance contributions and business rates.
Adjusted EBITDAR (earnings before interest, tax, depreciation, amortisation and rent) rose 4% to £1.074 billion, while adjusted basic earnings per share increased 7% to 208.5p.
Statutory profit before tax fell 19% to £298 million, after £185 million of adjusting items, including £130 million of impairment charges related to the AGP.
The board held the full-year dividend at 97p per share, while total cash returned to shareholders through dividends and buybacks in the financial year 2026 reached £419 million, bringing the total since April 2023 to £1.6 billion.