As UK furloughs near end, Whitbread to shed 6,000 jobs
As UK furloughs near end, Whitbread to shed 6,000 jobs
22 SEPTEMBER 2020 9:18 AM

The effects of COVID-19 on the United Kingdom’s hotel industry and the end of the government’s furlough scheme have forced Whitbread PLC, the U.K.’s largest hotel company by asset number, to terminate 6,000 jobs, 4,500 of which are in the company’s hotel division.

DUNSTABLE, England—The 31 October end of the United Kingdom government’s furlough scheme for hospitality employees is already having a dramatic effect on one of the country’s largest hotel firms.

Whitbread PLC, parent company of the Premier Inn brand, announced in an update ahead of its first-half 2020 earnings on 27 October that it will lay off 6,000 employees, or 18% of its workforce.

Whitbread CEO Alison Brittain said “many (of these staff losses) are expected to be voluntary, so the one-off costs are modest.”

The company’s hotel business bears the brunt of those losses, accounting for 4,500 of the total layoffs.

“It is with great regret that we have advised our teams this morning that we intend to commence a consultation process with our U.K. hotel and restaurant colleagues as the furlough scheme comes to an end,” Brittain said.

She said the move will ensure the firm emerges with a lower cost base, more flexible operating model and stronger resilience.

Whitbread is positioning itself “to take advantage of the compelling, long-term structural-growth opportunities that we believe will emerge both in the U.K. and Germany,” Brittain said.

Approximately 20,000 employees have been on flexible furlough, allowed to work some of the time by the new government standards.

“The scheme has been incredibly welcome. … It has helped us, and the entire industry … but the government has been pretty clear that (it) was not planning on extending the current scheme. If they do, it would be very welcome,” she said.

Summer warmth
Whitbread’s hotel performance suffered in the first two quarters, although occupancy is slowly gaining traction, Brittain said.

Whitbread’s comparable revenue fell by 76% and 78% over both quarters, adding this was better than the previously announced forecast of an 80% decline and “cash burn looks much better than guidance.”

Brittain said each 1% decline in revenue per available room equated to £18 million ($23 million).

In a statement from business advisory Morgan Stanley, managing director Jamie Rollo said the firm’s RevPAR forecast for full-year 2020 is a 60% decline, which would result in an earnings-before-interest-and-tax decline of £373 million ($477.5 million).

Brittain said Whitbread was helped by an increase in F&B sales due to the United Kingdom government’s “Eat out to help out” campaign in August and a weekly increase in occupancy, since hotels were permitted to reopen on 4 July.

Brittain said the break-even occupancy for the company’s hotels ranged between 50% and 55%, and by the end of August all of its hotels had resumed business.

She added that the high point of hotel occupancy in August was 58%, but in London the metric hovered around 30%.

As is broadly true for the entire U.K. hotel industry, Whitbread’s rural and seaside hotels have fared better than its urban hotels, due to a rise in staycations.

She said the firm is operating “ahead of the market.”

“We know customers are seeking value for money … high levels of quality, and we have been able to provide both of those things, so we are pretty confident about our ongoing business,” Brittain said.

Whitbread already has moved to shore up its financials. Brittain said initiatives include the “immediate postponement and cancellation of non-critical spend, cancellation of dividends (and) voluntary pay cuts for the board and management team.”

“We utilized support from government schemes both in the U.K. and in Germany, and we topped up our U.K. teams to 100% of pay on top of the furlough scheme where we used it,” she said. “In May, we increased our financial flexibility and strengthened our balance sheet with our shareholders contributing via a £1 billion ($1.28 billion) rights issue.”

U.K. Prime Minister Boris Johnson plans to address the House of Commons today on increased lockdown measures due to a recent spike of COVID-19 cases.

The 21 September announcement to close pubs and restaurants an hour earlier at 10 p.m. is likely to be ratified, but Brittain said that had not affected her decision regarding layoffs, which have been in discussion for several weeks.

“(The curfew will) not be impactful for us, but it is across the sector, which will have a degree of frustration about it,” she said.

There have been local lockdowns, she added, which with Premier Inn’s extensive footprint has meant some individual hotels already have faced renewed restrictions.

As of press time, Whitbread’s stock was trading on the London Stock Exchange at £20.41 ($26.25) per share, a decline of 56.9% year to date.

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