If there was ever a perfect representation of the challenges currently consuming the UK hospitality industry, the Whitbread Group’s plan to cut 3,800 jobs announced on 30 April, would be close.

Owner of the Premier Inn hotel chain – the UK’s largest by bed count – Whitbread is looking to save £250m while overhauling its hotel restaurants over a five-year period. The hotel and restaurant group is also closing its Beefeater and Brewers Fayre restaurant chains as it looks to cut £1bn from net capital investment and “recycle” – sell and lease back – up to £1.5bn worth of property to fund future growth.

Whitbread chief executive Dominic Paul cited “significant cost increases in the form of business rates and National Insurance, as well as the implied market discount to our inherent value,” for the plan, which takes the company to FY 2031. Full year revenue to February 2026 was flat at £2.92bn and net income was down 16%, at £213m.

Eyeing rising energy prices and inflation linked to war in the Gulf, Darren Nathan, Head of Equity Research at Hargreaves Lansdowne, has warned that for Whitbread, “profit growth is likely to be a challenge this year.”

“If consumer sentiment weakens, that pressure will intensify further. Weakening economic signals and high oil prices are rarely positive for the hospitality industry,” he added.

Adaptability is critical for hospitality businesses

As Whitbread’s stated strategy suggests, scale will be less of a driver near-to-long term growth in the next period: being nimble enough to navigate regulatory obstacles and adapt to new income streams is likely to be the tactic of choice for the group and its industry competitors.

David Chaplin is a chartered accountant and chairman of the Chaplin Hotel Group, which includes the luxury Gonville Hotel in Cambridge. Although operating at a different end of the marketplace, Chaplin has a perspective that suggests Whitbread’s downsizing strategy is a sign “of the hotel operator coming to its senses.”

He cites the example of another ‘giant’ of the UK hospitality sector, Tim Martin, chief executive of the Wetherspoons pub chain, who took a similar tack, closing down ‘duplicate’ bars in popular locations, to reduce overheads.

In what Chaplin calls “an already grotesquely overburdened” sector, with some of the highest costs in Europe, it is currently an uphill struggle to steer international clientele to British shores, many of whom he says would rather go to “cheaper, rival European cities.”

“The Treasury scrapping VAT relief to overseas shoppers [the VAT Retail Export Scheme, discontinued by the Conservative government in January 2021] has had a devastating effect on UK hospitality, driving tourists elsewhere,” says Chaplin.

“From a global perspective, we [in the UK] have spent the last 30 years making ourselves unaffordable and uncompetitive. We are a high-cost economy.”

The ‘Airbnb effect’ is creating market pressures

Chaplin, who is chair of the Cambridge Hoteliers Association, also points to “the Airbnb effect”: private short-stay accommodation contributing to oversupply and downward pressure on prices but also having an unfair advantage over hotels in terms of less stringent regulation and taxation.

“Change is potentially coming [from April 2026, through the government’s proposed ‘C5’ Planning Class category for short-term let properties], but the effect of Airbnb and short-term lets was not being regarded in the analysis until relatively recently,” he says.

Short-term lets currently fall under the ‘C3’ planning class for ‘residential dwelling’, which critics like Chaplin insist leaves the subsector operating with fewer regulatory obligations than more obviously commercial accommodation such as hotels and Bed and Breakfasts.

RevPAR is becoming a less effective metric

The current climate of rising costs is forcing hotel operators to rethink how they measure growth and operational efficiency.

The revenue per available room or RevPAR has been the standard metric for decades, but in an era of shifting consumer patterns and revenue streams, it is beginning to bump up against its own limitations.

“As costs have increased, the costs of filling a room are up but also as a proportion of sales. Further, when the price of a room drops, what it costs us is an even higher proportion,” says Chaplin.

An increase in RevPAR is potentially dangerous, if it comes at a higher cost overall, he adds. “In which case it’s worth running at lower occupancy if you can increase the room rate. You need a departure from RevPAR and need to look at your cost base.”

Hospitality: resolutely human-led

On a positive note, particularly at the luxury end where Gonville operates, hospitality is largely being spared the bad news and disruption that AI has brought to other industries. “This is a sector run by people for people, and it runs on great service and a lovely smile,” says Chaplin.

“It’s human to human. And it’s so important.”