Whitbread has blamed ‘punitive’ business rate increases as it outlined plans to axe 3,800 jobs and sell hotels. 

It came as the Premier Inn owner set out a new five-year strategy to make £250million in cost savings.

Chief executive Dominic Paul said this was the conclusion of a review that began after the Budget last year, when hotels were hit with sharp increases in business rates. 

He also cited other recent increases for businesses, including National Insurance contributions for employers.

He said: ‘We always challenge ourselves to improve and, in light of significant cost increases in the form of business rates and national insurance, as well as the implied market discount to our inherent value, we’ve looked hard at the options open to us to maximise value creation over the medium and long-term.’

Many hotels saw their business rates go up this month – despite Labour's pledge to ease the burden of the tax. Whitbread said its bill had increased by £35million this year and will have risen by £110million by the third year of annual increases.

‘We think the business rate system should be simplified, and we think the business increases are punitive to the hotel industry,’ Paul said.

The group plans to convert its 197 restaurants into hotels offering food and drink before selling 110 of them over the next two years.

The shift comes as its hotels business has gone from ‘strength to strength’ while the restaurant industry has ‘been more challenged’ in recent years, Paul said.

The group hopes to redeploy a ‘significant’ proportion of the roles it makes redundant among its 30,000-strong workforce.

The business stands to benefit as competitors close and fewer new hotels open due to the high tax environment, Paul said.

He said there were fewer hotel rooms in his segment of the market now than before the pandemic - and higher business rates threaten to lower this further.

But he added: ‘It’s not necessarily the best thing overall for the economy, which is why we think having a lower taxation environment that will lead to more jobs being created overall would be healthier for the economy.’

The average business rates bill for hotels will rise 115 per cent over the next three years, or a total of £205,200 over that period, according to trade body UK Hospitality – making the sector one of the hardest hit.

The Chancellor U-turned earlier this year to offer rate relief to pubs, after a campaign from publicans that has seen Labour MPs barred from many establishments.

Paul also said increases in employment costs had made it harder to employ people, even though many of his employees had joined after being on welfare or were young people in their first jobs.

He said: 'The challenge with increased costs of employment, [is] it gets harder to do that, and you know, it's getting more expensive to recruit people, and it's getting more expensive to have people in the business, and that can't be good for job creation overall. 

'And I think job creation as an economy is one of the core factors that makes a healthy economy and a healthy country, and the increase in taxation is making that harder.'

It came as Whitbread reported a pre-tax profit for £298million for the year to 26 February, 19 per cent lower than the previous year. Total revenues were flat year-on-year at £2.9billion.