Whitbread plans Premier Inn, Costa Coffee split

Premier Inn Frankfurt Messe, Germany. Photo credit: Whitbread(Image: Whitbread)

UK hospitality company Whitbread is set to separate its hotel business Premier Inn from its Costa Coffee chain in a bid to boost the café brand's competitive edge. The move follows pressure to increase growth in the face of mounting competition from competitors Starbucks, Pret A Manger and Greggs.

Whitbread will split the two subsidiaries within 24 months. Investors Elliott Management and Sachem Head Capital Management, who own a 10-percent stake in the company, have been pushing Whitbread to divide the brands, allowing them to focus on their own growth and optimize value for shareholders. However, Elliott Management believes the process should take six months, instead of 24. 

"We will ensure that prior to separation each business is sufficiently developed and well-positioned to take advantage of the structural growth opportunities available to them in the UK and internationally," Adam Crozier, chairman of Whitbread, said in a statement.  

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Whitbread's goal for the cafe chain now is to expand its Costa Express brand and its presence in China. The company will also focus on continuing Premier Inn's development in Germany. The hotel chain recently acquired 19 hotels in Germany with 3,100 guestrooms to develop its presence in the country and expand its portfolio of 72,466 guestrooms in the UK. 

Whitbread is currently investing £8 million to develop a new hotel and restaurant in Skegness, UK to continue Premier Inn's growth, according to Linconshire Live. Construction on the 80-room Premier Inn began on April 25 on the Pier Field site next to Skegness Pier. The hotel will share the site with a Cookhouse & Pub restaurant and a KFC as part of a mixed-use development. The new Premier Inn and restaurant are slated to open around Easter 2019.