Whitbread plc

Good morning, everyone. Thank you very much for joining the call for our Q3 full year 2025 trading update. I'm joined by Hemant Patel, our group CFO. Hopefully you've had a chance to review our announcement this morning. I'm going to start with a brief overview for those who haven't seen it before opening up the call for Q&A when Hemant and I will be happy to answer your questions. Back in October, we announced our five-year plan. And by focusing on what we can control, we expect to deliver at least £300 million incremental profit and more than £2 billion for shareholder returns. I'm pleased to say that we're making great progress against these strategic priorities, including our accelerating growth plan and cost efficiencies. As I will come on to, we're also building great momentum in Germany. We're confident that we're on track to deliver a step change in our profits, margins and returns. Starting with our Q3 trading update, the third quarter saw the continued return to more normalised levels of demand in the UK, and as expected, trading improved throughout the quarter. Total UK accommodation sales were broadly in line with the prior year, which was still 51% ahead of full year 2020. Our brand strength and commercial initiatives meant that we increased our outperformance versus the market on both accommodation sales and restaurant growth. Our UK food and beverage sales were in line with our expectations, reflecting the impact of our accelerating growth plan. Germany traded strongly in what is always an important quarter. In local currency, total accommodation sales were up 23% and REVPAR was up 20%, reflecting the progressive maturity of our estate and our commercial initiatives. Our performance versus the market has also strengthened, with our more established cohort and our total estate outperforming the wider market on both accommodation sales and REVPAR. Now moving on to current trading, and let's start with the UK. Our performance has stepped up versus the third quarter and in the six weeks to the 9th of January 2025, total accommodation sales are up 2% and REVPAR was in line with last year. In Germany, current trading during the first six weeks has been strong with a good trading performance in the Christmas markets. In local currency, total accommodation sales were 37% ahead of last year and total estate REVPAR was up 28% to 53 euros. Rev path for our cohort of more established hotels was also up 31% to 61 euros. Now a word on costs. There is no change to our full year 2025 guidance. I'm looking forward to full year 2026 with 50 million pounds worth of cost efficiencies and steps taken to mitigate the impact of the UK budget. We expect net cost inflation to be between 2 and 3% on our UK cost base of 1.7 billion pounds. We have significant control over our cost base and have a strong record of delivering significant savings each and every year, and we expect to deliver £250 million worth of savings to full year 2030. Turning now to the outlook and starting with the UK. While Ford's visibility remains limited, our booked position for full year 2026 is building ahead of last year with positive long-lead leisure bookings into peak periods. In Germany, we're performing well, and with a clear plan to further increase our brand awareness, grow Red Car, and open more rooms, we are confident in our ability to become the country's number one hotel brand. In summary, we're pleased with our UK performance in what is a challenging environment, and we are building real momentum in Germany. We're making good progress against our strategic priorities, and we remain confident in our five-year plan. A vertically integrated model means that even with conservative market growth assumptions, we are on track to deliver at least £300 million incremental profit and more than £2 billion for shareholder returns. Before we move into Q&A, could I please ask you to keep to a maximum of two questions each so that we can get through as many as possible. With that summary, I'll now hand over to Siobhan to host the Q&A.

Thank you. To ask a question, please press style followed by one on your telephone keypad now. If you change your mind, please press style followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Vicky Stern from Barclays. Vicky, your line is now open. Please go ahead. Yep.

Morning. Happy New Year. First one's just on RevPAR, obviously. So Q3 did see a sort of turn for the worse versus Q2 despite easier comps. Obviously it did accelerate through the quarter. Just keen to hear your reflections on where that shift came from. So it seemed to be more on the business travel side than leisure, but just keen for any colour you've got there on the drivers. And then obviously in December we saw quite a nice improvement, albeit starting to see a bit of normalisation now in January. But obviously you never have great visibility. You touched on a little bit there. Curious if there's anything you can call out there on what you're seeing, your sense of where things might land in coming months at least for the REVPAR. And then the second one on AGP disposals and selling these backs, just to check in, are you still confident in the cash proceeds? I think you targeted £175 to £225 million for this year. Yeah, how feeling about the disposals and then with that the headroom in terms of further cash returns?

Thanks, Vicky. Happy New Year. Yeah, I mean, you know, let's take the red card question first. I mean, overall demand is slightly softer in the UK than last year. And we are seeing an overall slightly more challenging environment. I mean, there are no surprises there. Everyone is seeing the weekly data. But I guess I'd make a few points. Trading actually improved as we went through the quarter. And then, as we saw, total sales up 2%. We're still up 50% versus pre-pandemic. So I think the encouraging side is we are very much holding on to those gains versus where we were pre-pandemic. And then I know you didn't ask about Germany, but current trading accommodated sales up 37%, very, very strong. I mean, I would say we're making very good progress on our commercial initiatives. It's no coincidence that we've been outperforming the market. So although Q3 started slow, we built up performance as we went through it. Our outperformance versus the market is reassuring, I think. And then to your point about kind of how we're feeling about this year, forward visibility for the year is really limited. We're expecting the supply side to remain quite constrained overall. And while the macro environment is likely to stay challenging, I think with the strength of the brand that we've got and the suite of commercial initiatives that we've got in place and are kind of progressing really well on, I think we're well placed overall. On the sale and leaseback, I mean, the short answer is yes, we're confident, but Herman, do you want to build on that at all?

I mean, yeah, just on ATP disposals. So, I mean, the first thing is, yeah, we gave ourselves 18 months to two years, 24 months to go through our disposal program. So, we're still very happy with where we are overall in terms of the disposal program. which has been progressing now over the last nine months or so, and will continue into next year. In terms of the level of disposals, again, we're happy with where we're going to end up. We're still happy with sale and leasebacks for this year, but the range that we talked about here, we're still within that range. and so therefore we're quite we're overall happy very happy with the excessive growth program once you look at that with regards to cut a headroom going forward we'll apply the capital allocation framework at the end of the year as we would normally do every six months or so and we'll see where we're going to get to okay thank you very much

Thank you. Our next question is from Jamie Rollo from Morgan Stanley. Your line is now open. Please go ahead.

Thank you. Good morning, everyone. The first question is, could you please break down the 5% to 6% gross cost inflation guidance for 26 into some of the constituent parts, particularly sort of calling out NIC, living wage, energy hedges perhaps rolling off? And then secondly, the language on Germany looks like it has changed a bit from breakeven to profitable on a one rate basis. FY25, just wondering if we're reading too much into that. Have you had your minute of profit in Q3? Thank you.

That's very interesting.

Thanks, Jamie. Just a couple of quick things before I hand over to Hemant. I mean, I think overall, we're really pleased with the efficiency program that we, you know, we've had an efficiency program for many years in the business. We've stepped it up materially. We've got a real level of granularity behind it. It's one of the areas that gives us strong confidence in being able to mitigate some of the cost pressures that we've been facing. But also, as you know, we outlined that we are aiming for £250 million worth of cost efficiencies over the next five years. So I think it's really good that we got ahead of that very early. And that's one of the things that, you know, the areas that gives us confidence about being able to guide that 2% to 3%. 2-3% this year. And in Germany, I suppose what you're picking up on is just an increasing level of confidence about our overall performance in Germany. I remember this call this time last year. There were many questions about kind of why we felt that we actually could get the business to profitability in Germany. And our view at that point was that the guest experience, we thought we were very well positioned. We were seeing very high guest satisfaction scores in Germany. I always think that you have to start from that point of view. Ultimately, we are a guest-focused business. You have to get the product right. It's very clear that we've done that in Germany. The guest satisfaction scores are extremely high, and that gives us a real level of confidence. But as importantly, you also need the commercial side of the business to be really well run, and we've made tremendous progress in that area. And those two things combined, coupled with the fact that obviously we're seeing the data to support our confidence, does build our confidence about reaching profitability for next year. And I think kind of aligned to that, our confidence that we're building a business that is getting towards scale, resonating really well with customers, and will become a positive contributor to profitability for Whitbread and gives us another engine of growth.

If I just add to that, Jamie, just on the first point regarding the gross inflation, I mean, I'm not going to be able to give you kind of a detailed breakdown at this stage. It's not, you know, but directionally, obviously, the labour costs got up more than we were probably expecting before the budget. And historically, over the last couple of years, with minimum wage increases, they've been roughly 10%. um and we are probably talking something similar right now with the national insurance uh increase as well offsetting that um uh we have got energy edges rolling off um which will be the um uh either very low depending on exactly what we're talking about or deflationary um low inflation or deflationary um and then within that there's a range of other things in between but overall we're really happy with the five to six five to six percent guidance we're giving and as Dominic mentioned we've got a very strong cost plan against that And then just finally just on Germany, I think, you know, we talked about breakeven run rate. We talked about possibility run rate. I think just to define what we mean by that, you know, over the second half of this financial year, I'm supposing, and the first half of the next financial year, so that 12-month period, we would expect to be making profit in Germany. So I think, you know, that's our definition of being on that run rate to break into profitability and tax, back to the fact that actually, as Dominic says, we're getting more and more confident about joining a business.

Great. Thank you very much. Thanks, Jamie.

Thank you. Our next question is from Richard Clark from Bernstein. Your line is now open. Please go ahead.

Good morning, everybody. Thanks for taking my questions. Yeah, just a couple from me. I guess if we look at your reiteration of 300 million PBT improvement over five years, and if we assume that the budget impact was somewhat unexpected, when you announced that. And you've just said, you know, the cost efficiencies are effectively the same number. What is the bridge there? How are you going to be able to mitigate that budget? Are you assuming something at an industry level that the industry will sort of, you know, have less supply growth or better red park growth maybe to mitigate the budget? And then maybe just over in Germany, just how much of maybe that strong performance you've been seeing you would put down to leaning into the OTAs, putting the hotels onto the OTAs, and whether that is one of the commercial leaders you're thinking about in the UK as well.

Thanks, Richard. I mean, I guess in terms of the extra costs that we've seen following the budget, a couple of things to point out. One, yes, of course, as Hemant has just said, there is impact to our business from that for next year. I think as an organization, as a business, we're really good at mitigating cost increases. And we've been around for a long time. We've had various cost shocks over the years and we are very good. And one of the benefits of being a vertical integrated business is we have a lot of leaves at our disposal to help us do that. So we do feel confident that over time, over that five-year plan horizon, we will come up with further cost mitigations. And the second thing to say is when an organization like ours lays out a five-year plan, we obviously have to build in contingencies. and safety bells because we never quite know what curveball is going to come in. So, you know, you'd expect us to have an element of caution within the numbers that we put out. for precisely the reason that we've seen in the budget. Just, I suppose, to put a little bit of color to some of the things that we're doing, you know, we are accelerating some of our automation work, for example. You know, it's clear labor costs have got slightly more expensive. Therefore, automation becomes more cost-efficient, and therefore, we are accelerating some of those plans. You don't see the benefits of that absolutely immediately. But over time, and particularly within a five-year plan horizon, you'll see the benefit of those kind of automation strategies and projects. So we back ourselves to mitigate the costs over time. And also, we have a degree of conservatism in any five-year plan number that we would pay out. Just the second part of your question, Richard, on Germany. I mean, I just reiterate something I said earlier, which is actually really important. I know a number of you have seen our hotels in Germany, but the guest satisfaction scores are really high. So when you've got guests that are enjoying the experience on a relatively nascent brand in the market, the power of having a strong guest experience is significant because it leads to more frequency, people staying with you again, and also word of mouth. The second thing we're seeing is that our brand awareness is building still at a ResVeno level, nowhere near where we are in the UK, but building nicely. And Eric, who's our CEO in Germany, has done a really nice job of actually defining the brand in Germany, really centering it behind this concept of great sleep, exactly what we've done in the UK, and helping it stand out in the marketplace. So we're seeing some nice growth. and brand awareness there. The third thing is we've got smarter and smarter operating from a revenue management perspective in Germany. I think we've got a really good handle now on some of the differences with the UK market and the German market. How Germany acts in events, for example. How do you trade things like Christmas markets? And one of the reasons why we perform well in Christmas markets last calendar year in December was just because we've traded that period really well and much better than we had the year before because we're learning. So I think the kind of revenue management and the digital initiatives that we've taken in Germany are really paying off. You're right, we're also using OTAs and affiliates a bit more than we have done in the past. That's entirely appropriate in Germany. We're a relatively new brand. We've done a lot of data-led research to say that it gives us access to a different cohort of customers that are coming direct, and therefore it is accretive for us overall as a business. That said, we're in a really difficult, different position in Germany versus the UK. So because we're newer and we're less well-known, our ability to get incremental customers through affiliates and online travel agents is really high. In the UK, it's a very different position because we're so big, we're so strong, we've got such high brand awareness. The direct strategy works exceptionally well for us in the UK. All that said, we use business travel agents, for example, because it gives us access to office-type customers. We use affiliates at certain times, but we're not expecting to do a significant distribution shift in the UK. Whereas in Germany, the strategy we've now put together is working really well, really nicely, and helping us build that momentum.

And just to add a little bit more to Dominic's point on cost inflation mitigation as well. You've seen through this year, we started the year with guidance of 30 to 40 million pounds of efficiencies. We've ended, we've taken that up twice through the year to 60 million pounds now. You've seen we've been able to react and given further guidance over the next five years of 250 million pounds over five years. and actually we've been bringing things forward into this year from next year so we've had to fill the hopper for next year again to take it up to 50 million pounds and we haven't stopped yet so as Dominic says we're prudent with our guidance and we still continue to look for further cost-saving initiatives we've shown this year that we're able to accelerate increase and find new initiatives and I'm sure we'll be able to do the same thing as we go through next year as well thanks Richard thank you

Thank you. Our next question is from Tim Barrett from Deutsche Numis. Tim, your line is now open. Please go ahead.

Hello. Morning, both of you. I had a couple of questions on the top line, please. Firstly, I don't think we've talked about the December, January exit rate and that good improvement. I wondered, is that all down to London or is there anything you'd call out specifically there? And then the second is on AGP. Very clear message that you're on track, but Obviously, we have to try and have a stab at modelling F&B. So could you say how many of the pub restaurants have now gone, closed or sold, and how many, sorry, what percentage of revenue do you think that implies out of the couple of hundred that's going? Thank you.

Hi, Tim. I'm going to take, I'll take the second part of your question and partially answer it, and then I'll hand over to Hemant, who can cover both in a little bit more detail. I mean, fundamentally on the Accelerating Growth Programme, our message is we're bang in line with where we want to be at this stage of the programme. We updated much more thoroughly on in October. So we're in line with our expectations on AGP overall. I mean, you're right, of course, that has an impact on our food and beverage sales. And just to reiterate why that is, there are a group of our branded restaurants that we only serve our hotel guests in now. So we close to the wider public and we only serve our hotel guests prior to then closing. converting those spaces into restaurants while we build new food and beverage spaces. So that's a reason for the sales impact, exactly as we'd expect, exactly in line with where we want to be, and overall progress bang on line with where we want to be. There's a little bit of colour just to add. We're now at a stage, I think, when we talked about the planning permissions that we had put in and received. Obviously, we've had more planning permissions in, we've received more. um more positive confirmations on planning commissions since then we haven't said a number but again bang in line with where we expected to be and we started construction in a number of the hotels so we started building extensions in some of the hotels and we started building numbers with some of the new food and beverage spaces and we've got a number that already opened um i've stayed in a few of those hotels over the past few weeks i've experienced in new food and beverage areas they're really good remember why we're doing this we're doing it for two reasons one There are three reasons. One, to create new hotel rooms, more profitable than running a restaurant. Two, we're doing it so that we can invest in the space and make a better guest experience. Our indications on the ones that have opened so far is absolutely, that's absolutely the case. We're seeing guest satisfaction levels in those spaces higher than pre the conversion, which is really encouraging. And the third reason for doing it is that hotel rooms are naturally more profitable than brand restaurants. And I think some of the changes you've seen over the last few months with the budget, for example, means that actually running kind of restaurants and bars and cafes has got more expensive than it was 12 months ago. And I think it reiterates the strategic direction that we're taking and I think underlines that fundamentally we're making the right we've made the right strategic decision here on investing in our core estate making the guest experience actually stronger but also removing the drag of less profitable restaurants replacing with with proper hotel rooms so slightly longer answer to only part of your question but guess just underlying underlying we're feeling really good about the decision that we made and also making good progress on the on the strategic initiatives

Yeah. And Tim, there's not much really to add on that we can give in terms of the detail right now. As Dominic says, we're progressing really well. We're really happy with the progress we're going to make. Most importantly for us, obviously, is where we get to in terms of the end state, going through the disruption, getting the exit so that we can actually get to the point where we have removed the loss-making impact, the loss that the restaurant is making. To remind you that we expect that from this year, over the next five years, we'll see a £100 million improvement from the Accelerating Growth Plan There's a reversal of the 2025 million pound impact. And then there's the impact of the extension rooms that are coming in as well as the about 30 million pounds coming from the removal of the loss, the loss from those loss making restaurants that we talked about as well. To your first question in terms of December, January exit rates. Yeah, I mean, most of the impact in December is a lot of that was for the market was a timing of Christmas. So Christmas just being later in the week meant that actually people were taking a longer period of time at the end of Christmas. the period that there was an extra week of business effectively before Christmas in December. So it had a big impact on our B2B business in particular, as well as leisure, and across both London and the regions as well. As we've gone round from that, obviously what happens after Christmas is that it's a week later in terms of people coming back to work. and that's actually this week where we're starting to see the pickup of people really starting to book um business trips over the next few over the next kind of uh next couple of months we would have seen that this time last it would be last week this time last year um and hence there's a there's a phasing difference so that's the main difference you know that's what's happening there but obviously for us we're really happy with the commercial program we put into place has been um That's illustrated by the fact that actually through the year, we've been ahead of the market in terms of revenue quarter by quarter. But for the first couple of periods, our REVPAR was behind the market. In Q3, we actually turned to beating the market in terms of REVPAR. And across the five, it's six weeks of performance, but we've got five weeks of market data. We extended our growth versus the market. So, you know, on REVPAR. against the market as well as combination sales. So very happy that for us the commercial program is making a difference and that made a difference to send up, but obviously there appears this phasing impact, as you know.

Thank you, Tim. Yeah, got it. Okay. Thank you.

Thank you. Our next question is from Alex Brignall from Redburn Atlantic. Alex, your line is now open. Please go ahead.

Morning. Thank you very much for taking the question. Morning. Morning. Um, the first one, just, um, it's a bit of a technical one, just on your, the covenant. Obviously you've done a big investment program on, on the restaurant, which I presume you spoke to all of your creditors on. Um, could you just talk about how that plays in to the covenants that we look at? Because you were obviously not thinking of the original investment grade limits that you have on FFO as it relates to this investment phase. Um, and then the second one is just on, um, certain leasebacks and how you think about them. Obviously, before we had to deal with the new accounting, certain leasebacks were very easy and gave you a big sort of balance sheet and cash benefit. But now, notwithstanding the fact that your covenants have different capitalization, now certain leasebacks don't, I presume, have a meaningful benefit to actual net debt when you think about the cap rate that you would achieve when you sell them. So can you just think about whether that has changed the way that you think about when you do certain leasebacks? Thank you. Yeah, okay.

I mean, there's no impact from the restaurants on any covenants that we have as we go through the exits of them. Yeah, we have, 20 hours after we talked about it, we have them Well, actually, we don't have any debt covenants on our latest set of bonds, the ones we refinanced five years ago, four years ago. And there isn't anything else restricted for us. So actually, there isn't really anything for us to be concerned about in terms of the exit of the restaurants. Regarding certain leasebacks, the way we think about certain leasebacks, clearly, you know, we're very aware of the accounting impact. But actually, the decisions we make are very much based on the cash movements, because that's obviously what the investors will really care about. And obviously, then long-term returns as well. So when we think about selling a lease back or indeed bringing a lease in, which we've done a couple over the last few years where we've actually brought leases in, we think about actually what is the best cash-based return decision. that we are going to be making in order to generate the most cash flow over the long term for investors. So that's a primary concern. Clearly, they were very aware of what the accounting impacts might be and what that might look like, what it might mean for our net debt and leverage ratios. But clearly, the most important thing is making sure we're making the best efficient returns. Fantastic. Thank you both.

Thanks, Alex.

Thank you. Our next question is from Estelle Feingrod from JP Morgan. Your line is now open. Please go ahead.

Hi, good morning. Just two questions. Could you provide perhaps just a few more words on what you can perceive of the UK consumer and any trends, leisure versus business that you can see outside of the calendar effects that you just described? And are you confident you can achieve positive rough power this year with comps now getting a bit easier? And just one, anything you could say on that hotel tax that has been mentioned for the UK? Do you think this could weigh on pricing? Thank you.

Estelle, I didn't catch your last part, the last part of the question. Can you just repeat that?

Yeah, the second question was we heard about a potential tax for the hotels, hotel tax has been mentioned for the UK. There were a few press articles in the last few days saying Have you seen?

Yeah. Okay, cool. Thank you, Tad.

Yeah, cool. Great. Just to have your view on this one and whether or not this could wait on pricing. Thank you.

Yeah, no, got it. Thank you. I mean, in terms of the outlook for the consumer, I mean, as I think I said at the beginning, you know, we all see the FDR data. It bounces around. It has been a slightly more challenging environment. I guess a couple of points to note. Business-to-business travel, so our business travel continues to look resilient. It's very early days, but to Hemant's point just now, the business customer generally starts looking for this year and about this time of year, and there's some encouraging signs in that area. Leisure, it's too early to call on how it's looking. We don't generally give guidance, and we don't give guidance on how the year is going to pan out. But I think we put in our release the fact that we're seeing strong demand for peak events, for example. We're seeing a general resilience in the leisure consumer. So I would say kind of what we're seeing is an environment that is definitely there is, you know, we've seen more normalized levels of demand in the UK. But actually, overall, we've seen a resilient market overall for us. And we're outperforming the market. So you kind of go, well, why is that? And I think it comes back to our core strengths, which is we've got a very strong brand. We've got what I would call a really accelerated commercial set of initiatives. We're very focused on how do we drive rev power, not just in terms of occupancy and core pricing, but actually in terms of how do we How do we extract more revenue from each hotel stay? So that's things like how do you sell early check-in and late check-out? How do you sell rooms with a view? And remember, our new hotel system, Opera, enables us to do those things. So we're feeling... good about the plan that we've got. We feel good about the levers that we've got. The market will end up being what it will be. But overall, it's been probably more resilient than some people thought. And I think our outperformance versus the market is encouraging. And fundamentally, that's what we're focused on doing. And I would back us to continue to accelerate that commercial plan to drive a strong performance as we can. In terms of the hotel tax, there was one article on it. You can imagine we've looked into that. We don't feel as though the government is serious about putting that in. I think it'd be very hard for the government to do that on the back of the budget. We do have that in some other markets, some German markets. Cities, for example, have a hotel tax. What we do in that situation is we set the price out separately, so the customer books a hotel, and then there is a separate charge, which is a city tax that's overlaid on top. It would be a kind of complicated tax to put in. I think there would be an awful lot of pushback from the hotel and leisure industry if that was put in. Fundamentally, we focus on what we can control. If something like that came in, and I think it's a big if, if something like that came in, we would probably be better placed than most to deal with it. We've already got the systems capable. ability to deal with it but overall it wouldn't be it wouldn't be overly helpful but we don't think that the government has got any firm plans to introduce something like that right thank you very much thank you our next question is from a Jane a mystery from Jefferies the line is now open please go ahead good morning thank you for taking my questions I've got to and

The first one is that you've spoken a lot about your commercial program on UK light flights, and I wondered if you could quantify the impact that it had on REF PARs in Q3. And when do you expect to see peak benefit to UK REF PAR or UK sales in the coming months? And my second question is a bit more technical. For FY26, you've mentioned the OPEX cost base of $1.7 billion. Should we then further adjust this to reflect the restaurant closures that you will be doing in FY26? And if so, by how much? Thank you.

Hi, Janet. So let me take the first question and then I'll hand you over to Hemant to take the second question. I'm going to guess that – so no, we – Internally, we have a pretty clear view of it. We don't break out kind of what our initiatives, how much of the outperformance or how much of our performance is due to the initiatives that we've laid out. I would say that they are, you know, I guess some of the data to support it would be that our performance improved through the quarter and our outperformance has widened. As with anything, these things kind of ebb and flow over weeks. It's why we are a very trading-led organization, but we also have to project forward with this business. We're a long-term business and we have to be very confident and make sure that we've got the right strategies in place for the next five years. And we feel really good about that. You know, the five-year plan that we've laid out, the core strategic initiatives, the accelerating growth plan, the commercial initiatives in the UK, the accelerated efficiency plan, you're seeing some of the benefits of that right now. Germany moving from a headwind to a tailwind, all of that put together gives us some real confidence about driving an increase in profitability and returns over the next five years. You're right, the commercial initiatives in both the UK and Germany are an important part of that. Where we are on the journey on that, I'd still say relatively early in that journey. You know, with a big benefit that we've got in the UK market is we've got all of the data from our customers. We are getting better and better at using that data. And I think there's a big opportunity there, both to increase frequency, reduce churn from our customers, but also to sell ancillary revenues as well. And you can see us beginning on that journey. We've now got... early check-in and late check-out offer to customers. We've trialled and are extending rooms with a view, which got really positive early indications. So I'd say we're still relatively early in that journey, but we are executing behind it at real pace, enabled by this new system that we've got in place, which is actually transformative for us that will be over the coming years. So some of our kind of that medium term confidence that you can feel about that business, about that you can feel that we've got at our disposal. And of course, some of this takes time. But when we look at the business overall, we feel really confident that we will be able to continue to transform this business, drive REVPAR growth over the next five years, and drive margin improvement, some of the core strategic initiatives that we've got, and build a business of scale in Germany. Put all of that together, and this is a really compelling story.

Yeah, Jaina, it's not a simple answer in that it's the like-to-like cost base, the £1.7 billion this year, but obviously it does depend on exactly when we've closed sites, so some of them, some of the restaurants, and when we're disposing of them. Similarly, how you apply that to next year will very much depend on when we might be disposing of sites for next year. Remember, we've given ourselves up to 24 months so some of them could even go into the year after the next theoretically although we hope to have made sales before then so if you like we can we can help you with that separately just you know detail the detail of your modelling on that but it's what I would say is I don't think it'll be hugely material to the overall number in all honesty but we can work through that with you okay thank you thanks Janet thank you our next question is from thank you yep

Yeah, no worries. I'm Jo Thomas from the HSBC.

Yeah, good. A couple of questions. One just following on from that last one on commercial initiatives. Can you just give us a there's a lot that you've been doing. Can you just give a bit more of a flavour as to the big moving parts over the course of this next year, what you're introducing and when and kind of how we should I'm not asking you to quantify it, but when we should start to see REFPA really benefit from some of those things that you're introducing. And then, secondly, finally, you've previously talked about pockets of oversupply in certain areas. I just wonder if there's anything to flag around the UK right now. Thank you.

Yeah, thanks, Joe. I mean, I guess the short answer to your question is we don't lay it out in the way that you're looking for us to lay out. I've just I don't think that would be right for us to do at this stage. What I would say is that the number of initiatives that we've got, so let me list a few, the early check-in, late check-out, the interconnecting rooms, the rooms with a view, they're some examples of some of the initiatives that we've got. We believe the benefits of those we will see as we all go through the year. But there are other things that we're doing as well. We're creating more energy around our brand conversation with our customers. We're aligning it behind a core value message. You've probably seen more of that. You've probably seen us do much more customer notifications and more communication to customers, all aligned behind this kind of core value message. And we did a lot of customer research. What comes out very clearly that customers love about us is, They know that they're going to get a really consistent experience. They know that they're going to get a great night's sleep, best bets in the business, a really good breakfast, warm and friendly service from our guests, all at a strong value proposition. So we've jumped on that. We've got very clear communications around that. We link it to a value message. And what that does is it actually helps us cut through in the marketplace. It helps us take disproportionate market share. and help support us outperforming the market overall. So there are a number of – and then kind of I suppose the third bucket, I'd say, is actually more granularity about how we mine the data that we've got as a business into different customer cohorts and how we can use that data to support increased frequency or reduced churn from our core database. You put all of those things together, and they will help us trade throughout the year. As we said in our results in October, what we're not in control of is what's happening to the overall market. So that time will tell on how the overall market looks in the UK for this year. But what we do feel confident about is we've got a really good set of commercial initiatives in place. And as you saw from our most kind of recent numbers and the trajectory, the market overall is okay, and our performance is increasing, and that's fundamentally what we're focused on.

Yeah, Joe, and your second question about supply, I mean, clearly, you know, we – I won't go through detail again. You've heard it from me many times, but, you know, we have a very detailed – understanding of supply in the UK hotel market by cutting the thousands of different small cashrooms that we monitor. So we've got that full understanding of supply. We've got a good understanding of how supply is going to move over time. uh as well um because it takes time obviously for hotels to be built or for plan permission to be gained um uh uh but uh yeah and then converting ourselves as well so you've got a good understanding what that might look like we base our plans um on that our network plan is very much then you know it takes the demand that we expect to see in in those area by area to fully understand that, you know, what that might mean for our plans. That's how we get to this 125,000 room target that we have in the UK over the longer term. And, you know, to the 98,000 rooms that we're going to get to by FY30, so to it, you know, 2020, 930. And, yeah, we're still very happy with the work we've done, and nothing has changed our minds that actually it's going to take some time for supply to kind of come back to where it was pre-COVID, you know, before we see supply come back to the levels it was pre-COVID across the UK. So we've got that deep understanding, you know, area by area. We understand exactly what that might mean for us, how we might want to optimise. supply in that area, whether that's extensions, including the Accelerating Growth Programme, whether it's adding rooms, whether it's closing and combining hotels, we're able to do that with the estate control we have over our estates as well, to us to optimise profitability, cash flow by cash flow.

Yeah, and Joe, I suppose just to close that out, I mean, to Hemant's point, we're expecting the supply side to remain quite constrained for this year. The macro environment is likely to stay reasonably challenging, but the strengths of our brand and the commercial initiatives that I talked about, we believe were well placed. Thank you. Thanks, Joe.

Thank you. This concludes our Q&A session today, so I'd like to hand back to Dominic for closing remarks.

Thank you, Becky. Thank you all for your time today. We feel, as you can see, we feel good about the progress we're making overall as a business. Any follow-up questions, you know where we are. Please do reach out. And other than that, I say happy new year to everyone and thanks for your time.