Hotel and restaurant group Whitbread has asked landlords for a 50% rent cut for the next three months as pandemic restrictions continue to hit trading.
The owner of the Premier Inn, Beefeater and Brewers Fayre brands said in a letter to landlords they must “share some of the pain” of lockdown.
Britain’s biggest hospitality group, with 800 hotels in the UK and Ireland, had already warned of big job cuts.
Landlords and commercial property investors will likely resist rent cuts.
They have seen their own finances depleted by rent cuts and restructurings across the hospitality sector. Unlike many rivals, Whitbread had continued to pay rent in full.
Andrew Jones, chief executive of LondonMetric, a FTSE 250 property company with a Premier Inn tenant, said Whitbread has “behaved impeccably” towards to landlords “and so we will look to help them with their cash flow whilst the business recovers”.
But he added: “A permanent transfer of value from our shareholders to theirs is not appropriate for a company still valued at over £6bn.
“There are no contractual provisions for landlords to share gains in the good years and so sharing pain in the tough years seems inequitable. After all, you can’t un-sign a contract.”
Deferring rent payments for a period would be more “equitable”, he said.
Laura Lambie, senior investment director for Investec, told the BBC’s Today Programme that the letter, first reported by property news publication CoStar, was “worrying from the landlord’s point of view, not just Whitbread”.
A Whitbread spokesperson said that since the start of the pandemic the business “has taken decisive action to ensure that our cost base reflects the low levels of demand”.
The company added: “Throughout the pandemic to date, we have paid our rent commitments in full, even when our hotels and restaurants were forced to close.
“With ongoing government restrictions expected to result in subdued market demand into the first half of 2021, we are now asking our landlords to support us, as other stakeholders have during the pandemic, through a reduction in rent for the December quarter in recognition of the current environment.”
In September, Whitbread warned that 6,000 of its workers could be laid off. The company also scrapped its dividends to shareholders, while directors and senior management took pay cuts. More than 27,000 staff were furloughed under the Job Retention Scheme.
The company recently invested $40m (£30m) in new German hotels which it planned to open by December, despite reporting a £725m loss for the six months to the end of August.
The UK government has extended eviction protection for retailers and restaurants until the end of 2020, and has also renewed a business rate holiday for the current financial year.