Earnings Transcript for WTB.L - Q3 Fiscal Year 2025

Dominic Paul: 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 5-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. Now starting with our Q3 trading update. The third quarter saw the continued return to more normalized levels of demand in the U.K. And as expected, trading improved throughout the quarter. Total U.K. 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 RevPAR growth. Our U.K. 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 U.K. Our performance has stepped up versus the third quarter. And in the 6 weeks to the 9th of January 2025, total accommodation sales were up 2% and RevPAR was in line with last year. In Germany, current trading during the first 6 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. RevPAR for our cohort of more established hotels was also up 31% to €61. Now a word on costs. There is no change to our full year 2025 guidance. And looking forward to full year 2026, with £50 million worth of cost efficiencies and steps taken to mitigate the impact of the U.K. budget, we expect net cost inflation to be between 2% and 3% on our U.K. cost base of £1.7 billion. 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 U.K. While forward 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 RevPAR and open more rooms, we are confident in our ability to become the country's #1 hotel brand. In summary, we're pleased with our U.K. 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 5-year plan. Our 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 of shareholder returns. Before we move into Q&A, could I please ask you to keep to a maximum of 2 questions each, so that we can get through as many as possible. With that summary, I'll now hand over to Becky to host the Q&A.

Operator: [Operator Instructions] Our first question is from Vicki Stern from Barclays.

Vicki Stern: First one is just on RevPAR, obviously. So Q3 did see a sort of turn for the worst 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 color 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 normalization 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 sale and leasebacks. Just to check in, are you still confident in the cash proceeds? I think you targeted £175 million to £225 million for this year. Yes, how are you feeling about the disposals, and then with that, the headroom in terms of further cash returns?

Dominic Paul: Thanks, Vicki. Happy New Year. Yes, let's take the RevPAR question first. I mean, overall demand is slightly softer in the U.K. 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 in the current trading, accommodation sales up 37%, very, very strong. I mean I would say we're making great progress on our commercial initiatives. It's no coincidence that we've been outperforming the market. So although Q3 started slower, we built our 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 whilst 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 Hemant, do you want to build on that?

Hemant Patel: I mean, yes, just on AGP disposals. So I think the first thing is, yes, we gave ourselves 18 months to 2 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 kind of 9 months or so, and we’re continuing 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, that the range that we’ve talked about, we’re still within that range. And so therefore, we’re overall very happy with the Accelerating Growth program [indiscernible] we’ll talk about that. With regard to capital headroom going forward, we’ll apply the capital allocation framework at the end of the year as we would normally do every 6 months or so, and then we’ll see where we’re going to get to.

Operator: Our next question is from Jamie Rollo from Morgan Stanley.

Jamie Rollo: 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 run rate basis for FY '25. Just wondering if we're reading too much into that? Have you made a profit in Q3?

Dominic Paul: 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 -- 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 to be 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 5 years. So I think it's really good that we got ahead of that very early. And that's one of the things -- the areas that gives us confidence about being able to guide to that 2% to 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 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 2 things combined, coupled with the fact that, obviously, we're seeing the data to support our confidence, does build our confidence about reaching the 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.

Hemant Patel: And 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, but directionally, obviously, the labor costs have gone up more than we were probably expecting before the budget and historically over the last couple of years with minimum wage increases have been roughly 10%. And we are probably talking something similar right now with the National Insurance increase as well. Offsetting that, we have got energy hedges rolling off, which will be either very low, depending on exactly what we’re talking about, low inflationary or deflationary. And then within that, there’s a range of other things in between. But overall, we’re really happy with the 5% to 6% guidance we’re giving. And as Dominic mentioned, we’ve got a very strong cost plan against that. And then finally, just on Germany. I think we talked about breakeven run rate. We talked about profitability run rate. I think just to define what we mean by that. Over the second half of this financial year that’s closing and the first half of next financial year, so that 12-month period, we would expect to be making profit in Germany. So I think that’s our definition of being on that run rate to breakeven to profitability in fact, backed by the fact that, actually as Dominic says, we’re getting more and more confident in our Germany business.

Operator: Our next question is from Richard Clarke from Bernstein.

Richard Clarke: Just a couple from me. I guess if we look at your reiteration of £300 million PBT improvement over 5 years, and if we assume that the budget impact was somewhat unexpected when you announced that. And you've just said, 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 have less supply growth or better RevPAR 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 levers you're thinking about in the U.K. as well?

Dominic Paul: 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 shops over the years, and we are very good. And one of the benefits of being a vertically integrated business is we have a lot of levers at our disposal to help us do that. So we do feel confident that over time, over that 5-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 5-year plan, we obviously have to build in contingencies and safety belts, because we never quite know what curveball is going to come in. So 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. We are accelerating some of our automation work, for example. It's clear that 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 benefit of that absolutely immediately. But over time, and particularly within a 5-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 5-year plan number that we would pay out. Just the second part of your question, Richard, on Germany. I mean, I'll 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 relatively low level, nowhere near where we are in the U.K., but building nicely. And Erik, 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 U.K., and helping it stand out in the marketplace. So we're seeing some nice pickup in 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 U.K. market and the German market, how Germany acts in events, for example, how do you trade things like Christmas markets. One of the reasons why we performed 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 different position in Germany versus the U.K. 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 U.K., 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 U.K. 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 U.K., whereas in Germany, the strategy we've now put together is working really well and really nicely and helping us build that momentum.

Hemant Patel: 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 million to £40 million of efficiencies. We’ve ended – we’ve taken that up twice through the year to £60 million now. You’ve seen we’ve been able to react. And we’ve given further guidance over the next 5 years of £250 million over 5 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 the £50 million, and we haven’t stopped yet. So as Dominic said, we’re prudent with our guidance. We’re still continuing to look for further cost saving initiatives. We’ve shown this year that we’re able to accelerate, increase and find new initiatives. I’m sure we’ll be able to do the same thing as we go through next year as well.

Operator: Our next question is from Tim Barrett from Deutsche Numis.

Tim Barrett: I had a couple of questions on the top line, please. Firstly, I don't know if we talked about the December, January exit rate and then 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 modeling F&B. So could you say how many of the pub restaurants have now gotten 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?

Dominic Paul: Tim, I'll take the second part of your question and partially answer, 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 program, our message is we're bang in line with where we want to be at this stage of the program. We updated much more thoroughly on that 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 closed to the wider public, and we only serve our hotel guests prior to them converting those spaces into restaurants while we build new food and beverage spaces. So that's the 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. Just a little bit of color just to add. We're now at the stage, I think, when we talked in October, we talked about the planning permissions that we have put in and received. Obviously, we've had more planning permissions in. We've received more positive confirmations on planning permissions since then. We haven't set 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 some of the new food and beverage spaces. And we've got a number that are already opened. I've stayed in a few of those hotels over the past few weeks. I've experienced the new food and beverage areas. They're really good. Remember why we're doing this. We're doing it for 2 reasons

Hemant Patel: Yes. And Tim, there’s not much really to add on AGP 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. Just to remind you that we expect that from this year, over the next 5 years, we’ll see £100 million improvement from the Accelerating Growth Plan. There’s a reversal of the £20 million, £25 million impact. And then there’s the impact of the extension rooms that are coming in as well as the about £30 million coming from the removal of the loss from those loss-making restaurants that we talked about as well. To your first question in terms of December, January exit rate, yes, I mean most of the impact in December, a lot of that for the market was the 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 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 around 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 business trips over the next couple of months. We would have seen that this time last – it would be last week or this time last year. And hence, there’s a phasing difference. So that’s the main difference. That’s what’s happening there. But obviously, for us, we’re really happy with the commercial program we put into place has been really positive. 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 beating the market in terms of RevPAR. And across the 5 – it’s 6 weeks of performance, but we’ve got 5 weeks of market data, we extended our growth versus the market. So on RevPAR against the market as well as accommodation sales. So very happy that for us, the commercial program is making a difference, and that made a difference in December. But obviously, there is this phasing impact, as you know.

Operator: Our next question is from Alex Brignall from Redburn Atlantic.

Alex Brignall: The first one, just -- it's a bit of a technical one. Just on your -- the covenants. Obviously, you've done a big investment program on the restaurants, which I presume you spoke to all of your creditors on. Could you just talk about how that plays into the covenants that we look at? Because you're obviously not thinking of the original investment-grade limits that you have on FFO as it relates to this investment phase. And then the second one is just on sale and leasebacks and how you think about them. Obviously, before we had to deal with the new accounting, sale and 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 sale and 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 sale and leasebacks?

Hemant Patel: Yes. I mean there’s no impact from the restaurants on any covenants that we have as we go through the exits of them. Depending on exactly what you’re talking about, we have them – we have various – well, actually, we don’t have any debt covenants on our latest set of bonds, are the ones we refinanced 5 years ago or 4 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 sale and leaseback, the way we think about sale and leasebacks, clearly, we’re very aware of the accounting impact of them. 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 the long-term returns as well that we make. So when we think about sale and leaseback, 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’re going to making in order to generate the most cash flow over the long term for investors. So that’s a primary concern. Clearly, we’re 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 decision for returns.

Operator: Our next question is from Estelle Weingrod from JPMorgan.

Estelle Weingrod: Just two questions. Could you provide perhaps just a few more words on what you can perceive of the U.K. consumer? I mean, 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 RevPAR growth 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 U.K.? Do you think this could weigh down pricing?

Dominic Paul: Estelle, I didn't catch the last part of the question. Could you just repeat that?

Estelle Weingrod: Yes, the second question was we heard about a potential tax for the hotel, the hotel tax has been mentioned for the U.K. There were a few press articles in the last few days. Have you seen?

Dominic Paul: Yes.

Estelle Weingrod: Yes. Great. Just to have your view on this one and whether or not this could weigh down pricing.

Dominic Paul: Yes, got it. Thank you. I mean, in terms of the outlook for the consumer, I mean, as I think I said at the beginning, we all see the STR 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 booking 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 – we’ve seen more normalized levels of demand in the U.K. 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 RevPAR, not just in terms of occupancy and core pricing, but actually in terms of 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 stronger performance as we can. In terms of the hotel tax, I mean, 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 would be very hard for the government to do that off the back of the budget. We do have that in some other markets. Some German cities, for example, have 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 will 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 capability to deal with it. But overall, it wouldn’t be overly helpful, but we don’t think that the government has got any firm plans to introduce something like that.

Operator: Our next question is from Jaina Mistry from Jefferies.

Jaina Mistry: I've got two. The first one is that you've spoken a lot about your commercial program on U.K. like-for-like. And I wondered if you could quantify the impact that it had on RevPARs in Q3? And when do you expect to see peak benefit to U.K. RevPAR or U.K. sales in the coming months? And my second question is a bit more technical. For FY '26, 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 FY '26? And if so, by how much?

Dominic Paul: Jaina, so let me take the first question, and then I'll hand you over to Hemant to take the second question. I mean, I guess -- so no, 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 RevPAR performance is due to the initiatives that we've laid out. I would say that they are -- 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 and months. 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 5 years. And we feel really good about that. The 5-year plan that we've laid out, the core strategic initiatives, the accelerating growth plan, the commercial initiatives in the U.K., 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 real confidence about driving an increase in profitability and returns over the next 5 years. You're right, the commercial initiatives in both the U.K. and Germany are an important part of that. Where we are in the journey on that, I'd still say relatively early in that journey. With a big benefit that we've got in the U.K. 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 checkout offered to customers. We've trialed and are extending rooms with a few, which have 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 -- that you can feel that we've got about our business is because we can see the levers 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 5 years, drive margin improvement, some of the core strategic initiatives that we've got, and build a business of scale in Germany. You put all of that together and this is a really compelling story.

Hemant Patel: Yes, Jaina, it’s not a simple answer in that it’s the like-for-like cost base, the £1.7 billion this year. But obviously, it does depend on exactly when we’ve closed sites, so 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 the sites for next year. Remember, we’ve given ourselves up to 24 months. So some of them could even go into the year after next theoretically, although we hope to have made sales before then. So if you like, we can help you with that separately in detail of your modeling on that. But what I would say is I don’t think it will be hugely material to the overall number, in all honesty, but we can work on it through that with you.

Operator: Our next question is from Joe Thomas from HSBC.

Joe Thomas: A couple of questions. One, just following on from that last one on commercial initiatives. Can you just give us a -- I mean there's a lot that you've been doing. Can you just give a bit more of a flavor 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 RevPAR 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 U.K. right now.

Dominic Paul: Yes. 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 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 are some examples of some of the initiatives that we've got. We believe the benefits of those we will see as we will 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 the 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 beds 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 and 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 helps support us outperforming the market overall. So there are a number of -- and then kind of I suppose the third bucket I would 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 reduce 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 U.K. 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 outperformance is increasing, and that's fundamentally what we're focused on.

Hemant Patel: Yes. Joe, on your second question about supply, I mean, clearly, I won't go through detail, again, you've heard it from me many times that we have a very detailed understanding of supply in the U.K. hotel market by kind of the thousands of different small catchments that we monitor. So we've got a good understanding of supply, we've got a good understanding of how supply is going to move over time as well, because it takes time, obviously, for hotels to be built or for planning permission to be gained and then converting hotels as well. So we've got a good understanding what that might look like. We base our plans on that. Our network planners very much then take the demand that we expect to see in those area by area to fully understand what that might mean for our plans. That's how we get to this 125,000 room target that we have in the U.K. over the longer term, and to the 98,000 rooms that we're going to get to by FY '30, so 2029, '30. And we're still very happy with the work we've done, and nothing has changed our minds, but actually it's going to take some time for supply to kind of come back in to where it was pre-COVID, 2027, 2028, something like that before we see supply come back to the levels it was pre-COVID across the U.K. So we've got that deep understanding area by area, we understand exactly what that might mean for us, how we might want to optimize supply in that area, whether that's extensions, including the Accelerating Growth program, 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 state as well to optimize profitability catchment by catchment.

Dominic Paul: Yes. 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 strength of our brand and the commercial initiatives I talked about, we believe we're well placed.

Operator: This concludes our Q&A session today. So I'd like to hand back to Dominic for closing remarks.

Dominic Paul: Thank you, Becky. Thank you all for your time today. 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’d say Happy New Year to everyone, and thank you for your time.