The Premier Inn owner Whitbread is to cut 1,500 jobs in the UK and shut more than 100 struggling restaurants despite announcing a significant rise in returns to shareholders.

Whitbread, which runs 850 hotels in the UK and has the sector’s biggest brand, Premier Inn, said it was starting a consultation on the cuts on Tuesday and that it would seek to find alternative jobs for those affected.

The move is part of a £150m three-year cost-cutting drive that will slim down its 37,000-member workforce. It has also begun a process to sell 126 restaurants.

The job cuts are in stark contrast to buoyant figures delivered to the City on Tuesday. The company’s sales rose 13% to nearly £3bn in the year to 29 February, and adjusted profit before tax climbed 36% to £561m.

Whitbread raised its final dividend for each share by 26% to 62.9p and was planning a further £150m share buyback. Its shares rose 0.5% on the news.

Dominic Paul, the chief executive, said demand had been slower in the seven weeks to 18 April, partly because of the earlier timing of Easter.

He added that midweek room bookings by business travellers had been “really resilient” while weekend demand had not been as strong, which meant total hotel revenues were 1% behind the full-year results.

Paul said there was still strong demand for rooms this summer from those attending events such as Taylor Swift concerts and the Goodwood motor sports festival in July.

The company’s summer holiday bookings are also ahead of last year and some coastal towns, such as Newquay, have sold out early.

The company has embarked on a £500m investment plan that includes adding 3,500 new hotel rooms at Premier Inn in the UK to its current 80,000, and building more restaurants inside its hotels. It said 387 of its hotels had integrated restaurants while others had a restaurant next door, run either by Whitbread or another operator.

As part of the plan, Whitbread plans to sell 126 unprofitable Beefeater and Brewers Fayre restaurants, with 21 sales already agreed, but intends to keep 196 mainly larger restaurants adjacent to hotels. It will close 112 restaurants and convert the space into new hotel rooms.

“We are materially bigger than we were pre-pandemic,” said Paul, while other smaller hotel operators had to shut permanently because of the impact of Covid-19 lockdowns.

“With interest rates still pretty high, developers are struggling to develop sites and our competitors are struggling to get new sites. We will have more rooms in our future pipeline in the UK than all of our key competitors put together.”

In Germany, where Premier Inn has 59 hotels, the company wants to become the biggest hotel brand and is on track to break even this year, after a loss of £36m for last year despite sales growth of 62%.