Swallow deal boosts hotel sector shares
Whitbread's agreed £578m takeover of Swallow Group could be the spur for further acquisitions in the UK hotel market, observers believe.
Shares in Hilton, Jarvis and Thistle all rose on news of the takeover, which valued Swallow at 390p a share - 41% above its closing stock market price last Thursday evening (18 November).
"The feeling is that some of these guys have been left out in the cold and may have to huddle together for warmth," said Simon Johnson, hotels analyst at broker Credit Suisse First Boston.
Whitbread has vowed to improve revenues and room yields at Swallow, where occupancy is running at 72.8% and average room rate at £58.05. This compares with 76% and £75 at Marriott UK. It also aims to cut costs by £10m a year by 2003. Up to 200 jobs will go at Swallow's head office.
"In terms of the total numbers employed by Swallow, which is about 4,000, we're talking relatively small numbers," said Alan Parker, managing director of Whitbread's hotels division.
But he said his company would be offering Swallow employees the chance of moving to new jobs at Whitbread, where there were suitable opportunities.
by David Shrimpton
Sir Michael Angus will be stepping down as chairman of Whitbread next June. He is to be replaced by Sir John Banham, currently chairman of Kingfisher and Tarmac.
