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Marriott sell-off complete

27 April 2006

Whitbread's final separation from Marriott, worth almost £1b in total, has received a warm welcome from analysts and industry commentators.

On Friday (21 April) the leisure giant announced the £951.4m sale of 46 Marriott hotels to the Royal Bank of Scotland (RBS), bringing to an end its involvement in the luxury hotel sector.

Whitbread transferred the hotels into a joint venture with Marriott in March 2005 after deciding to exit the four-star hotel market and relinquish its master franchise for Marriott in the UK.

It anticipated raising £1b from selling the hotels within two years. It received £710m last year from Marriott and now gains about £237m from the RBS sale.

Chief executive Alan Parker said he was pleased with the deal, adding: "We are now in position to return to shareholders the £400m that we previously committed.

"This means that, together with the £400m special dividend last May, we will have returned a total of £800m to shareholders."

Analysts also welcomed the transaction. "It's a deal that works for all parties," said David Bailey, director of TRI Hospitality Consulting, who added that Whitbread had achieved "a pretty good price".

Bailey said the sale enabled Whitbread to focus on its budget Premier Travel Inn brand and to pursue rival Travelodge. Marriott, meanwhile, which will continue to run the hotels for RBS, regains control over its brand in the UK.

The hotels have underperformed against their peers for some years. One industry source said Whitbread's efforts to boost their profitability had been hampered by "the weighty franchise fees it had to pay for a brand it did not own".

The sale more than trebles the portfolio of hotels owned by RBS, which acquired 11 Hiltons and 11 Le Meridien hotels in 2001. It has earmarked £65m to upgrade the Marriott properties over the next five years.

In a separate deal, Whitbread sold RBS a Marriott development site in Leicester for £30m.

By Angela Frewin

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