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Whitbread denies Spirit deal will lead to break-up

28 July 2004
Whitbread denies Spirit deal will lead to break-up

New Whitbread chief executive Alan Parker has brushed away calls to break up the company following its £505m purchase of the Premier Lodge budget hotel chain from Spirit last week.

Parker said that nothing should be read into the purchase of the group and that it did not signal plans to sell off any part of the business.

"This was a specific opportunity to expand one of the best-performing sectors of our business," Parker said. "Premier Lodge was always a target for us. It has been on our radar for a couple of years."

Parker also denied claims that Whitbread had paid too much for the chain. The acquisition works out at about £54,000 a room, compared with a development cost of between £35,000 and £40,000 a room for new Travel Inns.

He said: "This was not an ‘either or' deal. We will continue to build. This was a once-in-a-generation opportunity to buy budget hotels in great locations."

Parker said the group would add 1,500 new budget hotel rooms to the portfolio every year, reaching a target of about 40,000 rooms in the next five to six years.

Whitbread has already started the process of changing the name of its 461-strong portfolio of budget hotels to Premier Travel Inn. Parker said he hoped the move would finally end customers' confusion between Travel Inn and its rival, Travelodge.

Whitbread also bought 19 co-located pub restaurants for an extra £31.2m from Spirit, which it will rebrand as Brewers Fayres by March 2005.

The deal

  • £505m - cost of the 141 Premier Lodge hotels, including nine in the pipeline
  • £31.2m - cost of the 19 co-located pub restaurants
  • £32m - how much Whitbread will spend on completing the nine new hotels
  • £8m - how much Whitbread expects the integration of Premier Lodge to cost
  • 10% - the return on investment Whitbread expects within two years
  • £29m - Premier Lodge's pre-tax profit last year

Source: Caterer & Hotelkeeper magazine, 29 July 2004

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