Whitbread has swooped on 21 Express properties in the UK to convert to its Premier Inn badge. And the non-cash deal with pub group Mitchell & Butlers, valued at £78m, may be followed by more transactions.
M&B still has its Innkeeper's Lodge chain and it said that this 80-plus chain is among the "non-core" assets where it hoped to "create additional value".
In addition to the 1,250 Express rooms, there is planning permission in place to add a further 200 rooms on the existing sites. As part of the refurbishment to Premier Inn, each site will have a restaurant added that can produce hot food.
Whitbread is handing over 44 pub restaurants to M&B as its half of the asset swap. Like the hotels, the EBITDA from these was £9m.
Whitbread said the disposed pubs were unsuitable sites on which to build a Premier Inn and it leaves the company with just 51 sites which are standalone pub restaurants. All are intended to have a Premier Inn added.
The conversion of the Express units will cost £18m but will give Whitbread a head start towards its planned 4,000 room additions in its 2008 to 2009 financial year. And it is a significant blow to the ambitions of InterContinental which is number three in the UK budget hotel market after number one Whitbread and number two Travelodge.
On the figures in TRI Hospitality's Budget Hotels UK 2008 study, Express will fall back to double figures in property number terms.
If Premier Inn adds the 89 Innkeeper's Lodge units it would further cement its market share position, which, prior to the Express deal, stood at 37%. Innkeeper's Lodge has 2,698 rooms but Whitbread would undoubtedly look to exploit the land bank and raise this figure significantly higher.