Whitbread planning £1.5bn hotel selloff - report

(Sharecast News) - Premier Inn owner Whitbread is reportedly planning to sell a swathe of hotels to unlock £1.5bn for shareholders. According to The Times, the company is expected to announce plans later this week for the sale and leaseback of one in five of the freehold hotel properties it currently owns outright, following a strategic review of its business model.

About 50% of Premier Inn hotel freeholds are owned by Whitbread. It was understood that this will be reduced to 40% under changes to the company's five-year plan, due to be unveiled alongside its annual results on Thursday.

The move will turn Whitbread into a majority leasehold business for the first time since Premier Inn was founded in 1987. City sources told The Times that the move, coupled with other initiatives to boost cashflow, would release about £1.5bn that could then be returned to shareholders.

The decision to switch to what is being dubbed a "capital lighter" model follows a sweeping review of Whitbread's business model.

The Times said the move is likely to be welcomed by Whitbread investors. The company's share price has fallen 25% since October after it revealed a sharp increase in its annual business rates bill following changes to the way the levy is calculated.

After initially flagging a £50m hit, Whitbread revised the increase to £35m in January over the coming fiscal year.

Russ Mould, investment director at AJ Bell, said: "It is increasingly common for hotel operators not to own the buildings in which they operate, and for Whitbread it would mean a big cash injection and a pot of money that could be returned to shareholders.

"Whitbread has found life harder going in recent years, particularly in the UK, and needs to do something to win back the market's support."

At 0855 BST, the shares were up 2.9% at 2,531p.