HVS Hospitality Enews Europe - W/e 28 June 2002

Catering firm Compass Group has announced that it is to sell its Travelodge budget hotels and its 397 Little Chef restaurants after a strategic review concluded that neither business was essential to the group's future plans, which are to focus on its food outsourcing business. Compass inherited the Travelodge portfolio following its demerger from Granada in 2000, and there are now more than 220 hotels, a total of some 12,000 rooms, spread across the UK and Ireland. The auction process, which is expected to take around four months to complete, comes a mere six months after Compass Group revealed plans to franchise the Travelodge brand in continental Europe. It was reported then that two hotels would be opening near Madrid and Barcelona in summer 2003. Moreover, Compass signed up Jarvis Hotels and First Motorway Services as the first two franchisees of the brand in the UK.

The management of Ascot racecourse in Berkshire have requested planning permission for a £180 million redevelopment designed to make the racecourse the best in the world. A 190-room, four-star hotel features as part of the plan, and it is expected that work will begin in autumn 2004 and finish in time for the Royal Ascot meeting in 2007. Meanwhile, certain reports suggest that Cliveden House in nearby Taplow might become the property of Von Essen Hotels. US property fund LF Strategic Realty Investors, which is owned by Lazard investment bank, put its 65% stake in the luxury 39-room, five-star hotel on the market at the end of May. Von Essen Hotels, which owns six country house hotels in the UK, declined to comment on the rumours and added that 35 was the upper limit on the number of rooms in any prestigious hotel it might wish to acquire. For its part, Lazard would prefer to see the 65% stake go to another investment bank rather than to a hotel group.

Accor is to look to franchising as a means of extending its presence in the UK to 170 hotels by 2005. In its first such move in the UK, Accor wants to strike a number of multimillion pound deals with established UK operators or foreign management firms seeking a foothold in the UK on all of its brands, with the exception of Sofitel. Accor currently operates some 80 hotels in the UK, predominantly under its Ibis and Novotel brands. The Sofitel brand should not feel neglected, however. The 186-room Sofitel St James which opened in London in April is one of 11 new Sofitels, a total of some 3,194 rooms, that are either open or due to open worldwide under an exceptional schedule that will bring the Sofitel portfolio to 160 hotels, a total of some 32,203 rooms, in 53 countries.

Peel Hotels has been busy in the transactions market, purchasing two hotels and selling another. The company, which now owns six of its 18 UK hotels, paid Grace Hotels a total of £9.4 million for the 76-room Avon Gorge Hotel in Bristol and the 39-room George Hotel in Wallingford, Oxfordshire. Peel Hotels has been managing both properties for several years and plans to add another ten bedrooms and a leisure complex to the Avon Gorge Hotel. Peeling off from the company is the 71-room Spa Hotel in Harrogate, North Yorkshire, which for £2.4 million has become the sixth UK property of boutique hotel chain Hotel du Vin. It is expected that the deal will complete in September, at which time the hotel will close for a six-month refurbishment, work which will also reduce the room count to 45. The purchase and the refurbishment work are being financed by a £6 million loan from the Royal Bank of Scotland.

Choice Hotels Europe (CHE Group) has concluded its first sale and leaseback deal after BAE Systems Pension Funds Trustees paid £3.75 million for the Quality Clock Hotel Welwyn, in Hertfordshire. CHE Group will take an initial 35-year operating lease on the 96-room property, which was one of four Quality-branded hotels that CHE Group put forward last month for sale and leaseback. CHE Group hopes that the four hotels will together raise a total of £21 million, money which it will use to repay bank loans.

In his address to shareholders at their general meeting NH Hoteles' President Gabriele Burgio announced that group sales to the end of May were up 15% on last year's comparable figure to €325 million. He added that occupancy across comparable hotels for the first five months of 2002 was running at 66%, yielding RevPAR almost identical to last year's figure, at approximately €63. On a separate issue, Mr Burgio noted that all of the company's hotels should have been rebranded as NH by the end of the year, with the exception of those in the recently acquired Astron Hotels chain. Rebranding here would only take place if a market study confirmed the suitability of such a plan.

Hoteles Catalonia is to have its fifth hotel in Madrid, a €21 million 110-room, four-star property which should be operational in 2003 or 2004. Opening a little sooner is the 304-room, four-star Playacanela hotel on Canela Island (Huelva) in southwestern Spain, which Hoteles Playa will be unveiling next month. The company, which operates 16 hotels in Spain, will be opening another three hotels in the Huelva region over the next few years. Elsewhere, the Urbem construction company will make its first venture into the hotel sector by investing €35 million over the next three years in the development of two hotels and a spa resort in Valencia.

Luxembourg-registered investor and hotel operator Orco Property Group is set to open the luxury Residence Isabella aparthotel in Budapest in August having invested a reported €4 million in its conversion from the Isabella King Residence Hotel. The property, which has 38 apartments, will complement Orco's 70- room, four-star Andrassy Hotel in the city. Meanwhile, at the end of this month the Bosnian Federation Privatisation Agency will announce a tender for the sale of the 354-room Holiday Inn in the Bosnian capital Sarajevo. The asking price has been set at €20.5 million, and the successful purchaser will be obliged to pay cash. Further east, the holding company Metalloinvest has set a December date for the demolition of the 336-room Hotel Minsk in Moscow. The hotel will be replaced by a US$60 million hotel and office complex, which is set to be completed towards the end of 2005.

A Kuwaiti consortium calling itself International Financial Advisors (IFA) has become the latest party to plant its flag on the €3 billion man-made Palm Island resort currently under development in Dubai. IFA, which comprises the Kuwait Real Estate Company, its compatriot the International Finance Company, and United Investments Portugal (UIP), has invested US$45 million in three sites, two of which will accommodate hotels, on The Palm Jumeirah half of the development. This venture will assist UIP in its quest to create five-star resorts in the Middle East and Europe to match its Pine Cliffs Resort on the Algarve in Portugal. Elsewhere in the Middle East, a group of unnamed US investors is reportedly poised to make a multimillion dollar acquisition of ten hotels in Israel, some of them reportedly close to bankruptcy and the bulk of them located in Tel Aviv and Jerusalem.

Gresham Hotel Group has responded to press speculation of recent weeks by confirming that it is in preliminary talks with a third party which may or may not result in an offer being made for all or part of the company. Although Gresham did not name the third party, reports suggest that it is a consortium of Irish investors headed by Nigel McDermott, a founding director of stockbrokers NCB. The reported aims of the consortium are to rebrand Gresham as a fourstar city centre hotel chain and to dispose of the Lyric hotels division and the 188-room Gresham Hyde Park in London. If the rumours of a management buyout prove to be unfounded, then Mr McDermott's consortium will face a challenge for supremacy from Euro Sea Hotels (ESH), which was last week granted an extraordinary general meeting to air its plans. Contrary to recent events, which included the removal by ESH of three Gresham directors, the Israeli company, which holds a 28.25% stake in Gresham, is not looking to overthrow the board but wants to develop and grow the company.

Esporta, which operates 41 fitness clubs throughout the UK and in continental Europe, is reportedly looking to Whitbread to ride up and save it from private equity firm Duke Street Capital Leisure Investments. Duke Street, which has a 25% holding in Esporta, launched a hostile £133 million takeover bid at the end of May, a bid which Esporta felt undervalued the business. Whitbread, which last month offloaded Curzons Management Associates, the operator of its 12 Curzons fitness clubs in central London, may be tempted most by Esporta's upmarket Riverside clubs.

The share price responded strongly to the company's announcement of a bid from a third party.

Deutsche Bank raised its rating on the stock to 'Strong Buy' from 'Market Perform', claiming that Thistle is highly undervalued in both earnings and underlying asset value.

The share price was kept buoyant by news that Jack Petchey had taken his stake to 10.54%.