Whitbread Grabs 15 German Hotels Despite £725m H1 Loss

Main Photo: The existing Premier Inn Dresden City Zentrum

Date: November 2020

Location: Germany

Name: The newly acquired hotels currently operate under the Centro, Ninetynine and Fourside brands….will rebrand to Premier Inn in early 2021

No. of Keys: 2,150 on this deal, the acquisitions will increase Whitbread/Premier Inn’s Germany portfolio of both open and pipeline hotels to 68 with 12,000 beds.

Seller: Hamburg based Centro Hotels. Centro had offered Whitbread the whole of its 53-strong portfolio, largely in Germany but with properties in the Netherlands and Austria. Having selected those with the best fit for Premier Inn, in strong locations, “we ended up with our group of 15.”

Buyer: Premier Inn owner Whitbread is to acquire 15 more hotels in Germany, despite the Covid headwinds affecting the hospitality sector and the £725 million pre-tax loss stated in its interim results, which were published yesterday.

The acquisitions will increase Whitbread/Premier Inn’s Germany portfolio of both open (21) and pipeline hotels to 68 with 13,000 beds.

The newly acquired hotels currently operate under the Centro, Ninetynine and Fourside brands. Eight are already open and seven are described as “pipeline” properties. The acquisition will take Premier Inn’s estate of open and trading hotels to 29. The acquisition is subject to the scrutiny of the competition authorities.

Premier Inn has a 1% market share in Germany compared to its 11% share of the UK market and it says the market in Germany is a third larger than the UK, although it is more fragmented.

The budget hotel segment in Germany represents only 9% of the market, compared to 28% in the UK, because franchise operators have experienced difficulty expanding. It says its vertically integrated model and willingness to invest capital in expansion are a strong advantage, however.

The latest acquisitions involve the transfer of leases from the existing operator and, subject to clearances, the hotels will be part of the Whitbread estate by December.

The total investment will be between €40 million and €50 million which is mainly attributable to rebranding which will occur in early 2021. The company said that it has so far committed €800 million to the market in Germany. “Given the scale and characteristics of this market and despite the significant impact Covid-19 has had on the sector we remain focused on continuing our expansion in Germany and delivering on our ambition to be the number one budge hotel operator in that market.”

Whitbread said its H1 performance was in line with expectations and reflects the closure of most of its businesses during lockdown from the end of March. It reopened 97% of its estate by the end of July. The firm said that the current fast-changing Covid-19 situation means “near-term visibility remains limited”, but says it is well-placed to capitalise on “enhanced structural growth opportunities”.

The firm made a £1 billion rights issue in June and had access to £600 million under the UK government’s Covid Corporate Financing Facility.

Price: Between £40m and £50m, including refurb costs. The properties are all leasehold, so acquisition costs are limited. “The majority of the capital spend is our refurbishment cost – we’re taking the lease obligation away from the company, we’re signing a new lease with the landlords.”

Price per Key: TBA

THPT Comment: Good to see Whitbread making progress on their inventory in Germany..a way to go before it catches up with the UK, but sensible to diversify the market-place.

First Seen: Real Asset Insight

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