Thistle aims to raise £500m in hotels sale and leaseback deal

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The Independent Online

Thistle Hotels, London's biggest hotel operator, is in talks that could lead to the sale of assets worth £500m.

Ian Burke, the chief executive, said yesterday that the group was working on a "material transaction" to rebalance its hotel portfolio but declined to divulge details.

Analysts said Thistle was likely to seek a sale and leaseback of its portfolio of provincial properties and some of its underperforming London hotels. However, they were divided as to Thistle's motives, which range from returning money to shareholders to making an acquisition, possibly in Europe.

One analyst said: "They may look to rebranding themselves or relaunching the brand," pointing to a move made by Jarvis last year to franchise Marriott International's Ramada name. Thistle ranks just eighth in terms of brand awareness. The news sent the shares up 5 per cent to 139p.

Thistle, which is 46 per cent owned by the Singapore-based Brierley Investments, yesterday unveiled a 28 per cent fall in full-year profits to 30 December. The group felt the effects of last year's collapse in tourism sharply because it has 22 London properties, which generate two-thirds of overall profits.

Mr Burke said he saw an improving trend after the "most challenging market conditions since the Gulf war". He said revenue had recovered from a 22 per cent shortfall in the fourth quarter to a 10 per cent dip in the first eight weeks of this year but remained cautious, refusing to forecast exactly when he saw demand returning.

"For Thistle to see a recovery from the fourth quarter, we need to see more confidence in the international market place, particularly from business travel but also from leisure," he said.

The group relied on the corporate sector for 56 per cent of its room nights last year and 65 per cent of the rates it received. Revenue per available room (revpar), which is a key industry measure of profitability, fell 5.4 per cent during the full year and nearly 9 per cent in London. However, revpar crept up by 3.3 per cent in the provinces, which reflected the strength of the UK short breaks market, Mr Burke said.

Thistle, which reduced its head count by 650 following the 11 September attacks, said it would reduce cash costs of £200m last year by £10m. Pre-tax profits for the full year were £49.1m, compared with £68.2m a year earlier, on sales down 6 per cent to £305.3m. The group held its final dividend at 3.4p, taking the year's payout to 5.1p.