Whitbread may sell off all of its luxury Marriott hotels in the UK, raising hopes the leisure group could return more than £1bn to its shareholders.
The news sent the group's shares up more than 10 per cent during the day at one point, as investors looked forward to the proceeds of selling its 52 Marriott hotels, which are valued at about £1.1bn. They ended up 69p at 965p, a six-year high.
"The company confirms that it is currently in discussions which may or may not lead to the disposal of some or all of these hotel assets," a statement from Whitbread said.
About half of Whitbread's Marriott hotels were already up for sale following a strategic review unveiled in October last year. This, and the sale of other assets, was part of a plan to raise £800m of capital.
Investors at the time were disappointed that the asset sale did not go far enough, and now Whitbread is looking at the possibility of selling off all its four and five-star hotels and returning cash to investors. It is likely to retain some management contracts that would see it remain in charge of running the hotels.
The Marriott asset sale follows news on Thursday that its rival hotelier, InterContinental, had raised a further £1bn from selling its properties and would give back the proceeds to investors on top of the £1bn it has already paid out.
Sale-and-manage back deals, where the hotel sells the assets to a property investor and continues to run the hotel for a management fee, are becoming popular in the sector. Groups with strong hotel brands believe this type of deal, as well as franchise arrangements, give them better returns than owning hotel properties, which require large amounts of capital expenditure to buy and maintain.
If all the proceeds of the Marriott assets are returned to shareholders, analysts believe it could enhance earnings by 17 per cent and would amount to about 407p per share for shareholders.
Marriott International is considered a likely candidate for buying the UK assets, although they also may be of interest to De Vere, another luxury UK hotel chain.
Selling off the Marriott brand would leave Whitbread with David Lloyd health clubs, a range of restaurant brands including Pizza Hut, Costa Coffee and Beefeater.
Whitbread would also be left with a large budget hotel chain, Premier Travel Inn, which was formed after Whitbread bought Premier Lodge last year in order to merge it with its Travel Inn brand.