Whitbread to consolidate lead in London with £100m expansion of Premier Inn

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The Independent Online

Whitbread, the hotels and leisure group, is to invest £100m in an expansion of its Premier Inn brand in London, adding 1,200 rooms across six hotels to its operations in the capital.

Whitbread said yesterday it was spending £18.5m buying three hotels in Westminster, Kensington and the City from the Real Hotel Group. It will spend a further £12.5m refurbishing the properties.

In addition, the company unveiled plans to build three new hotels in Ealing, Waterloo and the City, with developments worth around £70m taking into account an immediate cash investment of £6.5m and the future value of lease commitments.

The deals will take Whitbread's presence in London from 5,300 to 6,500 rooms, increasing the number of hotels it runs from 44 to 50. Alan Parker, the company's chief executive said he expected to announce an extra expansion within the next 12 months, likely to add another 2,000 rooms to the total.

Whitbread is already the largest hotel operator in the capital, but is keen to expand aggressively in the run-up to the 2012 Olympics and has also been offered first right of refusal should the Real Hotel Group decide to sell one of a further 12 sites.

"The capital is an important focus for Premier Inn and there is an increasing need for high-quality affordable accommodation," Mr Parker said. "Our further pipeline will position us as the largest hotel chain in London with at least 8,500 rooms before the Olympics."

However, Whitbread's London expansion comes amid fears of a tourism slowdown in the capital, as the number of visitors from Asia and the US in particular slows.

According to Visit London, the group that promotes tourism to London, foreign visitor numbers rose 12 per cent to 15.6 million in 2006, the last year for which figures are available. But it has called for additional spending to market the capital overseas as a global economic slowdown reduces foreign travel.

The strength of sterling against the dollar is seen as a particular deterrent for American tourists considering the UK as a destination, though Whitbread said European business was compensating for this.

Geoff Collyer, an analyst at Deutsche Bank, said he did not expect Whitbread's investments to change plans for further share buybacks this year.