Leisure group, Whitbread, has acquired the Premier Lodge chain of hotels for £505m from the Spirit Group.

The deal will integrate 132 Premier Lodge hotels with Whitbread’s existing Travel Inn business and form a new brand called Premier Travel Inn.

Consisting of 29,141 rooms in 461 locations, Premier Travel Inn will instantly become the biggest budget hotel business in the UK.

Alan Parker, chief executive, revealed that the similarity of the two brands was a deciding factor in the decision to acquire Premier Lodge.

He said: “Following extensive due diligence, we have developed detailed integration plans to enable us to deliver the improved profitability and synergies which have been identified.

“The acquisition represents a step-change in our scale and presence in this attractive and growing sector.”

Whitbread will pay the transaction in cash and the company expects the return on the total investment to exceed 10 per cent by the end of the 2006-2007 financial year.

Premier Lodge reported pre-tax profits of £29m for the year ending 31 December 2003, while Travel Inn contributed £74m of Whitbread’s operating profit during the year ending 4 March 2004.

Whitbread also revealed that, as part of the Premier Lodge deal, it has acquired 19 pub restaurants from Spirit for a further £31.2m.

All pubs are situated adjacent to Premier Lodge hotels and will be integrated into Whitbread’s Brewers Fayre brand. Details: www.whitbread.co.uk