CEU Ishr Msci Emu

    For Immediate Release 7 June 2006

                              CHE Hotel Group PLC                              

                                Trading Update                                 

Branded hotel operator, CHE Hotel Group PLC, today issues a trading update
ahead of its half year to 30 June 2006, for which the results will be announced
in the early autumn.

The remodelling and refurbishment programme of our hotel properties, following
receipt of the equity funding in January, continues apace as we strive to
complete as much of the works as possible before the stronger autumn business
period. Projects are now completing on a weekly basis and we are receiving
complimentary feedback from our customers and agents which is beginning to
translate into improved business volumes with expressions of much more to come.

Hotels that benefited from investment in 2005 and have had sufficient time to
make reasonable comparisons to prior year trading periods are all showing
positive revenue growth, despite the softer than expected trading in the hotel
sector experienced in this early part of the year.

In view of the softer market we chose, where possible, to bring forward the
timing of the remodelling and refurbishment programme from that previously
anticipated. As a result on average 5% of our bedroom stock will not have been
available for letting in the six months to June. This together with further
disruption, from works being carried out within hotel public areas, has
resulted in more guests than anticipated choosing to wait until the work is
completed before returning to the hotel. The new sales structure, introduced in
the autumn of last year, took longer to staff up and train than anticipated but
is now showing clear signs of providing us with better coverage within all
market sectors of our business.

As a consequence our half year results, when announced, will fall well below
our expectations by approximately �1 million (which had already taken account
of the fact that energy costs have risen by 18% and the recommencement of
franchise fees payable to Choice Hotels International).

Other parts of our business, being our Continental European hotels and
franchising, are operating as anticipated. The New Connaught Rooms, our multi
purpose conference, meetings and banqueting facility, is performing much
better, even though it is also undergoing some refurbishment.

The new Sleep Inn in Derby, our premier limited service product, which opened
in January, is exceeding all expectations and four other properties are under
construction and should all be open by the spring of 2007. We now have a
development director in place to roll out the Sleep Inn expansion programme.
Three properties are awaiting final planning approval and we are already at
various stages of the approval and planning process on more than a dozen other
projects.

The strengthened management structure is having an immediate impact on the
growth of the business. Michael Prager, who has a successful track record in
revenue development, joins full time on the 19 June as Chief Operating Officer
and has been able to work part time with us for the last two months. The new UK
operations director joined us on the 8th May.

The outlook for the stronger second half of the year remains in line with our
expectations although as a result of trading in the first half, the shortfall
will be carried into the full year result. Booking patterns for July and
thereafter are showing positive signs as the works are being completed in the
hotels. We have recently signed a number of large contracts with new customers
and volumes of business are increasing steadily and significantly with our
larger clients and agents. The sales structure is now operating as planned and
the new management team will have fully settled in, obviously assisted by being
able to sell into an improving portfolio of properties.

The Board remain confident that as we continue to make the transition from
being a defensive survivor to being a more aggressive force within our chosen
area of focus that appropriate management action is being taken to secure a
sound platform for future profitable growth. This will be seen as we progress
through the traditionally stronger second half of the year and on into 2007 and
thereafter.

                                     ENDS                                      

For further information, please contact:

CHE Hotel Group plc 020 8233 2001

David Cook, Chief Executive

Paul Mitchell, Finance Director

KBC Peel Hunt 020 7418 8900

Jonathan Marren

Waughton 020 7796 9999

Robin Hepburn

Notes to Editors:

CHE Hotel Group PLC

CHE (Choice Hotels Europe) operates 58 owned, leased or managed hotels in the
UK, France, Germany and Belgium. In addition it holds the Master Franchise for
Choice Hotels' brands across Europe, excluding Scandinavia, amounting to 278
franchises in 11 countries. It also operates the New Connaught Rooms conference
and banqueting suite close to London's Covent Garden.

Choice brands include Comfort Inn, Quality Hotel, Clarion Hotel and Sleep Inn.

A placing and open offer raised �18.6m, in January 2006 which is being invested
in upgrading the Group's hotels and accelerating the development to Sleep Inns,
its premier limited service brand. A further �0.8m was raised from shareholders
in January 2005.

The CHE management team has considerable experience in the hotel sector. David
Cook, the Chief Executive, joined from Millennium & Copthorne Hotels, where he
was Group Finance Director; Paul Mitchell, Finance Director, was formerly Vice
President of Financial Planning and Control for Europe, Middle East and Africa
at Intercontinental Hotel Group. Michael Prager has held senior positions in
Utell International, Intercontinental and Radisson Hotel groups. Peter Cashman
is a seasoned hotelier and been a Director of the Group for 20 years.

                                       

END

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