CEU Ishr Msci Emu

    CHE HOTEL GROUP PLC                              

For Immediate Release 31 October 2006

CHE Hotel Group PLC ("CHE") is pleased to announce that it has entered into an
agreement (the "Termination Agreement") with Choice International Hospitality
Services Licensing Co., B.V. ("Choice") for the early termination of the master
franchise agreement covering continental Europe ("European MFA").

Introduction

The European MFA was originally entered into on 30 January 1998 and granted CHE
the exclusive right for an initial ten years to grant hotel franchises in the
continental European territories comprising Germany, France, Monaco,
Liechtenstein, Luxemburg, Andorra, Spain, Italy, Portugal, Austria,
Switzerland, Belgium and the Netherlands under various Choice Hotels
International Inc. ("CHI") brands and on a non-exclusive basis in the Czech
Republic, Poland, Russia, Hungary, Greece, Romania, Bulgaria, Malta, Cyprus and
Turkey.

The consideration for the initial ten year term of the European MFA was an $8
million fee payable by CHE over eight years and the agreement included an
option to extend for ten years for a renewal fee of US$8 million, subject to
certain conditions. Under a waiver agreement dated 21 December 2000, CHE was,
inter alia, released from its obligation to pay the remaining $5 million
initial fee payable together with all franchise fees, marketing fees, and
application fees becoming due and payable by CHE at any time until 31 December
2005. Thereafter, the full continuing payment obligations were to resume.

In the year to 31 December 2005, the European MFA contributed revenue of �3.9
million (compared to the �71.9 million for the CHE Group) and operating profit
(before un-allocated administration and finance expenses) of �0.6 million
(compared to �7.0 million for the CHE Group). As a result of the
re-introduction from 1 January 2006 of the franchise fees payable under the
European MFA which are anticipated for the year to 31 December 2006 to be
approximately �0.9 million, the Directors have decided that it is no longer
commercially viable to continue with the European MFA and have therefore agreed
its early termination.

Details of the Termination Agreement

As part of the Termination Agreement, it has been agreed that CHE and/or its
affiliates will dispose of the franchise businesses operated by it related to
the Europe MFA to Choice. The book value of the assets being disposed as at 30
June 2006 was �1.29 million.

For the businesses relating to Germany, Liechtenstein, Luxemburg, Italy,
Austria, parts of Switzerland, the Netherlands, Czech Republic, Poland, Russia,
Hungary, Romania, Bulgaria and Turkey, a new special purpose vehicle (SPV)
(called Choice Hotels Franchise GmbH) has been formed and the assets, namely
working capital, office equipment and computers, employees and contracts
associated with the franchise side of these businesses, including the lease of
the office premises, have been transferred to that SPV. The disposal will be
achieved by Choice acquiring the entire issued share capital in the SPV for a
consideration based on a net asset value of that SPV at the time of disposal,
subject to a maximum consideration of �0.3 million to be settled in cash.

For the businesses relating to France, Monaco, Andorra, Spain, Portugal, the
remaining parts of Switzerland, Belgium, Greece, Malta and Cyprus, CHE's
affiliate, Friendly France S.A. will dispose of the business, assets, employees
and contracts directly to a newly incorporated French company established by
Choice for the purposes of that acquisition for a consideration based on a net
asset value of the businesses at the time of disposal, subject to a maximum
consideration of �0.8 million to be settled in cash.

The Termination Agreement is expected to be completed by 31 October 2006.

Effect on CHE

The Company currently operates 60 owned, leased or managed hotels, operating in
the limited service and midmarket full-service segments, currently under the
Sleep Inn, Comfort, Quality, Clarion and Stop Inn brands. Two hotels are owned
by the Company, 47 are leased and the remaining 11 are operated on a managed
basis. The Company also operates the New Connaught Rooms, located close to
Covent Garden in London, which offers conferencing and banqueting facilities.

Under the European MFA and a separate master franchise agreement for the UK and
Ireland (which is unaffected by these arrangements),As at 30 June, CHE had
individual franchise agreements for a total of 273 independent hotels,
excluding the Company's owned, leased or managed hotels that are also within
the franchise network under the above brands.

The European MFA covered 201 independent hotels and therefore following
termination CHE will now have remaining individual franchise agreements for 72
independent hotels under the remaining master franchise agreement for the UK
and Ireland.

CHE will continue to operate 8 hotels in Germany and a further 8 hotels in
France and Belgium as a franchisee of Choice.

The proceeds from the disposal will be used for general working capital
purposes.

In addition, as a consequence of this transaction CHE will be changing its name
and will seek shareholder approval for this change at the appropriate time.

Peter Catesby, Chairman, said, "We are pleased that we were able to come to a
mutually beneficial agreement with Choice Hotels International, which enables
us to maintain a strong presence in Europe while focusing on significant growth
opportunities in the United Kingdom."

"This is a win-win for both Choice Hotels International and CHE," said Joseph
Squeri, President and Chief Operating Officer of Choice Hotels International.
"The transaction enables Choice Hotels International to continue its strategy
of more closely directing the growth of our franchise operations throughout
continental Europe, while maintaining a strong relationship with CHE Hotel
Group PLC as a major franchisee of Choice Hotels International in continental
Europe as well as our master franchisee in the United Kingdom and Ireland."

For further information please contact:

CHE Hotel Group Plc

Michael Prager, Chief Executive 020 8233 2001

Paul Mitchell, Finance Director

Waughton

Robin Hepburn/David Millham 020 7796 9999

KBC Peel Hunt

Jonathan Marren 020 7418 8900

Notes to Editors:

CHE Hotel Group PLC

CHE (Choice Hotels Europe), operates 60 owned, leased or managed hotels in the
UK, France, Germany and Belgium, of which 7 are operated outside of the Choice
Hotel's brands. In addition it holds the Master Franchise for Choice Hotels'
brands in UK and Ireland, amounting to 72 franchises. 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.
The Group also operates hotels under their own Stop Inn brand.

A placing and open offer raised �18.6m net of cost, 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.

The CHE management team has considerable experience in the hotel sector.
Michael Prager, the new Chief Executive, has held senior positions in Utell
International, Intercontinental and Radisson Hotel groups; Paul Mitchell,
Finance Director, was formerly Vice President of Financial Planning and Control
for Europe, Middle East and Africa at Intercontinental Hotel Group. Peter
Cashman is a seasoned hotelier and been a Director of the Group for 20 years.
David Cook will remain as an Executive Director until he retires in November
2006.



END

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