Whitbread 'in talks to buy Travelodge and Little Chef'

Whitbread is understood to be in talks with Compass to buy Travelodge and Little Chef.

The group, which already owns Travel Inn, is thought to be keen to expand its presence in the growing budget hotel sector.

Compass reportedly wants to sell the roadside chains as a package.

But sources close to Whitbread say the group is not prepared to pay a premium for the names, as it would rebrand the hotel chain Travel Inn if it was successful in its bid.

Whitbread is reported to be working with Deutsche Bank to analyse the potential of the businesses, particularly how much custom Travelodge generates for Little Chef, to help it assess if it wants to buy both chains.

It is also assessing if Travelodge could add value to its existing restaurant chains Beefeater, Brewer Fayre and Brewsters.

The group is currently growing its Travel Inn business organically, with plans to expand from 16,000 beds to more than 20,000 in the next couple years, but an acquisition would speed this up.

The move would also give it an enlarged share of the estimated 50,000 budget hotel rooms in the UK if it added Travelodge's 220 hotels to its portfolio.

Whitbread's occupancy rate currently runs at around 85% of capacity at weekends and 90% during the week, and the acquisition would help it meet the growing demand.

Whitbread would today not be drawn on the speculation, saying it did not comment on market rumours.