Budget hotels chain plans expansion

Travelodge today moved to capitalise on the rapid growth in the budget hotel sector by announcing plans to double in size over the next six years.

The chain – bought by private equity firm Permira two years ago – pledged to add 15,000 rooms by 2011 and create 4,500 jobs within three years, quashing speculation that it was mulling a stock market flotation.

Around £20m (€28m) will be spent on revamping the Travelodge brand for the first time in two decades as competition in the budget hotel sector heats up following the combination of Premier Lodge with Travel Inn last year.

Figures released by Travelodge today showed sales rising by 13% to £163m (€233m) during the 12 months to December 31, driven by 17 new hotels and more than double the number of bookings made using the internet.

Revenues per available room were 6% higher than a year ago and this was mainly due to an improvement in occupancy, which was up three percentage points to 73%, the company said.

Travelodge was acquired by private equity group Permira from catering group Compass in a £712m (€1bn) deal that also included the Little Chef restaurants.

Chief executive Grant Hearn said a great deal of vital work has been completed since then, including the disposal of non-core assets and freehold property, and this had enabled the company to repay more than £400m (€572m) of debt.

He added: “We have serious plans to drive the growth and usage of the budget sector. We want people to save money by staying with us.”

According to Travelodge, the budget hotel sector is the fastest growing part of the UK hotel business with the highest returns and is expected to grow to 100,000 rooms by 2010.

Travelodge will add 2,500 rooms this year to its current total of 15,000 but it will still be dwarfed by the Premier Travel Inn business, which was created by leisure giant Whitbread last year, which has more than 28,000 rooms in 461 locations.

The roll-out of the updated brand featuring a person snoozing on a pillow above a new typeface is scheduled to begin today and the Travelodge at Park Royal, London, will become the first hotel to sport the logo.

An advertising campaign will support the new brand over the next two years, building on the £20m (€28m) that has already been spent by Permira since the start of 2003.

Guy Parsons, sales and marketing director at Travelodge, said: “We know that people are starting to use budget hotels in the same way that they do low-cost airlines and we are well placed to deliver that offer.”

Today’s news comes just months after Permira confirmed it would sell off most of the Little Chef restaurant business.

It plans to hold on to the 115 outlets situated next to its Travelodge hotels and will put the remaining 182 up for sale early next year, along with the Little Chef brand. The brand will be franchised back to it by the new owner.